Perspective: Private Medicare-are marketing curbs just the beginning?

June 20, 2008

CMS proposes new marketing rules for Medicare Advantage.

Last month, the Centers for Medicare & Medicaid Services took aim at the hard-sell and "unscrupulous" practices-cold calls, unsolicited pitches, churning-that some insurers have used to market their private Medicare health plans. Reactions to the proposed rules have varied.

AHIP, the health plan industry trade group, says the new rules will bolster beneficiaries' confidence in the information they get. FP John Murphy, president of the American Geriatrics Society, calls them "good first steps" to protect vulnerable seniors, although he adds that "end runs" are possible around any system we put in place. For its part, the National Association of Insurance Commissioners has been complimentary-to a point. While praising "all the positive changes," it faults CMS for not giving new regulatory authority to the states-something the industry itself is foursquare against. Criticism from Medicare advocacy groups has cut deeper. "Part D and the Medicare Advantage program are structurally flawed," says Robert M. Hayes, president of the Medicare Rights Center, which blames marketing abuses on plans' headlong rush for profits, made possible by generous government subsidies.

A hard look at extra costs

Still, Medicare advocates aren't convinced the government and taxpayers are getting a solid return on their investment. "Even with enhanced payments, private health plans often fail to deliver coverage that a patient could obtain from Original Medicare," the Medicare Rights Center argues in a 2007 report. The Center is part of a coalition calling upon Congress to peg private Medicare payments to the cost of insuring seniors in traditional Medicare.

Certainly, this would save money. According to testimony last year by Congressional Budget Office Chief Peter R. Orszag, paying private plans at local Medicare rates would save $65 billion between 2008 and 2012 and a stunning $160 billion between 2008 and 2017. But there are consequences, Orszag says. To the extent that some plans really do use the extra payments to offer reduced premiums or supplemental benefits, the cuts would also slow and likely reverse participation in private Medicare, which now makes up roughly 20 percent of Medicare enrollment. That, of course, would raise ne'er a stir among critics of subsidies, many of whom have been against privatization from the start.

Like so much else in Washington these days, the next move is likely to be decided post-election. If the Democrats win the White House and keep Congress, private Medicare will almost certainly come under the knife. But even a fiscally minded McCain administration may be inclined to do some pruning. It was only five years ago, after all, that McCain turned a big thumbs down to a major piece of Medicare legislation.

The very bill that created both Medicare Advantage and the Part D drug plan.