Wasteful Government Spending

by hilzoy

Once upon a time, Congress thought to itself: why not allow private insurance companies to compete with Medicare? Surely private, profit-driven companies could come up with ways to be more efficient than Medicare; if so, why not let them at it? In principle, I think this is a good idea. I don't think it's likely to work all that well in this case -- Medicare is actually a pretty efficient program compared to private insurers -- but I could be wrong, so why not give it a try? Competition is good, right?

It is if it's honest competition. Unfortunately, the Medicare Advantage program is not about honest competition, especially not since the 2003 prescription drug bill, which set up a payment system for MA plans that basically stacks the deck in private insurers' favor, and shovels large amounts of our tax dollars in their general direction. Here's a report (pdf) from the Medicare Payment Advisory Commission, which found that payments to Medicare Advantage programs average 112% of the payments under traditional Medicare. And here's a CBO report estimating that if we set reimbursements to MA programs at the same level as traditional Medicare, we would save $65 billion over 5 years, and $160 billion over ten years.

I am all for allowing private firms to compete honestly with government programs. I am not for allowing them to compete while giving them an unfair advantage, especially when that unfair advantage consists of my hard-earned money. And I am extra-especially not for giving them that kind of advantage when its long-term effect will be to draw people out of traditional Medicare and into more expensive, less efficient programs.

As if that weren't bad enough, today's NYT reports this:

"Insurance companies have used improper hard-sell tactics to persuade Medicare recipients to sign up for private health plans that cost the government far more than the traditional Medicare program, federal and state officials and consumer advocates say.

Insurance agents, spurred in some cases by incentives like trips to Las Vegas, have aggressively marketed the private plans, known as Medicare Advantage plans. Enrollment in them has skyrocketed in the last year, and Medicare officials foresee continued rapid growth in the next decade.

In Mississippi, George R. Dale, the state insurance commissioner, said, “Abusive Medicare insurance sales practices are spreading rapidly throughout the state.” State Senator Terry C. Burton, a Republican, said, “My office is receiving calls daily from seniors who have been victims of unscrupulous salespeople.” (...)

In an interview, Bobbie S. Whatley of Columbus, Ga., a 69-year-old nurse practitioner, said that a young man wearing a blue denim shirt with a WellCare logo showed up on her doorstep in November and talked to her about her insurance.

Mrs. Whatley did not sign up, she said, but he “forged my signature,” and a month later she received mail thanking her for joining one of WellCare’s private fee-for-service plans.

“It turned into a nightmare,” she said. “I spent two months trying to cancel my enrollment. I have all my mental faculties. If I let somebody like this come into my home and take advantage of me, then I am really concerned about older people who are more debilitated and not able to take care of themselves.” (...)

James E. Long, the insurance commissioner in North Carolina, is investigating complaints that insurance agents switched residents of an assisted living community from traditional Medicare into private plans without their permission. Officials in Kansas, Oklahoma and Wisconsin said they were investigating similar complaints.

Insurers sell private fee-for-service plans as a replacement for traditional Medicare and for Medicare supplement policies, known as Medigap insurance.

But Dr. Barbara L. McAneny, a cancer specialist in Albuquerque, said that many of her patients who signed up for such plans “suddenly found that they had huge new co-payments — $1,250 every three weeks for a combination of five intravenous chemotherapy drugs.”

In Florida and seven other states, the Universal Health Care Insurance Company offers a private fee-for-service plan that promises “the ultimate freedom to see any doctor, any time, anywhere.” This product — the Any, Any, Any plan — got off to a fast start, enrolling 85,000 people. But it “temporarily postponed new enrollments as of Feb. 14” because of a dispute with the Florida insurance commissioner, Kevin M. McCarty, who said the company did not have adequate cash reserves to comply with state law. (...)

David A. Lipschutz, a lawyer at California Health Advocates, a nonprofit group, said that insurance agents working for WellCare had made unscheduled visits to a subsidized housing complex in the San Francisco area and signed up elderly Chinese-Americans with limited ability to speak English. After being enrolled in one of WellCare’s private fee-for-service plans, he said, some of the low-income patients discovered that their doctors did not accept the plan. (...)

Brock A. Slabach, administrator of the Field Memorial Community Hospital in rural Centreville, Miss., said that private fee-for-service plans were causing havoc at his 25-bed hospital.

“People are signing up for programs they don’t understand,” Mr. Slabach said. “Agents for a private fee-for-service plan set up tables in front of a grocery store or a drugstore here. Seniors think they are signing up to get drug coverage or just to get more information. The next thing they know, when they show up at our hospital, they are in that company’s plan.”

Private plans generally provide all the services of traditional Medicare, and many offer extra benefits, but the co-payments may be different. Thus, Mr. Slabach said, under traditional Medicare, a beneficiary does not have any co-payment for the first 20 days in a skilled nursing home, but some private fee-for-service plans charge $100 a day, and that charge comes as a shock to some patients."

Part of the problem here is that these plans are so very profitable, especially if companies try to keep higher-cost seniors out of their plans. (The Commonwealth Fund claims that "private plans increasingly designed benefit packages to discourage sicker enrollees by increasing costs for services associated with chronic care.") Setting payments for MA funds at the same level as payments under traditional Medicare would, hopefully, discourage companies from treating Medicare recipients as sources of easy cash. And, of course, laws prohibiting the kinds of tactics described in the Times article should be aggressively enforced.

Pete Stark (D-CA) plans to introduce legislation to lower payments to Medicare Advantage plans. Unfortunately, some Democrats seem to be caving on this one. Paul Krugman:

"The forces behind privatization not only continue to have the G.O.P. in their pocket, but they have also been finding useful idiots within the newly powerful Democratic coalition. And it's not just politicians with an eye on campaign contributions. There's no nice way to say it: the NAACP and the League of United Latin American Citizens have become patsies for the insurance industry."

(Why? See here.)

If money grew on trees, and there were no veterans going without care for traumatic brain injuries, no children going without necessary medical care, and in general no worthy projects going unfunded, throwing money at the insurance industry wouldn't be a problem. In the real world, we should stop this idiocy, and ask private firms to engage only in honest competition.

Comments

[OCSteve]

I’m feeling contrarian today, but you give me nothing to work with here :)

[Free Lunch]

When originally conceived, this was an excellent program: Seniors got better coverage for less flexibility in choosing care, but like the fake HMOs that pushed out the real ones, the original program has been mangled beyond recognition.

Is there a better argument for single-payer universal health care?

[John Thullen]

"unscrupulous salespeople"

I'll have you know that commissioned salespeople receive extensive training in effective methods of separating you from your money as they get "product" out the door and live the American dream.

Don't you people realize that truth would kill capitalism as we know it? I suppose you want the government to mandate large print over small print? Think of the overhead. A truly free people want no print whatsoever.

I hope this sort of hate for our great country's precious bodily fluids is confined to the Net.

See, the trouble is not that sellers lie and cheat. It's that buyers don't lie and cheat right back.

Play the game, people!

[hilzoy]

I do not avoid Medicare Advantage salespeople, Thullen. But I do deny them my essence.

[Anarch]

Did you first discover this during the physical act of love?

[John Thullen]

You know, Hilzoy, I have a monthly sales quota to meet over here. A set of steak knives is riding on this.

Everyone has a price at which they will relinquish their essence.

If that were not so, the National Product would be insufficiently Gross.

You've heard economists speak of the "velocity of money". They are referring to the speed with which your money travels into my tax-free offshore accounts.

Let me talk to my sales manager and maybe we can throw in a free undercoating for your essence.

Last guy I had in here, nice fella, family man, salt of the earth, went away without the undercoating.

Soon as you can say "subprime mortgage", he had rusty essences.

Say you're sick. Say you need health insurance. Then I wouldn't say you're sick, if I were you.

Word to the wise.

[bernard Yomtov]

While we're on the subject of govt waste, there's also this in today's NYT.

[Free Lunch]

Student loans are another reasonable-cost government service that has been turned into a high-cost product by privatizing.

The problem isn't the Republicans here. They're expected to try to feed money to their constituencies. The problem is the 'Republican-lite' DLC types who have either bought into the lie that private business is more efficient than government or are just carrying water for big business.

Another good example of the big business bias of new laws is the NCLB tutoring program that requires audited financials before you can qualify to be considered to be an NCLB tutor. Let's make sure that retired teachers and other qualified tutors don't even have a chance at this pot of money.

[Philip the Equal Opportunity Cynic]

Exhibit A (well, G or P or X) that what we have in the contemporary GOP is not a bunch of libertarian free-marketeers who believe that government should just stay out of the way of business, as I generally believe. Rather, the GOP is a bunch of a statist proto-fascists; they want government to take an active role in tilting the playing field toward certain types of businesses.

Big government is beautiful if you're a Republican benefitting from its largesse.

[Pooh]

John Thullen needs to start his own blog. I would read it daily, perhaps even hourly.