Will Obamacare be the death of Medicare Advantage after 2014?

Today marks the third day of the Federal Government shutdown.  Republicans want a compromise on the new health care law and the Democrats are not about to budge.  The question, is why?

The hard truth is that Obamacare is going to cost far more than any of us regular citizens can possibly imagine.  All we have to do is look at the inflation in the Medicare system since 1965 to know that this is true.

The costs won’t be sustainable, and all of the players in the game know it.  This is why so many state governors refused to expand Medicaid and implement the health insurance exchanges mandated by the Affordable Care Act law.

I don’t believe a single governor that refused Medicaid expansion in their state did so to deny their citizens the care they need.  In fact, quite the opposite.  There is compassion for those most in need of health care, and the battle over the ACA is going to deny these people access.

The top health story in the NY Times today detailed how Obamacare will leave millions of poor without health care coverage because “they live in states largely controlled by Republicans that have declined to participate in a vast expansion of Medicaid, the medical insurance program for the poor, they are among the eight million Americans who are impoverished, uninsured and ineligible for help.”

So, what does all of this have to do with Medicare Advantage?  In a single word, everything.  Medicare Advantage is the #1 pawn in a high-stakes game of chess.  This single pawn will cost conservatives the game.

Medicare Advantage is a market-based choice program offered to those with Medicare benefits.  In many respects, Obamacare models the Medicare Advantage program.  The difference is that Obamacare pretends to be a market-based alternative, whereas Medicare Advantage actually is one.

The state health insurance exchanges were sold to us as a “choice,” despite the minor detail that the IRS will fine you if you don’t comply. Ignoring this fact, Democrats insist that Obamacare is a patient-centered and market-based system. Republicans contend that it isn’t. So, the fight over Obamacare rages on, and the pawns keep falling.

No matter how loudly Democrats insist that their objectives are based on choice, it’s impossible to refute that Obamacare effectively obliterates choice for seniors, exposing the lie in the liberal agenda for the American healthcare system.  If this agenda plays out to its end game, it will destroy the Medicare Advantage program and kick off a national outcry for a single payer system.

Original Medicare, as designed in 1965, was created as a single payer system, more commonly known as private fee-for-service (PFFS).  PFFS worked fine while health care costs were relatively low.  As costs dramatically increased, it put a financial strain on both beneficiaries and the government.  To relieve the strain, the Medicare Advantage and Medicare Part D prescription drug programs were created, and they’ve been a resounding success.

Medicare Advantage and Original Medicare are very different.  Where Original Medicare is a PFFS system that directly pays health care providers, Medicare Advantage is a program where the beneficiary’s health benefits are paid to third party insurers that compete with one another to offer the best coverage at the lowest price possible.

Within the Medicare Advantage system — a single health insurance marketplace located at Medicare.gov — beneficiaries can shop and compare plans in their area (county by county).  Medicare Advantage providers receive a rebate from the Centers for Medicare and Medicaid Services (CMS) if they offer coverage below the government benchmark for a given area. This rebate allows insurers to further reduce their rates and expand the coverage offered in their plans.  This is how so many seniors are able to enjoy and afford health, wellness and additional coverage benefits that go well beyond Original Medicare.

If this sounds like a healthcare system based on choice, it’s because it is.  It’s this very concept that Democrats claim define Obamacare.  There’s just one minor detail that the architects of Obamacare conveniently left out: After 2014, Obamacare has the potential to gut Medicare Advantage as we know it today.

Provisions of the ACA law are structured to defund the government’s choice-based healthcare program.  It does so in several ways.  First, the ACA significantly lowers the Medicare Advantage cost benchmarks.  Obamacare reduces the benchmarks so drastically that  many enrollees will only qualify for a reimbursement to their providers worth 95 percent of what the government would normally cover under the Original Medicare PFFS system.

If that wasn’t bad enough, the ACA law also cuts the available rebates that insurers use to lower premiums and provide additional benefits. Previously, plans that efficiently managed patient care were eligible to receive up to 75 percent of the difference between their costs and the government’s benchmark cost.  The ACA, in addition to lowering the benchmarks, hacks the rebates down to 50 percent or less.

The result of these changes can only mean one thing. Medicare Advantage benefits will be reduced, rates will increase, and millions of seniors will go back to Original Medicare with its 80/20 cost structure and basic benefits.

If you’re wondering why these cuts and changes were put into Obamacare, there is only one obvious answer.  The architects want to remove all incentives for beneficiaries to enroll in a Medicare Advantage plan, effectively destroying the freedom of a market-based alternative that more than 14 million Americans have chosen as there preference.  If this happens, it will mark the beginning of the downfall of America’s market-based healthcare and the rise of a government run, single payer system, and socialized medicine.




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