Seniors Could Face Health Care Cuts

Published: Wed 30 Dec 2009

Thomas Kristoffersen

As health care reform measures make their way through Congress, seniors ultimately may pay the price if threatened cuts to federal subsidies for their Medicare Advantage plans become reality.

Such Advantage benefits as hearing aids, dental payments and even gym memberships currently are available at premiums often lower than those for government-provided Medicare. That's largely because the government pays without question an average 14 percent more toward payments for the private Advantage plans.

In turn, the Advantage providers consistently beat projections for their profits, according to a review requested by Senate Democrats. The report revealed 34 Advantage companies used $27 billion in government subsidies for profits, marketing and other expenses from 2005 through 2008. On average all Advantage companies spent more than 15 percent of premium revenues on profits, marketing and other expenses - almost 10 times the rate of regular Medicare.

The federal subsidies also paid for extras that only Advantage providers experience. They include hundreds of their executives earning more than $500,000 annually, executive retreats in Hawaii and Cancun, and costly marketing campaigns to lure seniors away from traditional Medicare.

This all could change under the current House and Senate proposals for health care reform. If the subsidies end, some seniors could see their health insurance premiums rise, benefits cut or health plans end.

Critics warn that current Advantage customers still could be turned down for needed treatments despite their getting coverage with few problems and perks that are relatively inexpensive. Those include vision coverage for an average $3.37 a month or hearing coverage for less than $1, according to 2007 filings with the federal government.

A Government Accountability Office study released in 2008 revealed Advantage may not offer as much as enrollees thought. For example, home health care costs were as much as 84 percent higher than with traditional Medicare. Also, about 500,000 Advantage customers had plans with high co-pays for hospitalization and no ceilings on how much they would have to pay for inpatient expenses.

Those seniors who returned to hospitals within 60 days of discharge would see the biggest differences in their costs. Their deductibles could be extremely high. Yet, if they had the traditional Medicare coverage, there would have been no deductibles.

Regardless of the disparities, the ranks of Advantage enrollees nearly doubled in the six years since Congress allowed the subsidies that helped them expand. Now about 1 in 4 seniors has coverage in a private plan.