The rationale for letting Medicare recipients enroll in private plans has always been that the private plans offere innovation and efficiency not available in the traditional, government-run plan. But the numbers have always told a different story. It costs the government more, not less, every time a Medicare beneficiary enrolls in one of the private Medicare Advantage plans. (Medicare Advantage is the private fee-for-service option created as part of the legislation that launched the Medicare drug benefit.)
Private insurers have generally rebutted this argument by claiming they offer extra services not available in the traditional program. And that seems to be true, according to the Medicare Payment Advisory Commission (MedPAC). In testimony before the House Ways and Means Committee today, MedPAC Chairman Glenn Hackbarth confirmed that the plans offer extra benefits.
But at what price? As Hackbarth explained, for every dollar in additional benefits the government paid an additional three.
The health insurance lobby insists there are other services, which MedPAC's calculations missed, that justify the markup. But that seems unlikely, as MedPAC's calculations are pretty reliable.
Now you know why President Obama and the Democrats want to reduce those overpayments and use the money, instead, to subsidize affordable health insurance for those who can't get it on their own.
(Via Sarah Rubenstein at the Wall Street Journal's Health Blog.)