The latest news suggests that Humana and other big insurers are losing shareholder value because they are spending more money on care in Medicare Advantage than anticipated. It’s hard to believe they aren’t profiting wildly when they have been running away with the store, raking in tens of billions of dolloars in overpayments from the government each year. But, if they are losing value, it’s another reason why Congress should cut its losses on Medicare Advantage and either overhaul the program or end it entirely.
If insurers deliver shareholder value by spending less on care, then shareholder value is at odds with the needs of Medicare Advantage enrollees. And, if insurers can’t deliver shareholder value when they are massively overpaid, Medicare Advantage enrollee costs are likely to rise significantly when the government ends the overpayments. Right now, the Medicare Advantage plans are being overpaid $88 billion, according to the Medicare Payment Advisory Commission or MedPAC.
No one, including many Democrats in Congress, wants to hear that Medicare Advantage is financially unsustainable and not delivering shareholder value. After all, as one Just Care reader just wrote me, it’s the only option many people with Medicare believe they can afford. (Traditional Medicare has no out-of-pocket limit. So, unless they have Medicaid, people need supplemental coverage to protect themselves financially, and supplemental coverage can be expensive. That said, out-of-pocket costs in Medicare Advantage can be over $8,000 a year for in-network care alone, which presents a significant barrier to care for many enrollees with complex and costly conditions. People in Medicare Advantage cannot buy supplemental coverage.)
It’s an open question whether Traditional Medicare without supplemental coverage is a better option for people with limited incomes than Medicare Advantage. At least, the government is not second-guessing their treating physicians or limiting their access to physicians and hospitals. Medicare Advantage is not working for millions of people with costly conditions; they often can’t get the care they need. When they need care, it’s a crapshoot whether their insurers will approve it and whether they will be able to afford the out-of-pocket costs.
What’s crystal clear is that Congress and the administration need to cut Medicare Advantage overpayments really soon if Medicare is going to be around in the future. These overpayments are unsustainable, and they are undermining Traditional Medicare. Without Traditional Medicare, the Medicare Advantage insurers will have no competitive pressure and their behavior, which already too often endangers people’s health and well-being, is likely to worsen.
Politically, many Democrats are likely to feel that their hands are tied, and they cannot support reforms to address the overpayments without a backlash from insurers. Republicans seem happy to allow the waste in Medicare Advantage to continue, because it’s helping the corporations that support them. But, only when Congress ends the Medicare Advantage overpayments will Republicans and Democrats serve the needs of all their constituents and ensure Medicare’s future.
Here’s more from Just Care:
- Medicare Advantage needs serious fixes; $88 billion in government overpayments must end
- Ten ways to improve Medicare Advantage
- Biden administration finalizes Medicare Advantage prior authorization rule
- Case study: Costco saves one couple hundreds of dollars over Medicare Part D
- OIG finds widespread inappropriate care denials in Medicare Advantage
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