Medicare Advantage prices rise as overhaul plan nears
Humana Inc., Health Net Inc., and nearly 200 other providers increased 2009 premiums by 13 percent on average, or more than five times as much as last year, for people who use Medicare Advantage, according to Avalere Health, a consulting company in Washington.
Advantage plans add features such as drug coverage to Medicare and are run by commercial insurers.
Obama has vowed to control health-care spending while extending coverage to more people, and, during his campaign, criticized the costs of Advantage plans. The premium increases, charged directly to the elderly rather than the government, are further evidence that insurers' need for profits is ballooning patients' expenses and reducing the efficiency of care, said Arnold Relman, former editor of the New England Journal of Medicine.
"Medicare Advantage is a rip-off," said Relman, 85, also a professor emeritus at Harvard Medical School in Boston. "I cannot see that they do anything better than public insurance does, and they do a lot of things worse."
Medicare will spend 14 percent more this year, on average, for Advantage enrollees than for beneficiaries with basic coverage, concluded a staff report in December by the Medicare Payment Advisory Commission, an independent agency that advises Congress.
Obama considers the government payments "excessive," Jen Psaki, a spokeswoman now on the White House staff, said in a Jan. 5 e-mail. During his campaign Obama promised to cut subsidies to Advantage by as much as $15 billion a year, or about 15 percent from last year's total of $100 billion.
Insurers also collected about $5 billion in Advantage premiums from consumers last year, said Thomas Scully, the former top administrator of the U.S. Centers for Medicare & Medicaid Services.
Scully, who helped design the Advantage program, said that he did not consider the premiums excessive and that Advantage was less expensive than alternatives.
Medicare is the U.S. health plan for the disabled and those over 65. Basic Medicare, with a monthly fee of $96, lets patients use nearly all U.S. doctors or hospitals. Beneficiaries can also buy separate private policies to cover prescription drugs and expenses exempted from standard benefits. Advantage, which covers 10.5 million people, bundles those options.
"There are almost 11 million people who have chosen to participate in Medicare Advantage because they feel they're good plans," said Richard Barasch, chief executive officer of Universal American Corp., an insurer in Rye Brook, N.Y.
The Advantage premiums paid by Blair Law and his wife, Mary, rose to $50 a month this year, up from zero initially. "These guys have you by the short hairs," said Blair Law, 77, a retired construction-company executive in Fort Myers, Fla. "They know you're disinclined to shift to another plan, so they keep ratcheting the cost up."
In 2007, the Laws joined an Advantage plan provided by Universal Health Care Corp. of St. Petersburg, Fla. Initially, the plan charged no monthly premium, and the insurer rebated the couple's basic-Medicare premiums, the Laws said. The rebate ended last year, and this year the company began charging the couple an additional $50 a month. Universal Health Care chief executive officer Akshay Desai did not respond to a request for comment.