GAO: Health insurers cost U.S. $54 billion more than Medicare
Study finds that Medicare Advantage is more expensive than Medicare; 'a blank check'

(Bloomberg)--UnitedHealth, Humana and other health insurers will collect $54 billion more from Medicare than the government would spend providing care directly over the next four years, a U.S. auditor said.

A "relatively small" share of the money, 11%, will go to extra benefits under the Medicare Advantage program, which covers 9 million elderly people who chose subsidized private plans for their care, the Government Accountability Office said in a report released today.

The report fueled a new political attack by House Democratic leaders on Medicare Advantage, which will direct $86 billion to health insurers this year on the theory it provides care more efficiently. That is 13 percent more than the government would spend on the same patients through conventional Medicare coverage, according to U.S. estimates.

"Medicare Advantage does not contain costs, and there's no evidence that the value provided to beneficiaries is commensurate with the program's high price tag," said Michigan Democrat John Dingell, chairman of the House Energy and Commerce Committee, in an e-mailed statement. "The real beneficiaries of Medicare Advantage are the insurance companies, which have profited handsomely."

The chairmen of several other House committees joined Dingell in criticizing the program, which is backed by President George W. Bush and Republican lawmakers. Insurance industry supporters of Advantage plans say the private-sector coverage provides elderly members added services and lower co-payments for the extra money.

The only Republican panel member to attend the hearing more than five minutes, Dave Camp of Michigan, disputed the GAO findings. "This really is a fake report with fake conclusions, and we're having this fake hearing about it so we can run to the media to make fake pronouncements," Mr. Camp said. He pledged to file a formal complaint about the report with the comptroller general, who heads the GAO.

Last year the government paid the plans $8.3 billion more than the traditional Medicare program would have spent on the same enrollees, the GAO said. Most of that differential went to reduce members' out-of-pocket outlays for plan premiums and service co-payments.

Medicare Advantage members saved more than $1,100 a year, on average, through improved benefits and lower out-of-pocket costs, Kerry Weems, acting administrator of the Medicare program, said in testimony today to the House Ways and Means health subcommittee.

The report found that beneficiary out-of-pocket costs for some services, such as hospital care and nursing home stays, sometimes are higher for Medicare Advantage members than beneficiaries with traditional Medicare coverage.

The GAO concluded that extra benefits for the 9 million Medicare Advantage members plans are being financed partly by higher premiums for the rest of the 44 million people enrolled in the Medicare program.

"There is no free lunch when it comes to Medicare Advantage," James Cosgrove, GAO's acting health care director, said.

The GAO's conclusions were limited by the lack of data that insurers are required to give Medicare, Mr. Cosgrove told the panel. Actual claims and benefits data were unavailable, forcing him to rely on annual estimates filed with the government, he said.

About 30% of Medicare Advantage members are enrolled in plans that expected to spend less than 85 percent of the Medicare premiums on medical expenses, Mr. Cosgrove said. The rest of the plans spend a greater share of premium revenue on services, he said.

Representative Jim McDermott, a Democratic member of the subcommittee from Washington state, objected when Mr. Weems said the names of low-spending companies couldn't be made public because the information is "proprietary."

"You mean the Congress can't know who's ripping old people off?" he said.

Mr. Weems said that he was aware of concerns about the lack of data and has directed Medicare officials to begin collecting detailed information from health plans on some benefit spending.

"Going forward we will collect the data in a regularized format so we can all understand it," he said.

Still, much will remain confidential, and Representative Rahm Emanuel, an Illinois Democrat, said Mr. Weems put "ideology and partisanship" above good results for the country.

"We don't know if we're getting our money's worth" with Medicare Advantage, Mr. Emanuel said. "It's like a blank check. You can't keep treating taxpayers like dumb money."

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