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Medicare Privatization Not Working So Well for Seniors This Year

Remember back in 2003 when the insurance industry said that the creation of the Medicare Advantage program — which allows Medicare patients to receive their health coverage through private plans — would save both the government and patients money?

Scratch that.

Seniors enrolled in MA prescription drug plans will pay, on average, $39.61 in monthly premiums this year — a 14 percent jump over the 2009 rate, according to a report released today by Avalere Health, a DC-based consulting firm. And for one particularly popular type of MA plan — called private fee for service — the new average rate will be $57.85, an increase of more than 31 percent, Avalere reports. By contrast, monthly premiums in a standard drug plan under traditional Medicare will average $30 this year, up 7 percent from 2009.

The cost hikes, according to Lindsey Spindle, an Avalere vice president, “fit into a broader trend of increased financial pressure on the insured through rising co-pays and increased premiums.”

So if patients are paying more for MA plans, that must mean that the government is paying less, right? Wrong. The Medicare Payment Advisory Commission has long reported that the government pays much more to cover the average MA patient than it does to cover those enrolled in traditional Medicare. In 2009, it paid 14 percent more for a typical MA enrollee. A part of that additional cost, MedPAC noted last year, “consists of funds used for plan administration and profits and not direct health care services for beneficiaries.”

Translation: Taxpayers are paying tremendous subsidies to insurance companies which, in turn, are hiking premiums on seniors.

Medicare privatization, of course, has been a goal of conservatives since the program was launched more than four decades ago. The theory has been that the private sector is more nimble and cost effective, that it can offer additional services while at the same time lowering costs. It would be a better argument if only it were true.

Hat tip: The Hill.

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