The Obama administration reversed cuts to Medicare Advantage on Monday, after pleas from the insurance industry lobby and congressional Democrats who want seniors to vote for them, The Hill reports. Advantage is the private insurance option offered by Medicare, and many plans entice seniors with free gym memberships, hearing aids, and other perks. Whether the plans actually offer better care is up for debate — what's certain is that the government pays 6 percent more for Advantage over regular Medicaid. Republicans and the insurance industry have argued that the cuts to Advantage would lead to fewer plan choices and higher premiums for the elderly, but studies have shown that most of the extra money is profit.
Medicare Advantage is kind of a scam
Obamacare meets its budget by cutting $156 billion from Advantage reimbursements over the next decade, meaning it combines two politically controversial things — Medicare cuts and Obamacare. The Washington Post's Jaime Fuller explains that Democrats, both red-staters running for re-election and Sens. Chuck Schumer and Michael Bennett, who help with the party's fundraising strategy, spoke on the House floor last week to stop the cuts Democrats support.
Whether cuts to Advantage would actually be a threat to seniors isn't clear. Last month, the Los Angeles Times' Michael Hiltzik argued that Advantage is an "insurance industry scam." A recent Wharton School of Business study "found that only about one-fifth of the extra reimbursement gets passed through to patients in the form of lower premiums, better care or more services," Hiltzik writes. "Where does the money go? Insurers pocket much of it as pure profit." The study didn't find any evidence that the higher payments led to better service for seniors.
But Congress won't do anything about it
Despite the evidence supporting cuts, Advantage reimbursements are going up. On Monday the Obama administration announced that, instead of cutting the reimbursement rate by 2 percent, they would raise it by 0.4 percent. The Center for Medicare and Medicaid Services said the change was "due to a reassessment of Medicare costs and the relative health of new sign-ups," according to the Post, but politically it has more to do with the fact that enrollment in Advantage rose 9 percent last year, according to Kaiser Health News. The total enrollment in the program is 15 million, or 30 percent of the Medicare population. That's a lot of angry voters.
In that sense, stopping the cuts is great for Congress, but the fact remains that Democrats have never liked Advantage. Schumer called it "a total sellout to the pharmaceutical industry" and didn't vote for it in 2003, along with all but 11 Democratic senators, according to the Post. But this is a midterm election year, and seniors are the only reliable voting demographic. Republicans have aired attack ads highlighting this threat to the elderly, and America's Health Insurance Plans, the insurance industry's main lobby group, launched its "largest-ever mobilization" against the cuts.
So now Republicans have one less thing to attack Democrats over, Democrats have one less issue to worry about, insurance companies will keep making money and seniors can keep their gym memberships and free glasses. As for how the suspension of the cuts affects funding for Obamacare? That isn't a problem for an election year.