Quack Wharton School Lefty's Crazy Medicare Advantage Theories--Part 1

The Wharton School of the University of Pennsylvania seems to be a new hot bed for recruiting guerilla fighters for President Obama's War on Seniors. First it was the bunch of UPenn academics that claimed in 2012 that seniors were stupid for choosing inexpensive drug coverage. Earlier in 2014 it was a Professor Marc Duggan. And now it's a Senior Hater named Amanda Starc. In a recent official University of Pennsylvania document called an Issue Brief concerning the public Part C Medicare Advantage program, Ms. Starc appears to me to show a significant misunderstanding of Medicare in general and the public Part C Medicare Advantage health plan program specifically.

 (Estimated Massachusetts break down of Medicare popularity--2011; splits differ in every state and change year to year with approximated nationwide statistics reflected in point 1 below)

In order of appearance but not importance, Starc says

1. “Medicare Advantage (MA) has been the most popular alternative to traditional fee-for-service (FFS) financing in the program’s nearly 50 year history.” I’m not quite sure what this sentence even actually means. If the lefty is talking about an alternative from our point of view as seniors (see image), the public Part C program is actually the second most popular type of supplement (used by 30% of us seniors), second to plans from former employers (used by about 40% of us seniors) followed by individually bought Medigap plans in third place (used by about 20% of us) with about a half dozen other supplemental options following behind, the most “popular” of which is Medicaid. Almost everyone except a few percent who are still working but are on Medicare Part A (or who have a spouse who is still working) have one or more of these types of supplements. No one except a very rich person can take the risk of going without a supplement. On the other hand, if the quack is talking about an alternative from the government’s point of view, it is not “the most popular alternative,” it is the ONLY alternative.
2. “In traditional FFS Medicare, the federal government pays hospitals and physicians directly for services.” Actually, in Original (not “traditional”) Medicare, insurance companies “pay” the bills under contract to the government just the same way insurance companies under contract to the government pay hospitals and physicians under the public Part C program. The major difference is the type of payment the government gives the insurance-company administrators – a capitated payment to the Part C insurance company vs. fee for service to the Original Medicare insurance company. The difference is not the involvement of insurance companies. Insurance companies are totally involved in administering all Parts of Medicare. In fact they are the same insurance companies.
3. “However, critics contend that the MA program actually costs the federal government more than traditional Medicare, because MA enrollees tend to be healthier than average and therefore would rack up much lower costs if enrolled in FFS Medicare.” In addition to being quite unrigorous from an academic point of view, this sentence mixes up multiple different issues in one factually unsupported sentence.

• First, no one has to contend that the Part C program -- with its special-needs plans and features designed to help the poor -- costs more “per enrollee” (Starc left out the key phrase "per enrollee"); that’s what the law says to do and no one disputes that the law is being followed. That minor extra costs is what pays for the added variety of benefits and lower cost sharing mentioned in the previous sentence of the UPenn Issues Brief. In 2013 and this year MedPAC says those extra benefits (the most important of which is an annual out of pocket – OOP --  limit on spending that averages around $4500) cost about 3% more per enrollee on average than FFS Medicare cost "per enrolee" (not including a now expiring and allegedly illegal Obama-administration bonus program). The OOP limit benefit alone would account for the 3% difference since FFS Medicare has no annual OOP limit. That’s simple insurance math although the OOP limit is by no means the only additional benefit even in the most barebones Part C offering. A variety of academic studies (see in particular Song, et. al) have shown that if Part C plans simply delivered the same benefits as FFS Medicare (the same high deductibles and co-pays, no OOP, no annual physical, etc.) their costs would be 10% less on average than FFS Medicare. That's because they are networked; that's simple insurance math too (and basically the key concept underlying the Patient Protection and Affordable Care Act)
• Second, it would have been a little more academic of Ms. Starc to specify  some research -- preferably some published this century -- that speaks to his or her “healthier” contention (as in Part C beneficiaries are healthier than those that do not select Part C as their supplement); I am not familiar with any such research and it seems unlikely given that public Part C Medicare Advantage health plan beneficiaries are disproportionately poorer and of color as compared to FFS Medicare enrollees. Poorer minorities are not typically healthier than richer whites.

See more from this Wharton School Senior Hater and his or her War on Seniors on later blog posts.