On August 7, the New York Times continued its decades-long attack on the idea that seniors should have a choice in the kind of Medicare they use: fee for service or capitated fee. The article was titled deceitfully "Medicare Advantage Spends Less on Care, So Why Is It Costing So Much?" The New York Times was deceitful because the article was based on this report, which basically said the opposite of what the Times reported: The Times deceitfully glommed onto the questionable claim circled in red concerning 30% overhead while making no mention of all the report's meaningful data underlined in blue that came before it. The third paragraph of the Times deceit begins:
"The study released in January, found that the revenue Medicare Advantage plans received in 2010 exceeded the amount they paid out for medical care by a hefty 30 percent. At more than $2,000 per enrollee per year, that probably topped $20 billion dollars, nearly all from federal payments, not enrollee premiums....."
Apparently the author of this blog and the New York Times is assuming you will not follow the link to the report, which actually says on page 1 (splitting up the two different thoughts in the underlined section above):
"… average spending per enrollee-month in TM was…$771 paid... by the Medicare program (per service)… The MA plans in the HCCI data received on average $767 per enrollee-month…”
So the Medicare Trustees (what the blogger calls "federal payments") paid $50 less per year on people on Medicare Advantage than people on traditional Medicare. The report, if you follow the link, also explains that people on traditional Medicare pay over $1200 more per year out of their own pocket (see Note 1) than people on a public Part C health plan, as explained in this further edit of the convoluted academic wording:
"We calculate that MA spending per enrollee-month totaled $642, of which $590 was paid by MA insurers and the rest by enrollees out-of-pocket. In contrast, average spending per enrollee-month in TM was $911, of which $771 was paid directly by the Medicare program to providers."
The report at the link also explains that the claim of a 30% overhead is highly speculative. But naturally that is what this opponent of senior choice glommed onto. The biggest reason that the 30% claim is likely wrong is that it does not account for the benefits in public Part C health plans such as eyeglass discounts or an annual physical exam that are not covered at all by traditional Medicare and that therefore are not tracked in the almost-10-year-old HCCI data concerning Medicare Advantage.
The reason for the Times' deceit is that the Democratic Party viciously attacked the Part C health plan program and the poor people like myself who use these plans (see Note 2) from the formal creation of the program in 1997 (and even before 1997 when what became Part C was in demonstration status) until 2014. The Democratic Party stopped its attacks on we seniors in 2014 given Part C's popularity but the venom the Party spewed for 30 years continues on. And people like the author of this New York Times article and the New York Times in general has apparently not gotten the word that the Party line has changed.
NOTE 1: This $1200 difference only applies on average as if no one bought expensive private Medicare supplemental insurance. In fact, people on traditional Medicare typically buy expensive private AARP-like supplemental insurance which costs over $2000 more per year than Part C plans on average
NOTE 2: Public Part C health plans, of which Medicare Advantage is one type, are not for everyone. The most important factor in Medicare choice is what insurance does your favorite provider accept. Most providers do not accept a public Part C health plan, a program mostly benefiting poor seniors. A secondary concern for rich seniors that live in different parts of the United States at different times during the year is that Part C plans are geographically based (there is an exception to that rule for rich seniors in Minnesota that can afford to live in different parts of the United States at different times during the year.
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