Chicago Tribune Editorial: Taking Advantage

Chicago Tribune Editorial: Taking Advantage
Copyright © 2007, Chicago Tribune
Published May 20, 2007

In 2003, a Republican-led Congress brushed aside budget warnings and passed one of the most profligate new federal programs in years: the Medicare prescription drug benefit. At the same time, the administration and some Republican leaders tried but failed to do something revolutionary: Inject significantly more private competition into Medicare.

The idea was that Medicare's command-and-control bureaucracy would go head-to-head against more nimble private insurance plans. Whichever delivered the most efficient care at the best price would prevail, because that's presumably where most seniors would want to be. Instead, Congress took more of a backdoor approach, adding incentives for private plans to offer coverage. It's called Medicare Advantage.

In traditional Medicare, a senior goes to a doctor and the government pays -- that's called fee-for-service. With Advantage, seniors signed up with private insurers, some like the PPOs familiar to many Americans, under tightly regulated conditions. The feds still paid the bills. The main differences were that Congress in 2003 raised the government's reimbursement rates and allowed insurers to offer new types of plans, among other rule changes.

With those incentives, the private insurers were able to sweeten the deal for seniors. Some paid lower out-of-pocket costs. Some could get benefits -- eyeglasses, for instance -- that traditional Medicare generally doesn't cover.

Seniors flocked to the plans. Medicare Advantage membership rocketed to include almost one in five beneficiaries. But now the critics -- mainly congressional Democrats -- are howling that the Medicare Advantage plans cost the government too much money. The government spends an average 12 percent more on the private plans than on standard Medicare, according to the Medicare Payment Advisory Commission. Some industry groups dispute those figures, arguing they're much lower. But the Congressional Budget Office reports that the difference will still amount to about $149 billion over 10 years. Yes, those differences are hard to defend, given the dicey condition of Medicare's finances. But they're no surprise: That's the way the program was designed by Congress.

Some Democrats have suggested siphoning some of that money to expand health insurance coverage for children. Sen. Barack Obama wants to slash the program and funnel some of the money to sweeten the drug benefit.

What would happen if the government payments were cut? Well, if history is any guide, some of the private plans would exit Medicare. And some, the more efficient ones, would remain, although they might have to cut back on some benefits.

One result would be unfortunate: More seniors would wind up back in the sclerotic standard Medicare plan, a huge victory for those who guard the horrendously inefficient status quo.

Still, we can't defend the financial advantage that Congress has bequeathed to private plans. If private plans can truly deliver more efficient care at lower costs, as we believe they can, then they should be able to prove it by competing on an equal footing with traditional Medicare.

Next time Congress takes on Medicare, we'd like to see lawmakers get out of the way and allow real head-to-head competition for patients. No sweeteners. The point of private competition is to improve the efficiency of care and drive costs down, not up.