While seniors famously prefer for politicians to keep their hands off their Medicare, it should be more of a big deal on the campaign trail than it is.
Sure, Kamala Harris last week did propose recent additions to the federally run health coverage for seniors, saying she wants it to cover long-term care plus hearing and vision care. And Donald Trump, on his campaign website, has vowed to protect it without much detail.
Yet neither presidential candidate is talking enough about the central issue plaguing Medicare — its growing cost, which doesn’t necessarily amount to better care.
Medicare accounts for 10% of the federal budget, a share projected to grow to 18% by 2032, according to KFF. Medicare Advantage, the privatized option under Medicare, makes up 22% of the total spending and has become a lightning rod for criticism from medical providers who say insurers running these plans too often delay and deny care while getting paid too much by the federal government.
What the next administration does — if anything at all — could alter the course of healthcare coverage that now affects 67 million of our seniors and — God willing — will touch us all eventually.
“I think it’s an incredible opportunity for a Harris or Trump administration to leave a legacy,” said Dr. Sachin Jain, CEO of SCAN Health Plan, a not-for-profit Medicare Advantage plan provider. “Because it’s a program that needs a fundamental reboot.”
In the last decade, the popularity of Medicare Advantage plans has soared, covering more than half of the senior-eligible population. They often offer perks such as dental and vision care and low or no premiums that traditional Medicare does not.
But the budget for MA plans has also ballooned to the point that the federal government is overpaying insurers offering these plans by $80 billion this year, according to The Medicare Payment Advisory Commission. On average, these insurers receive $2,329 more per beneficiary than what the federal government would have spent if the senior was in traditional Medicare.
Much of this overpayment can be attributed to two factors. First, MA plans receive a flat fee based on the average cost per patient in traditional Medicare, but these plans typically enroll seniors who cost below the average, accounting for $35 billion in overpayments.
Second, the flat monthly payments are increased for seniors with MA plans who have certain health conditions. Some insurers are “goosing their revenues” by making their enrollees appear sicker than they are by increasing their health risk codes, said Steve Lieberman, a senior scholar at the Schaeffer Center at the University of Southern California.
That adds another $50 billion in overpayments.
On top of the overpayment, the federal government is shelling out $15 billion in bonuses to MA insurers who have highly rated plans, called star ratings. There is no cap on how much in bonuses can be given out.
But “the star ratings program is not a good measure of quality, and it’s become kind of a magic funding machine,” Lieberman said.
The Biden administration has made moves to address some of the issues stemming from Medicare Advantage.
The Centers for Medicaid and Medicare set new rules on how much insurers can pay a broker selling MA plans to ensure seniors are put into plans that suit their needs. The administration also introduced a new patient risk coding model, designed to save $11 billion, and is revamping the plan rating system over the next three years.
The MA industry has been howling about these actions — with one analyst calling them perhaps an “historic level of regulations.” Lieberman, though, sees these efforts as only “modest steps.”
Both Jain and Lieberman had similar ideas on what changes the next administration should make to improve the coverage that seniors depend on, starting with the star ratings. The ranking system should be re-engineered so that it better reflects the quality of performance of Medicare Advantage plans.
“There’s an opportunity to make the star ratings matter even more,” said Jain, who also worked for the Center for Medicare and Medicaid Services under the Obama administration. “… A broker who sells a Medicare Advantage plan can make the same amount of commission for selling a high-rated plan as they make selling a low-rated plan. So you see a lot of people buying low-rated plans.”
Tougher requirements would also reduce the number of plans that qualify for the bonus payments that insurers receive from highly rated plans.
To reduce overpayment, Lieberman said the government should not make payments to insurers based on the average costs of seniors in traditional Medicare, who are typically sicker. The payment should be discounted based on the expected lower cost from the insurer’s less risky patient pool.
To that end, more oversight is needed to prevent insurers from upcoding patient risk, so they appear sicker and the insurer gets paid more from the government to cover them.
Finally, Medicare Advantage plans should be standardized so that a basic plan offers certain benefits and an enhanced one could offer those benefits plus some more add-ons. That would allow more competitive bidding between like plans and help reduce the number of plans out there, which overwhelms seniors during open enrollment.
This year, the average senior has 42 options to choose from, according to KFF.
“(Insurers) have been able since 2019 to offer multiple plans without having to have a meaningful distinction between the plans,” Lieberman said. “It’s simply a way to confuse beneficiaries and paralyze choice.”
One has to wonder, though, if the presidential candidates are paying attention to this snowballing budget buster.
Trump has provided no more than a promise to “fight for and protect…Medicare with no cuts” on his campaign platform. Harris wants to expand what traditional Medicare covers — including in-home long-term care — vowing to pay for it by increasing the government’s negotiation powers with pharma companies over prescription drugs.
“How much money you can save on prescription drugs is an interesting question. It’s unlikely to equate to the cost of significant home health benefits,” Lieberman said. “But obviously the devil’s in the details there.”
Of course, preserving and even expanding Medicare are noble policy pursuits for our seniors, but as problems with Medicare Advantage brew, their campaign pledges may miss the bigger picture.
Janna Herron is a Senior Columnist at Yahoo Finance. Follow her on X @JannaHerron.
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