The Vengeful Specter of Cuts to Medicare Advantage
Medicare Advantage is a fundamentally corrupt, parasitic institution. We must fully abolish the industry of private health insurance—severing the parasite from its host.
An argument we make often on Death Panel is that private insurance should be abolished. There must be no room for private insurance in Medicare for All or any other Universal Single Payer (federal or otherwise). There are few better examples of why we draw such a hard line on this issue than the Medicare Advantage (MA) market. In our 10/22 episode, we covered how debates over the (in)validity of this public-private healthcare-horror have resurfaced as part of the discussion over spending in Biden’s reconciliation bill fueled by deficit-hawk-hysteria. The private insurance industry has rallied to lobby and advertise in their own defense, seeking to protect what has become one of their most lucrative revenue streams by killing yet another attempt to curtail cushy CMS subsidies to Medicare Advantage plans. Furthermore, private insurers have relied on the same argument and tactic for over a decade now for their defense—leveraging public confusion over the difference between Medicare Advantage and traditional, public, fee-for-service Medicare to claim that any attack on Medicare Advantage is “a cut to Medicare.”
To truly be rid of these bloated private health finance giants who engorge themselves on public money, like for-profit-tapeworms, as they drive up costs for patients by imposing austerity regimes of care—we must fully abolish the industry of private health insurance—severing the parasite from its host. Dismantling Medicare Advantage and leaving no room for private insurance would be a great place to start. MA plans are booming business and keeping profit out of the administration of care for seniors and disabled people would offer a (pun-intended) crippling blow to theses monopolistic private insurance giants.
The first step in doing that is to understand why MA plans are so important to private insurance companies, which we touch on in the episode, but I wanted to provide a more in-depth breakdown for people who haven’t had the distinct luxury of becoming familiar with these plans as a Medicare recipient during open enrollment (like I have). The bottom line boils down to this; the debate which has emerged in the ongoing conversation about how exactly to “pay for” Biden’s increasingly un-ambitious “Build Back Better” policy platform is now re-centering away from savings gained by drug price negotiations, towards a plan to cut payments to privately administered Medicare plans, called Medicare Advantage plans, to finance social spending initiatives.
The idea is to theoretically kill two policy-birds with one spending-stone: savings would translate into additional money towards infrastructure and healthcare reforms while reducing the financial harm caused by private insurance companies who have colonized the Medicare market and continue to spend more money on developing AI risk assessments, plan advertising, building out their appeals departments, austerely limiting their networks, CEO salaries, and orchestrating frequent denials than they do providing care for plan beneficiaries. The more efficient option would be to eliminate them entirely, but that’s not on the table at the moment. I argue that it should be.
A frequent criticism of Medicare Advantage plans is that they are junk, sold to elders and people with disabilities as “more comprehensive” coverage than traditional Medicare. Plan members are then saddled with restrictive provider networks, endless administrative burdens like preauthorizations and denials, as well as huge bills and gaps in coverage.
These plans look great on paper and are heavily advertised as more comprehensive than traditional Medicare, but in practice offer little by way of comprehensive coverage to anyone who needs to actually use their insurance. This myth persists in part because of the successful efforts of private insurance industry giants like Aetna, Cigna, Blue Cross, and Humana who have put the majority of their efforts into marketing catch-all Medicare Advantage plans as easy fixes for seniors burdened by the fractured nature of the Medicare system. In fact, one Kaiser Family Foundation study showed that the average private insurer spent more than twice the amount of money on advertising Medicare Advantage plans as was spent on advertising for Part D plans ($30.1 million vs. $13.7 million) tipping the scales in favor of MA and giving the appearance of being a stronger brand. Medicare Advantage plans have been rightly called a deliberate “conspiracy on seniors,” (and disabled people) because while initially, these plans can be more affordable than traditional fee-for-service (FFS) “public” Medicare premiums, once people get sick, out-of-pocket costs on Medicare Advantage plans tend to skyrocket making it impossible for them to get care.
Medicare Advantage plans have few supporters outside of the private insurance industry and venture capital. In our very first Medicare for All Week, Vince and I interviewed Dr. Victoria Dooley, who put it so well, “If somebody says Medicare Advantage, run. Run!” Dr. Dooley explains how plans are designed to manipulate patients when they get sick. Her experience with these plans comes from her own patients, who she has witnessed be chewed up and spit out by this exploitative revenue stream which serves the needs of private insurers over patients every time:
Dr. Victoria Dooley 51:16 — Medicare Advantage robs taxpayers of billions, billions with a B, dollars annually. They do this false coding [up-coding]. They cherry-pick patients… that aren't very sick… So what they might do is they'll say, "Oh. The major cancer center in town is no longer covered by our plan." So what do you do if you have Medicare Advantage, and you have cancer, and the major cancer center in town is no longer in your network? You're going to leave. So they cherry-pick you, and then when you get sick, they lemon drop you…. So anybody advocating for the public option, which is going to include Medicare Advantage programs...If somebody says Medicare Advantage, run. Run! They say Medicare Advantage, they are talking about letting these private health insurance companies take advantage of [people], and that is absolutely unacceptable, and it's disgusting that any politician would allow it.
Dr. Dooley, a supporter of Medicare for All, is not the only one in her field who is highly critical of Medicare Advantage plans. In fact, full condemnation of this awful public-private solution is the official position of the conservative American Medical Association (AMA), an organization that can rarely be counted on for a position considered even vaguely “on the left.” A 2018 resolution from the AMA condemned these junk-plans, stating that "seniors are lured to these advantage plans by misinformation and confusing sales techniques."
In 2019, the AMA again passed yet another resolution, this time explicitly called Protecting Seniors from Medicare Advantage Plans, declaring that Medicare Advantage plans “overemphasize the value of different options and can create confusion,” causing people to buy into coverage full of holes and carefully engineered carve-outs and as a result creating the absolute “potential for higher annual and lifetime costs for the patient under an Advantage Plan...”
The way these plans work is rather sneaky as well, there are two different categories of Medicare Advantage plans: regional and local. Each has different reimbursement and certification structures and can be one of several different types of plans, though most are what is usually termed “managed care” in which services are heavily gatekept typically by a primary-care-provider-oriented referral system and severely limited provider network. These plans are structured as either health maintenance organizations (HMOs), preferred provider organizations (PPOs), private fee-for-service plans (PFFS), or special needs plans (SNPs) but regardless of the structure payments are allocated either along regional or local categories.
Under the Medicare Advantage program the benefit recipient isn’t technically the one purchasing the plan, but rather Medicare (via the Centers for Medicare and Medicaid Services or CMS) purchases insurance coverage from private insurers on behalf of its beneficiaries, with Medicare making monthly payments. The rules are that Medicare Advantage plans must cover services which are “actuarially equal” to all services covered under traditional Medicare plans (excluding hospice care, which is a huge yikes). Part B is always separate and the premium is paid from benefit checks. All Medicare Advantage plans except for those structured as PFFS plans must offer Part D drug benefits as a bundle, PFFS plans sometimes do and sometimes don’t.
Pretty confusing, right? It’s easy to see how people might be signing up for insurance coverage they don’t fully understand, with payment schemas that are either wholly or partially obscured. It’s very easy to see how Medicare Advantage is taken advantage of. The complexity is intentional, creating a need for intermediaries and policy brokers who can help people navigate which plan to buy, steering them towards more profitable products.
Medicare Advantage plans may also allow beneficiaries to supplement their own benefits by paying an additional premium on top of the payment which Medicare is making monthly to purchase the plan. These additional services typically cover things not covered by traditional Medicare Parts A, B, or D, like vision, dental, hearing aids, or certain kinds of reproductive care, this is where the value proposition and marketing pitch for these plans originates.
Beyond these two aforementioned payment schemes, are layered several more. Payments beyond the monthly base rate (adjusted for the beneficiary’s risk score and county) are structured according to a bonus tier system, with bonus amounts added to the monthly payments (made by Medicare) according to a plan’s rating in a CMS star system. The star system is supposed to measure the overall quality of the plan but these quality ratings have been shown to have little to no bearing on the actual quality of care people receive. It has also been widely documented that this star system can be easily manipulated because payments are benchmarked to the average fee-for-service Medicare payment for that service in a particular county, e.g., “In certain counties—urban areas with low [traditional Medicare] expenditure levels and historically high Medicare [Advantage] enrollment—plans with high star rankings can have their benchmark bonuses doubled.” By heavily focusing on profitable counties, companies can maximize and tailor their revenue by selecting for demographics likely to have more profitable plan members.
The TLDR is: Medicare Advantage is a complicated, huge, expensive mess. Basically, federal reimbursements for Medicare Advantage plans are notoriously really high, making them highly lucrative products for private insurance companies to offer. It’s a tremendous amount of public money which goes straight into finding new ways to deny people their care. And, this fact is being used to try and leverage a check on the industry to pay for Biden’s infrastructure spending, with Politico reporting this week that “The move to rein in Medicare Advantage would generate hundreds of billions of dollars in savings, bringing the party closer to fulfilling its vow to offset its planned $2 trillion spending package.”
It might seem like a no-brainer to reallocate what essentially amounts to a needless federal subsidy for private insurance companies towards offering traditional Medicare recipients more robust benefits like dental, vision, and hearing aid coverage. Yet, as the Politico commentators warn, the proposal of this cockamamie pay-for strategy has, in the past, come with some very serious political costs—incurring the risk of “sparking a war with the deep-pocketed insurance industry.” Similar fights have occurred more times than I can recall in recent years, resulting each time in the mobilization of millions of dollars in lobbying and ad buys from private insurance companies attacking any moves to reduce their profits.
And, like clockwork, the war has begun. Renewed calls to cut inflated reimbursement rates for these awful junk-MA-plans, as predicted, have resulted in a new wave of lobbying and messaging from the private insurance industry which seeks to collapse any attack on Medicare Advantage into an attack on Medicare itself. Indeed, as of the time of this writing, groups allied with private insurance companies have already spent an estimated $2.6 million on television advertising opposing this Build Back Better “pay for” since September 2021 alone. They are just getting started. This tactic has proven to be quite successful in the past and private insurance will do anything to protect this lucrative alternative revenue stream.
A simple search for articles keyworded “Medicare Advantage” in Politico’s digital archive delivers nearly 50 pages of results—if you organize it chronologically you can see this same fight repeat nearly verbatim close to a half-dozen times since 2008 and watch the drama play out like a tragic-comedic disaster. The same talking points show up again and again from both sides, the argument has barely evolved. E.g., in 2009, proposals to cut spending on Medicare Advantage were deemed to be one of “health reform’s hidden landmines,” the industry claimed that if the government interfered and took away Medicare Advantage subsidies there would be hell to pay from beneficiaries. Insurers then began to pour money into making the discourse even more politically toxic and what seemed at first to people like a no brainer became an issue no one wanted to touch with a 10 ft pole.
In January 2009, then-president-elect Barack Obama argued that Medicare Advantage “doesn’t necessarily make people on Medicare healthier,” proposing to eliminate the program in favor of expanding a public option. To sell it as part of the Affordable Care Act “pay for,” Obama pointed to $634 billion in potential savings from ending the Medicare Advantage subsidies—the talking point was met immediately with private-insurance-funded resistance. By June 2009 the public option had been abandoned, Obama publicly rejected single-payer, and was peddling Health Savings Accounts (HSA) as a solution on offer for Medicare Advantage members to help offset rising out-of-pocket costs and limited provider networks.
[Image description: Death Panel cover image for the episode titled, A Nightmare on Medicare Advantage (10/22/21). The image is a still from Bloodborne of a ghostly white figure over a dark grey background. Superimposed on top of the image are the words “Death Panel” in white type."]
A similar attempt to reign in bloated payments was proposed again the following year to be passed as part of reconciliation in 2010, with Politico then reporting that final tweaks to the bill imposed “an additional $16 billion in cuts to private Medicare Advantage plans, which now cost the government more on average than traditional Medicare, for a total of $132 billion in reductions.”
In 2011, it was estimated that Medicare Advantage plans cost the government 20% more than traditional Medicare, yet even the most budget-hawk Republicans fought tooth and nail to stop cuts to Advantage market payments. Similar attempts in 2012, 2013, 2014, 2015, 2016, and 2018 all resulted in a flood of spending from the private insurance industry to protect their revenue stream. All the while enrollment in Medicare Advantage plans steadily increased. Reimbursement rates to Medicare Advantage steadily increased.
In this current round of Medicare Advantage Wars, the messaging has not changed much, with the ambiguity between traditional Medicare and the public-private hellscape of MA being relied upon once again as a means of muddying the message. As Politico reported today:
“It’ll be [insurance] plans’ job to make it as toxic as possible,” said one industry insider close to the negotiations, who talked to POLITICO on background in order to speak freely on the sensitive talks. “We know members are already telling leadership: ‘We can’t take attack ads saying we’re cutting Medicare.’ They know the public isn’t going to distinguish between the private and public pieces of it.”
The Better Medicare Alliance…is also airing targeted ads in the home districts and states of Democratic moderates who are seen as potential swing votes...“You thought you could sneak this through? Trying to raise our premiums, disrespecting us,” the ads say. “We’re watching you.”
I have to admit, its a clever tactic and the sad truth is that this line often works and many are tricked into calling their representatives over “cuts to Medicare” when all that is threatened are cuts to private-insurance profit margins.
Wendell Potter, a former Cigna executive turned Medicare for All supporter, explained to the Daily Poster this week that private insurance has poisoned its own well, raising the costs of employer-sponsored health insurance so high, there is essentially nowhere left for the market to go. That is why, Potter argued, Medicare Advantage has come to become such a precious crown jewel for the private insurance companies who administer them, like his former employer Cigna: “...they are so focused on Medicare Advantage [because] they are finding that the commercial insurance market, private side, is not growing… It hasn't been growing for years.”
Private insurance companies are so greedy that they have cannibalized their own primary market, and as a result, have come to rely upon the grift of Medicare Advantage to keep margins high. By manipulating and misleading medically vulnerable people, private insurers were able to squeeze out nearly double the profit margins on Medicare Advantage plans compared to employer-sponsored plans, even more, when compared to ACA marketplace plans.
This is why it matters to make absolutely no room for private insurance in whatever health finance future we build. The contradictions of Medicare Advantage did not come into being by accident, they were designed that way to extract the maximum profit possible from the sick, elderly, and otherwise vulnerable.
Marta Russell called this the Money Model of Disability in which bodies deemed to be “no longer productive” to the labor market are repurposed by capitalism in order to extract surplus profit from their commodified survival. As Artie and I argue in our forthcoming book Health Communism: A surplus manifesto, this type of market dynamic is one of the central ways in which capitalism has leveraged “health” itself not only to extract profit from the surplus population but to also silo people into small and fractured constituencies, too decentralized to form any real solidarity or resistance.
And yet, we see, in the fight by the insurance industry to defend its own cash cow, the power of a unified voice of outrage. Private insurance companies rely upon the ambiguity they carefully maintain, which hides the boundaries between Medicare beneficiaries and Medicare Advantage beneficiaries because they know that the constituencies their decentralized extraction regime has created are too fractured to meaningfully mobilize. This is why private insurers must try to activate the whole Medicare constituency, as it would be quite difficult to find anyone to rally to save the junk-products peddled as Medicare Advantage without the fear and the threat of cuts to traditional Medicare.
Though it might feel like history is doomed to endlessly repeat, especially considering how this fight has played out the same way over and over again for a decade, these moments also show us the vulnerabilities of our enemies and ways in which we might be able to organize to upend private insurance’s profit regime. Private insurance is not only not necessary, it is a parasite sucking the life out of our systems of care. While it is true that parasites rarely kill their hosts directly, as we can easily see in the case of Medicare Advantage, private insurance’s parasitism is deadly enough to warrant a campaign of total eradication.
Listen to the full Death Panel episode A Nightmare on Medicare Advantage.
 Correction: I inadvertently butchered the initial claim made here, which has since been corrected. Great thanks to Deborah Socolar for catching! Details on my initial error can be found in the comments below. <3
Thank you for a thought-provoking article -- on the concept of the Money Model of Disability, and much more.
About Medicare Advantage, I totally agree -- and have from their start -- that they are a rip-off of members/patients, taxpayers, and caregivers.
But I need to question one astonishing point, the assertion that a Kaiser study "showed that the average Medicare Advantage plan “spent more than twice the amount of money on advertising as it did on care.”
This claim seemed implausible, as it would have to mean both unbelievably nonstop saturation advertising AND stunningly unprecedented lows in so-called "medical loss ratios" (which, may I add parenthetically, ought to be called "care shares").
Going to the KFF report on Medicare Advantage marketing that you link to, I saw this quite different finding, which simply compares two different categories of advertising:
"Insurers are estimated to have spent more than twice the amount for Medicare Advantage plan ads than for Medicare Prescription Drug Plan ads ($30.1 million vs. $13.7 million) — based on ads placed nationally and in the three study markets."
The other comments in that report on levels of advertising spending don't seem relevant, so I wonder... Perhaps that was the wrong link and there is something on this issue in a different KFF analysis? Or perhaps there was a slip in transcribing / tracking this finding? I hope you can check.
Thanks again for your valuable work --
Deborah Socolar, MPH
Thanks for a great, great article. I will listen to any and all podcasts. At the moment I have two brief comments:
- You can get a Medicare Advantage plan in some states with very broad coverage. My own Blue Cross Advantage plan here in MN has 100% of hospitals and 96% of doctors enrolled.
- You are correct that insurers look to Medicare Advantage for their profits. In the employer market, all the large companies with good risks are self-funded. The small business market has always been of uncertain profitability.