Medicare Advantage Plans Pump Up Premiums

From the “truth-is-stranger-than-fiction” department: Just as President Obama and the Democratic Congress are getting ready to cut subsidies to Medicare Advantage plans by 15 percent, these companies have increased 2009 premiums to Medicare beneficiaries by 13 percent, on average. That’s five times as much as these charges grew in 2008, according to a study by Avelere Health. By comparison, employees of large companies saw their premiums rise by about 9 percent this year.

The government is expected to pay MA plans 14 percent more this year than it pays for traditional fee-for-service Medicare. During the election campaign, President Obama cited Medicare Advantage as an example of “programs that don’t work.” But it’s not so easy to dismantle a program that involves more than 10 million of the 45 million Medicare beneficiaries. In addition, MA plans cover many services for which seniors would otherwise have to buy MediGap coverage.

Prescription medications used to be one of those items until Medicare started covering them in 2006 through private drug plans. These plans—most of which are owned by the same insurers that run MA plans—overcharge members and taxpayers, according to the Office of the Inspector General (OIG) of the Department of Health and Human Services. Eighty percent of the Medicare Part D plans owe the government program a total of $4.4 billion for 2006 alone. The OIG didn’t estimate how much the plans overcharged in 2007 and 2008.

What’s even worse, the Centers for Medicare and Medicaid Services (CMS) isn’t doing much about it, the OIG report says. CMS is required by law to audit a third of all insurers that offer the prescription drug benefit. In 2006, CMS was supposed to do 165 audits. But, as of last April, it had begun only seven, the report said. In late January, CMS said it had begun or completed 103 of the audits required for 2006.

Meanwhile, according to a new study in Health Affairs, when Medicare beneficiaries hit the “donut hole” where Medicare stops paying for their drugs, 14 percent of them cut back on their medications. (Drug coverage stops when beneficiaries hit $2,250 in costs and resumes when their expenses reach $5,100 during a calendar year.) Perhaps when the government finally collects the $4.4 billion in overcharges from drug plans, it can give these seniors some relief.