Congressional Report on Medicare Advantage

For some reason, it doesn’t seem to be getting a lot of play in the press, but the information is pretty interesting.

On Wednesday, The Energy and Commerce Subcommittee released a report on Medicare Advantage.  Let’s just get right into the findings:

From 2005 through 2008, the average Medicare Advantage insurer spent over 15% of premium revenue on profits, marketing, and other corporate expenses. Two-thirds of the Medicare Advantage insurers surveyed by the Committee had a medical loss ratio below 85% during at least one of the four years examined. Six of the insurers had medical loss ratios below 75% in one or more years. In comparison, traditional Medicare spends less than 1.5% on administrative expenses and over 98% on health care. In the aggregate, the Medicare Advantage insurers spent $1,450 per beneficiary in 2008 on profits, marketing, and other corporate expenses, nearly ten times as much as traditional Medicare spent on administrative expenses per beneficiary.

Saying that you have a medical loss ratio of 85% means that only about $0.85 of each dollar goes to actual care.  Compare that to traditional Medicare, where more than $0.98 of each dollar went to care.  Remember that the next time someone tells you how much more efficient private insurance companies are than government run insurance.

Requiring all Medicare Advantage insurers to have a medical loss ratio of 85% would provide billions of dollars in additional medical services to seniors. The total amount spent on profits, marketing, and other expenses by Medicare Advantage insurers over the last four years was $27 billion. The House health care reform bill requires Medicare Advantage plans to spend at least 85% of their total premium revenues on medical claims. If this threshold had been in effect from 2005 through 2008, the Medicare Advantage insurers would have spent an additional $3 billion on their beneficiaries’ medical care, enough to eliminate all copays for preventive care for all Medicare beneficiaries for ten years.

Some Medicare Advantage were so “inefficient” that merely requiring them to raise their ratio to 85% (still way below traditional Medicare) would raise enough money to eliminate any copays for preventive care for everyone in Medicare for a decade?  Imagine if they were all as efficient as government run traditional Medicare.

In 2007 and 2008, Medicare Advantage insurers with medical loss ratios lower than 85% paid their executives over $1.2 billion. In 2007, a company that had a medical loss ratio of 79% paid an executive over $35 million. The same company paid 16 more executives salaries and bonuses worth $1 million or more. Another company with a medical loss ratio of 79% paid more than $210 million in compensation to 260 executives.

No comment.  None needed.

Remember, the proposed cuts to Medicare are just to Medicare Advantage.  Not only has Medicare Advantage been spending much, much more on non-medical costs, they have also been taking about 114% of what we pay per traditional Medicare enrollee just to function.  If the government were requiring 114% of what private companies were to provide a service, and then had nearly ten times the overhead to do it, we would all be losing our minds.  It’s not good economic sense.

Read the whole report if you like.

Hidden information below


Email Address*