What Will Health Reform Do to Medicare Advantage?

The next reform battle will be fought in a peculiar trench of the health care landscape: Medicare Advantage. The latest controversy began when Humana Inc., an insurance company, sent a note to its enrollees predicting that health care reform would kick millions off Medicare Advantage -- an option for seniors to buy private insurance with public money. Some lawmakers castigated the company and a sterner whipping could be forthcoming. The Wall Street Journal op-ed page is spearheading the conservative indignation and some liberal blogs are playing defense.

But is it true? Will health care reform cut into Medicare Advantage?

It might. Democrats aim to cut as much as $120 billion from private insurers in Medicare Advantage over 10 years. CBO head Doug Elmendorf told lawmakers that those cuts "could lead many plans to limit the benefits they offer, raise their premiums, or withdraw from the program," the WSJ reports.

Back in August Ezra Klein wrote of the Medicare cuts:

From the beginning, Medicare has been named as one of the potential sources of savings that would fund subsidies for the uninsured. That sounds like service cuts, even if the specific changes don't involve anything of the kind (most of the savings would come from reducing overpayments to the private insurers that participate in the Medicare Advantage program).

Today he sounds more circumspect:

Democrats don't want to eliminate the Medicare Advantage program. But they want it to live within the same budget that Medicare uses. Republicans argue that pulling back these payments will force some Medicare Advantage plans to trim their benefits. That may well be true. But it is an argument against ever eliminating government overpayments to any program. It is an argument, in other words, for waste and abuse.

I think he's right -- Medicare Advantage is not going to emerge from $120 billion in cuts to private insurers without any change. The question, then, is whether the changes will be for the better or worse. Will the reforms gut Medicare Advantage and piss off a lot of senior citizens, who force the government to stop cutting the program? That's possible. Will the reforms bring down the taxpayer burden of public health programs while maintaining a very high standard for elderly care? That's possible too! But this country's public health programs are just as popular as private insurance. The important thing to note is that senior citizens love Medicare, with or without the (more expensive) Advantage program.