Road to Revival: Preserve Medicare Reform for Seniors

Something in the congressional health reform plans will require you to change the coverage or the doctor you have. You will be affected if you are among the growing number of Medicare beneficiaries who have chosen a Medicare Advantage private health plan. If certain provisions become law, Medicare payments to these plans will be cut, causing a reduction in benefits and physician networks.

More than 150,000 Medicare beneficiaries in Virginia would be subject to these restrictions. Sens. Mark Warner and Jim Webb will soon vote on the proposed payment cuts.

In traditional Medicare -- established in the 1960s -- administrators in Washington establish coverage and payment rules for private-sector vendors who manage the paperwork and pay the bills. Washington dictates the fees paid to physicians and hospitals. No matter the quality of care provided by the physicians and hospitals, all health care providers get to participate. Almost no attention is paid to coordinating the care or helping beneficiaries navigate the medical system.

Medicare Advantage private health plans changed all of that. They provide modern benefits management, much like that received by the 160 million people covered by commercial, employer-provided health insurance. In addition to valuable preventive services not covered by Medicare, most Medicare Advantage private health plans provide formal assessments of health risk, nurse care managers, health education initiatives, and better-coordinated care when you are really sick. They check the quality of care of the network of physicians and hospitals and help to channel you to preferred clinicians.

Warner and Webb may not even realize that Virginia's growth in Medicare Advantage over the past five years has been remarkable. As recently as 2004, there were just 20,000 Medicare beneficiaries who had made the switch from 1960s Medicare. In April of 2009, there were more than 150,000 who had chosen private health plans.

And Medicare Advantage members are spread all around the commonwealth. Major pockets of enrollment exist in Northern Virginia, Richmond, and Tidewater (roughly 20,000 each). An additional 47 cities and coun ties in Southwest and Southside Virginia have more than 1,000 people who have chosen Medicare Advantage.

Why are some in Congress out to get Medicare Advantage? Some studies suggest that the government pays Medicare Advantage private health plans too much. The common wisdom is that the payment is about 13 percent too high, compared to what the cost would be for the same people if they were in 1960s Medicare. This is despite the fact that the government regulates Medicare Advantage profits by requiring any excess payment to be passed on to beneficiaries in lower premiums or higher benefits.

As a health economist who has studied these issues since the 1980s, the notion of an excessive payment is not only weakly supported by the research, it misses the entire point. Higher enrollment in Medicare Advantage is fundamentally reforming 1960s Medicare and attacking Medicare's poor quality and costs, especially in high-cost areas of the country.

Improvements fostered by Medicare Advantage have spillover effects to the entire Medicare system. One estimate is that an increase of 20 percent to 30 percent market share of Medicare Advantage private health plans is associated with a 3 percent to 7 percent reduction in overall Medicare costs. These are permanent reductions over many years across the entire Medicare program. Moreover, they hit the hardest in Medicare's highest-cost areas of the country.

Medicare is the largest single payer of health services in the U.S. In 2004, Medicare accounted for 20 percent of hospital services, 38 percent for home health services, and 28 percent for durable medical equipment.

Medicare accounts for 3 percent of spending in the entire economy. Reliance on the 1960s style of managing health benefits is not the way to go. We should pay extra for bringing real reform to the enormous Medicare program.

Virginia has made such progress with significantly reforming Medicare through rapid growth in Medicare Advantage. Seniors who have chosen Medicare Advantage are reaping the benefits of enhanced coverage and better care coordination, and they deserve to retain their choice to select this Medicare option.

We could see a retreat on better quality and lower cost for all if those beneficiaries in the vanguard of Medicare reform are forced to return to 1960s Medicare. Repeatedly, the American public has been told that "if you like what you have, you can keep it." Let's make sure this statement isn't amended to say "unless you have Medicare Advantage."

Louis F. Rossiter, Ph.D., is a research professor for the Thomas Jefferson Program in Public Policy at the College of William and Mary.