Commentary

Health insurers should stop scaring seniors

by Will Nicholson, M.D.

The health insurance industry should end its media campaign aimed at frightening senior citizens about Medicare reform.

Scary political advertisements should have ended with the midterm elections last month. Regardless of your political sensibilities, I hope you can see that intentionally scaring the elderly with inaccurate and incomplete information doesn't uphold the ethical standards of doing no harm that the rest of us in health care try to live by. The industry we count on as the steward of our precious health care resources should be investing in the health of its customers, not diverting millions of dollars to fund political melodrama.

The tactic of frightening senior citizens in order to advance a political agenda has become far too common. When a hospitalized patient of mine asked me not about the medical emergency that brought him to the hospital but instead about how he would pay for his medical care once "the government steals $100 billion from Medicare," I decided things had gone too far.

I understand that patient's fear. In fact, we all should, because we all depend on Medicare. The vital services Medicare provides are not only critical for the health of America's seniors but critical to the viability of our entire health care system. As the needs of Medicare patients change, Medicare must continually improve its services to meet those needs. But even well-intended changes can be frightening to patients whose health depends on Medicare.

Insurance companies are trying to capitalize on that fear because they stand to lose $100 billion.

Americans are already on edge about health care. What we need from the insurance industry is strong leadership and transformative innovation. Instead we are watching it funnel our hard-earned health care dollars into frightening and inaccurate ads about a boogeyman they call ObamaCare.

As a physician I am skeptical that America's recent health care legislation will fix everything that ails Medicare. I am even more skeptical of the fanciful "let the free market sort it out" approach that has been heavily touted as the alternative. I am not a health policy expert, but on behalf of my frightened patients I've taken a look at Medicare reform in order to try and calmly assess the changes that have sparked such fear.

Our health care system must adapt to some significant financial challenges. Health care costs continue to increase about 4 percent every year. Many health insurers are projected to increase premiums in the range of 10-20 percent in the next year. Without intervention, the Medicare A trust fund is projected to run dry in 2017. Even though we have devoted one-sixth of our economy to health care, one out of six Americans still don't have health insurance.

Any of these may be cause for alarm. But we have the most innovative health care system in the world; these challenges only become truly scary if we allow ourselves to be paralyzed by fear instead of working together to remedy them.

To address our health care system's financial ills we can increase funding, decrease benefits, or squeeze more efficiency out of the system. A big part of ObamaCare (known more formally as the Patient Protection and Affordable Care Act, or PPACA) is focused on efficiency.

The PPACA devotes a great deal of effort to decreasing the amount of fraud, abuse and waste in the health care system. It substantially raises performance expectations on patients, health care providers and health care administrators like insurance companies. The alleged $100 billion in "cuts" to Medicare actually refers to the amount that Medicare expects to save over 10 years by gradually eliminating excessive payments and demanding higher performance from the most inefficient Medicare Advantage health insurance plans.

Medicare Advantage allows private insurance companies to manage Medicare funds on behalf of the Medicare beneficiaries who join them. This is an alternative to the traditional government-administered Medicare benefit that the majority of Medicare recipients use. There are three reasons that some Medicare Advantage plans have been targeted for reform.

First, the average Medicare Advantage plan is projected to cost 9 percent to 13 percent more -- around $1,000 more per person in 2010 -- than a traditional Medicare plan.

Second, Medicare Advantage plans have not consistently shown higher quality or better outcomes than traditional Medicare in spite of their higher price tag.

Third, the higher cost of Medicare Advantage plans must be passed on to the other 78 percent of Medicare enrollees who remain on traditional Medicare. In short, these plans cost more, don't provide better quality and clearly don't show the "advantage" that their name implies.

The premise of Medicare Advantage is that private insurance companies should be able to outperform the traditional government-run Medicare program. Unfortunately, when private insurers don't outperform traditional Medicare, all Medicare beneficiaries end up paying the difference.

As a physician who works with many forms of Medicare I've been impressed by some of the innovations offered by the Medicare Advantage programs. Some have found ways to cut through red tape or to streamline care. However, some programs counterbalance added perks like vision or hearing coverage with higher out-of-pocket expenses, limited referral networks or administrative hurdles that get in the way of health care delivery.

The PPACA demands better value from Medicare Advantage plans. It gives Medicare the power to bargain with insurers on behalf of enrollees for better contracts. As a result, the average cost of Medicare Advantage programs has actually gone down by about 1 percent for 2011. In addition, seven private plans that "unfairly proposed to increase out-of-pocket expenses for beneficiaries while increasing their own profit margins" were simply denied contracts with Medicare.

The PPACA also targets value by rewarding performance. The legislation implements minimum efficiency standards that poorly performing Medicare Advantage plans must live up to and it offers bonus payments for plans that exceed efficiency goals.

By 2014 the minimum proportion of funds that Medicare Advantage plans must spend on actual medical care (known in the insurance industry as the "medical loss ratio") will be set at 85 percent. This means that companies that cannot get their operating expenses down to 15 percent -- more than twice that of Medicare -- will not be able to participate. This standard doesn't seem unreasonable, especially since the founding premise of Medicare Advantage was that private insurers would operate more efficiently than the cumbersome bureaucracy of traditional Medicare.

The PPACA doesn't single out private insurers. It also raises performance expectations for Medicare itself and uses the money saved on Medicare Advantage programs to pay for new preventive services and expand prescription drug coverage.

What is being disparaged as the government's attempt to steal $100 billion from seniors looks more like an attempt to avoid $100 billion in overpayments to insurance corporations.

Ironically, insurance corporations have no qualms when they are the ones denying payments. Health insurers routinely deny reimbursement for health care that they deem cost-ineffective. If a physician's performance doesn't meet specific standards, insurers will pay us less or exclude us from new programs. Medicare's new standards are holding health insurance corporations to the kind of standards patients and physicians are held to already.

Truth in advertising is important. Although the insurance companies call it stealing, I think most would agree that Medicare's plan to demand better value from private insurers actually sounds ... sensible. In fact, private insurers would probably do the same thing in Medicare's shoes.

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Will Nicholson, M.D., practices family medicine in Maplewood and blogs at triagepolitics.com.