Medicare Advantage

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If you’re under 65, chances are you don’t know a lot about a program known as Medicare Advantage. But you will be hearing a lot more about it soon. It has become a major front in the growing war that the insurance industry is waging on the Obama Administration’s health reform effort. On Tuesday, the health insurance lobby launched a seven-figure ad campaign in at least a half-dozen states warning: “Congress is proposing over $100 billion in cuts to Medicare Advantage. … Many seniors will see cuts in benefits.”

So what should you know about Medicare Advantage?

The first thing to know, as Ezra Klein has noted, is that Medicare Advantage is not the same thing as Medicare. It is an option that Medicare beneficiaries have had since the 1970s to get their coverage through private insurance companies, rather than the government. It was a big favorite of the Republicans who ran Congress during the 1990s. They poured much more money into the program in hopes that more seniors would sign up with the insurance companies that were promising better service at lower prices. And it has proven to be a pretty sweet deal, at least for the insurance companies and the beneficiaries. For the government–well, not so much.

As Phillip Rucker writes today in the Washington Post, some Medicare Advantage programs offer seniors lots of goodies that Medicare doesn’t, from gym memberships to free aspirin and band-aids. And the federal government is picking up much of the tab, paying 14% more in subsidies per Medicare Advantage recipient than it does for individuals with standard Medicare. No surprise that the number of Medicare beneficiaries enrolled in private plans has nearly doubled since 2003, to 10.2 million.

It is particularly appealing to healthier seniors. They are more likely to be in the market for, say, gym memberships. And because they go to doctors and hospitals less often, they are less troubled by the fact the Medicare Advantage charges fees for each visit, as well as higher co-pays. Sicker (and more expensive) patients are more likely to stick with traditional Medicare, and pay for supplemental coverage through that program.

But Medicare Advantage has legions of critics, both on Capitol Hill and among health care experts, who say it wastes money and doesn’t provide the efficiencies it promises. That’s why it was one of the first places Congress looked when it was searching for ways to wring some savings out of the system. Still, the new insurance industry ads are likely to have an effect, because if there’s anything politicians know, it is that it is perilous to mess with a popular senior program.

The classic example was the Medicare Catastrophic Coverage Act of 1988, which at the time had seemed like a good idea. But it turned out seniors didn’t want to pay extra for the additional coverage it provided; at one point, House Ways and Means Chairman Dan Rostenkowski saw his car surrounded by a mob of elderly Chicago constituents. He fled, and they literally chased him down the street.

Will these new ads have that kind of backlash? No one can say yet. But a word of advice to lawmakers: You might want to pack your running shoes the next time you go home. Elderly people can run faster than you think — especially if they’ve been going to the gym.