Advantage Cronyism

If you like your doctor, you will be able to keep your doctor, at least if you pay cash.

One of the many problems with funneling our nation’s health-care system through our nation’s political system is that it would politicize health care. The health-care bill that recently passed the Senate could hardly provide better evidence of this claim.

James Madison wrote that “history informs us of no long-lived republic which had not a senate,” as such a “temperate and respectable body of citizens” is necessary to ensure an “attachment to the public good” and to prevent us from falling prey to those “stimulated by some illicit advantage.” But Senate Majority Leader Harry Reid’s conception seems to differ somewhat from Madison’s. Responding to accusations that the process culminating in a 1:00 AM Sunday night (Monday morning) vote on Obamacare had degenerated into something approximating “Cash for Cloture,” Reid replied, “I don’t know if there is a senator that doesn’t have something in this bill that was important to them. And if they don’t have something in it important to them, then it doesn’t speak well of them.”

By Reid’s standard, we certainly have no choice but to speak well of the Democrats. There was the “Louisiana Purchase” of Mary Landrieu’s vote, in exchange for $100 million in extra Medicaid funding for Louisiana; the $100 million “Cornhusker Kickback” to Ben Nelson, to make Nebraska the only state in the union that wouldn’t have to pay into Medicaid; and the “U Con” secured by Christopher Dodd, to get Americans to pay $100 million for a medical center in Connecticut. One gets the impression that Reid had a sign on his door, saying, “Will pay $100 million for votes.”

Things got so bad that even Democratic Senator Michael Bennet of Colorado declared on the Senate floor, “I’m not happy about the backroom deals.” (He was happy enough, however, to vote for the bill that contained those backroom deals.)

But as egregious and disreputable as these examples are, the most significant example of the politicizing of health care involves Medicare Advantage, the popular program in which nearly a quarter of all seniors are currently enrolled. Under Obamacare, those 11 million seniors would lose Medicare Advantage benefits and, in some cases, access to Medicare Advantage plans altogether. This would, of course, be in direct contradiction to President Obama’s very public pledge that “no matter how we reform health care, we will keep this promise: If you like your doctor, you will be able to keep your doctor. Period. If you like your health care plan, you will be able to keep your health care plan. Period. No one will take it away. No matter what.”

The President’s pledge would also prove to be untrue for many Americans with high-deductible, consumer-driven health-care plans. Such plans put people in charge of their own health-care dollars. But the essence of Obamacare is to expand the role of government and insurers, at the expense of individual’s control. According to the Congressional Budget Office (CBO), Obamacare would funnel $1.0 trillion over 12 years from American taxpayers, through the federal government, to private insurers (and not for consumer-driven plans), while requiring Americans to buy the insurers’ product. It’s no coincidence that insurers back Obamacare.

And they’re not the only ones. Eighty-nine percent of seniors currently have some form of supplemental, or Medigap, coverage in addition to Medicare. For many lower-income Americans, Medicare Advantage provides that supplemental coverage. So, Medicare Advantage cuts would often result in their having to buy Medigap plans. The largest seller of such plans? AARP–one of Obamacare’s marquee supporters.

It turns out, however, that not everyone enrolled in Medicare Advantage would lose their benefits. Senator Bill Nelson cut a deal with Senator Reid to carve out an exception for residents of Florida. Dubbed “Gatoraid,” this exception would, in the words posted on Senator Nelson’s website, “preserve the benefits for most of the current Medicare Advantage enrollees in Florida,” where “an estimated 800,000 would be grandfathered in.”

This isn’t merely another example of politicizing health care by giving pork to a particular state and making all Americans pay for it. Here, with just a few exceptions, the benefits preserved in one state would be lost in all of the others. Only Floridians (and a smattering of others) would continue to enjoy benefits now available to all seniors nationwide.

Nelson’s claim of 800,000 is almost certainly an exaggeration, as 300,000 appears to be the more accurate figure. But no one knows for sure. The legislation doesn’t explicitly mention Florida but says that the Secretary of Health and Human Services shall determine which seniors would qualify for the exception. That determination would involve application of a statutory formula, outlined in the bill, based on private companies’ Medicare Advantage bids, which are proprietary and are not made available to the public–or even to members of Congress. So it’s not entirely clear who would qualify for the exception. What is clear is that most people wouldn’t.

According to the Association of Health Insurance Providers (AHIP), the best available source for this information, almost no one outside of Florida would benefit from the exception. AHIP estimates that 99 percent of the exceptions would be granted either to Florida or to the city of Baltimore, with 96 percent of them going to Florida.

Only those seniors living in Florida–or Baltimore–at the time of enactment would qualify. So, if the Democrats were able to hold on to the exceedingly slim margins by which they squeezed their tailor-made health bill through the House (with just two votes to spare), and a different tailor-made health bill through the Senate (with no votes to spare), and somehow squeeze a compromise version through each chamber in the face of double-digit opposition from the American public, then the date of enactment would be the binding date. Thus, if a bill were to pass, say, on February 15, then loading up the moving truck and heading to Florida on February 16 wouldn’t do you any good. Neither would celebrating your 65th birthday on that same day, even if you had been a lifelong Florida resident. Born a day late, your birthday present would be a card admitting you to the new, scaled-down Medicare.

But, in reality, “Gatoraid” wouldn’t even apply to all of Florida. According to AHIP, it would apply only in Miami-Dade, Broward, and Palm Beach counties. Why? Because, after all of the talk from President Obama about the need to improve efficiency in the delivery of Medicare, the bill’s statutory formula would reward only those counties who offer Medicare in the costliest, most inefficient manner. And the hanging-chad counties are national leaders in costliness and inefficiency.

Meanwhile, seniors living in rural counties across America, arguably most in need of access to Medicare Advantage because they live where doctors are harder to come by, would lose Medicare Advantage benefits. So, this exception is clearly not based on the health-care needs of given seniors, but on the electoral needs of a given senator. As such, full Medicare Advantage benefits would be cut everywhere except where they are already most costly and where waste and fraud are generally most rampant.

Last fall, 60 Minutes reported that, “If you want to find Medicare fraud, the first place you should look is South Florida,” where “it has pushed aside cocaine as the major criminal enterprise.” Both 60 Minutes and the Washington Post report that, nationwide, Medicare fraud now costs American taxpayers a staggering $60 billion a year. In comparison, the most recent Fortune 500 tallies show that the annual profits of America’s ten largest private insurance companies are $8.3 billion–combined. Medicare loses seven times as much as private insurers make. And it loses more in South Florida than anywhere else. The cuts to Medicare Advantage are hardly the only Medicare cuts that seniors would experience under the Democrats’ proposed health-care overhaul. The CBO projects that, in the Senate bill’s real first ten years (2014-23), more than $1 trillion dollars would be siphoned out of Medicare and spent on Obamacare–three-quarters of which would be taken from parts of Medicare other than Medicare Advantage.

Furthermore, it would not merely be the direct effects of Obamacare’s cuts to Medicare that would affect seniors–as evidence is already starting to highlight. On New Year’s Eve, Bloomberg reported that “The Mayo Clinic, praised by President Barack Obama as a national model for efficient health care, will stop accepting Medicare patients as of tomorrow at one of its primary-care clinics in Arizona, saying the U.S. government pays too little.” Bloomberg reports that, if the clinic’s 3,000 Medicare patients “want to continue seeing their doctors,” they “will be forced to pay cash.”

In light of all this, it now appears that President Obama meant to say something more along these lines:

“No matter how we reform health care, we will keep this promise: If you like your doctor, you will be able to keep your doctor, at least if you pay cash. Period. And if you like your health care plan, you will be able to keep your health care plan. Period. No one will take it away. No matter what. Unless you have a consumer-driven plan or a plan like Medicare Advantage, in which case you’ll probably lose it. Unless your Medicare Advantage plan operates in the counties of Miami-Dade, Broward, or Palm Beach, in which case you’ll get to keep it. Period.”

Jeffrey H. Anderson, the director of the Benjamin Rush Society, was the senior speechwriter for Secretary Mike Leavitt at the U.S. Department of Health and Human Services.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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