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Health Insurance Reform Daily Mythbuster: 'Health Insurance Reform Will Eliminate Medicare Advantage Plans'

Health insurance reform opponents continue to spread myths about America's Affordable Health Choices Act, including saying that health reform will eliminate Medicare Advantage (MA) plans.  America's Affordable Health Choices Act continues MA plans, but eliminates wasteful taxpayers' overpayments that increase private insurance company profits, not patient care.

Here are the Top Five Medicare Advantage Myths debunked:

MYTH: Medicare Advantage plans run by private insurance companies have been able to provide better value to U.S. taxpayers than traditional Medicare.

FACT:  According to the nonpartisan Medicare Payment Advisory Commission, U.S. taxpayers pay 14 percent more on average to private Medicare Advantage plans to cover Medicare beneficiaries than it would cost traditional Medicare to cover them.

These overpayments to private insurers were created in the Medicare Modernization Act, which the Republican-controlled Congress passed in 2003 and President George W. Bush signed into law.

When the Medicare Advantage program was created, insurance companies said that they would offer coverage for less than it was costing the government under traditional Medicare to provide the same services.  Today, this promise has been broken and the taxpayers are paying the price - these Medicare Advantage plans are receiving 14 percent more. 

On average, this giveaway to private insurers costs an extra $1,000 per enrollee.  This adds up to an extra $12 billion a year--and that cost is passed on to all Medicare beneficiaries.

The nonpartisan Medicare Payment Advisory Commission has recommended phasing out these overpayments to Medicare Advantage - which is what the America's Affordable Health Choices Act does.

MYTH:  The overpayments to private Medicare Advantage plans mean better coverage for seniors.

FACT: Very little of the extra money going to private plans under Medicare Advantage goes to beneficiaries.  Most of these taxpayer funds are used to pad the profit margins of private insurers.

According to a study by the Robert Wood Johnson Foundation, only 14 cents for every extra dollar given to Medicare Advantage (MA) plans end up translating into additional benefits.  The other 86 cents goes into the pockets of the insurance companies.

The independent Medicare Payment Advisory Commission notes that the quality of care of traditional Medicare users and MA users are fairly similar -- while MA users actually reported more problems accessing specialists.

MYTH:  The current system of Medicare Advantage plans, despite the overpayments, is a good investment for everyone - including America's seniors.

FACT:  Everyone pays the price for these overpayments - including the 77 percent of Medicare beneficiaries who are enrolled in traditional Medicare.  According to the Chief Actuary for the Medicare program, seniors in traditional Medicare pay higher premiums to subsidize Medicare Advantage plans - a typical couple paying an additional $90 a year.

The Chief Actuary has also stated that the overpayments to the Medicare Advantage program speeds up the depletion of the Medicare trust fund by 18 months and threatens the long-term solvency of Medicare.

MYTH:  Enactment of the House health insurance reform bill will mean the elimination of private Medicare Advantage plans.

FACT:  The House health insurance reform bill does not eliminate Medicare Advantage plans - instead, it simply phases out the overpayments going to these plans.  Indeed, the Congressional Budget Office projects that most private Medicare Advantage plans would continue to operate, once the current overpayments are phased out.

Under the House bill, Medicare Advantage plans that are able to operate efficiently and provide extra value to their enrollees through care coordination will continue to flourish. 

MYTH:  Enactment of the House health insurance reform bill will lead to worse health care coverage for Medicare Advantage enrollees.

FACT:  As was seen above, most of the extra money going to private plans under Medicare Advantage - which the House bill phases out - does not go to seniors for additional benefits.  According to the study by the Robert Wood Johnson Foundation, 86 percent of this extra money simply goes into the pockets of the insurance companies.  Hence, the phasing out of these overpayments will mostly impact insurers' extra profits - and not seniors.

Additionally, the House bill makes reforms to Medicare Advantage that will improve the coverage of care for seniors enrolled in those plans.  Currently, some Medicare Advantage plans offer lower cost-sharing for drugs and vision care but higher cost-sharing for services such as hospitalizations and home health services. As a result, seniors can end up spending more out-of-pocket under a Medicare Advantage plan, not less. 

The House bill contains key provisions that limit cost-sharing requirements in Medicare Advantage plans to the amount charged for the same services in traditional Medicare coverage - which can end up saving seniors enrolled in certain Medicare Advantage plans thousands of dollars.