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Medicare Waste on Medicare Advantage

July 29, 2012
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A report by the Government Accounting Office (GAO) found that the Medicare Advantage option wastes $8 billion per year.

This option was started under the 2nd Bush administration under the belief that an HMO-like product operating as a for-profit insurance option could lower costs through care management, wellness, and prevention. Medicare Advantage plans cover about ¼ of all Medicare beneficiaries and have been more expensive than traditional Medicare since its inception. They have continued under the Obama administration.

In addition, several previous studies have found that Medicare Advantage plans have healthier patients on average than traditional Medicare. They do this in part through enrollment techniques such as advertising at senior fitness centers.

The failure of Medicare Advantage to control costs serves as a cautionary tale of the limits of free enterprise using for-profit insurance companies to lower U.S. healthcare costs. These plans did not fundamentally alter the doctor-patient relationship, nor did they confront the POEM assumptions. Therefore, they were doomed to failure.

To drastically lower U.S. healthcare costs, we have to dig deeper. We have to talk about concepts such as risk, primary care, humility, evidence, and cost-effectiveness. Otherwise, it’s just another for-profit insurance company clueless about the true drivers of U.S. healthcare costs stealing more resources from the rest of the U.S. economy in the form of fewer jobs and lower wages for everyone else.

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2 Responses to Medicare Waste on Medicare Advantage

  1. Tracie Updike MD on July 30, 2012 at 7:18 pm

    Dr Young,
    It is obvious that you are drinking the cool aid! It is also obvious thar you are not a member of a Medicare advantage insurance option. I am! And maybe most Medicare advantage are wasting money; let me tell you the IPA I am a member of is not! Most of ou PCP’s are at least a three star medicare doctor. I am a 3.5 and am working my —- off trying to get moved up to a 4 or even a 5 star doctor. That means convincing my patients to get their preventive healthcare done!! And as you know that is not easy. All of my Medicare and advantage patients have a list of what they need to done each year. And our hospital charges are way down; because we the PCPs are doing the grunt work to keep our patients healthy. And so when the gravy goes out of the advantage option, I will be finding another path because I can’t work any harder then I do!

    • Richard Young MD on August 5, 2012 at 8:16 pm

      Dr. Updike,

      Sorry it took a while to get back to you. I’m sure you work hard to care for your patients. However, just because you may be going above and beyond doesn’t mean the overall payment approach makes sense at the federal level.

      Your star rating system is probably a great example of the administrative waste inherent in this system. It needlessly divert resources away from patient care to paying for layers of bureaucracy.

      Remember, prevention does not save money. The insurance company middle men are ignorant and do not understand this. If this does not make sense to you, check out some of my past posts on prevention, or buy a copy of my book.

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