Buchanan Speaks Out Against Medicare Advantage Cuts at Congressional Hearing

WASHINGTON – U.S. Rep. Vern Buchanan (R-Longboat Key) urged the Obama Administration to reverse cuts to subsidies to Medicare Advantage plans that are part of the Affordable Care Act. The plans, which have been criticized as non-competitive and inefficient, serve more than 54,000 seniors in Sarasota and Manatee Counties.

Speaking at a Ways & Means Committee hearing on the future of Medicare Advantage (click here for video), Buchanan argued that future cuts to the program would be harmful to seniors who could risk losing their plans, benefits and providers who stop participating. 

The Affordable Care Act cuts more than $300 billion in subsidies to Medicare Advantage over the next 10 years, many of which will begin to be phased in next year.

Medicare Advantage plans are private plans, created under the Bush Administration, that serve as alternatives to the public program. They offer additional benefits beyond those provided in public Medicare, often at no additional cost to beneficiaries.

While this can be seen as a great deal for beneficiaries, critics have called it a very bad one for taxpayers, who pick up the extra cost, which typically far exceeds the dollar value of the benefit.

Studies have suggested that for each dollar of additional payments that such plans receive, as little as 14 cents is returned to beneficiaries in the form of additional benefits. The Affordable Care Act seeks to cut funding to Advantage plans by way of lower subsidies in order to redirect that funding toward endeavors it claims will offer a better return on public investment.

Medicare Advantage plans have been criticized for failing to promote strong competition for enrollees, as plans receive a formula-based government subsidy. Critics have suggested an approach closer to that of the ACA's health insurance exchanges, which instead of paying a more arbitrary formula, bases all payments on the second lowest bid per plan.

Meanwhile, federal officials are seeking broader powers to recover excessive charges paid out on Advantage plans. The Centers for Medicare and Medicaid Services says its wants to set up “a formal process to recoup overpayments.” A recent Center for Public Integrity investigation found that Medicare paid Advantage plans nearly $70 billion in “improper” payments, just in the years 2008-13.

The overpayments primarily resulted from inflated fees paid to companies who overstated the health risks of their patients. Medicare pays more for higher-risk patients via a formula referred to as their "risk score," mostly entrusting health plan administrators to identify and return any overpayments.