Like all privatization schemes, Medicare Advantage was developed under the idea that private insurers could provide the same services as Medicare at a lower cost. But, again, like all privatization schemes, the reverse was true. Costs have gone up, and, in many cases, available services have disappeared.

According to an analysis by the nonpartisan Congressional Budget Office, Medicare Advantage plans cost taxpayers an average of 12 percent more - and up to 50 percent more in some areas - than normal Medicare. In Michigan, MA plans are overpaid an average of 10.8 percent per enrollee. This means it costs $814 more per year for every person enrolled in an MA than it would cost to provide care for that person in traditional Medicare. Based on January 2007 enrollment in MA plans, this amounts to an overpayment of $163 million to private plans for Michigan alone. This extra cost doesn't necessarily indicate extra benefits. The higher prices in the private plans come with promises of improved flexibility and benefits, but some beneficiaries discover after signing up that they're actually getting less than traditional Medicare offers.

This overpayment isn't surprising - it's exactly the kind of expensive waste that comes from funneling valuable public resources into the pockets of insurance industry CEOs - but its scale is a cause for serious concern. The CBO report found that, with 20 percent of Medicare-eligible seniors using Medicare Advantage plans, the overpayments will total $54 billion over five years, and $160 billion over the next ten.

Everyone agrees that Medicare Advantage is more boondoggle than benefit.

Constituency groups that advocate for the rights of Medicare beneficiaries, including the Medicare Rights Center, the Alliance for Retired Americans and USAction (of which Michigan Citizen Action is an affiliate), are united in their support for "achieving financial neutrality between payment rates for the Medicare fee-for-service program and the Medicare Advantage program - ensuring that plans are no longer paid 12 percent more than the cost of covering the same beneficiaries in fee-for-service."

An American Medical Association statement to Congress on Medicare Advantage's "Private Fee-For-Service" plans noted that "it is difficult to detect any meaningful benefits either to patients or to rural communities that is derived from these enormous government subsidies. In fact, there is mounting evidence that PFFS plans are luring their enrollees with false promises, skimping on benefits and reimbursement rates, and using their government subsidies primarily to increase profits for their shareholders."

Medicare is privatizing, and it is costing U.S. taxpayers billions. Private Medicare plans (known as "Medicare Advantage" or "MA" plans) have grown rapidly in the past several years. Today, about 8.5 million Medicare beneficiaries nationwide are enrolled in some form of private Medicare plan - nearly 20 percent of all Medicare beneficiaries, and a 60 percent increase from 2003. This growth is the result of decisions Congress and the Bush Administration made as part of the 2003 Medicare Modernization Act (MMA), which substantially increased subsidies to private insurance companies and has accelerated the privatization of the Medicare system.

Private plans in Medicare were first introduced in the early 1980s. Initially, private plans were promoted as a way to save money for both beneficiaries and taxpayers. In theory, plans would be able to negotiate lower rates with health care providers by promising them a steady stream of patients. In addition, managed care offered the potential of better-coordinated patient care than the traditional fee-for-service Medicare system, which could lead to improved health outcomes and increased savings.

In reality, however, private Medicare plans have never saved money compared to traditional Medicare. Today, on average, Medicare Advantage plans receive a payment of 12 percent more per member than it would cost to provide care for that person in traditional Medicare. Taxpayers are paying billions of dollars to maintain these overpayments while seniors and others in Medicare are paying millions more in inflated Medicare premiums.

This problem is especially serious this year, as Congress looks to expand health coverage for low-income children and seniors while maintaining tight fiscal discipline. Overpayments to private Medicare plans need to be rolled back. Private plans can exist in Medicare, but only if they are willing to compete on a level playing field, without the additional billions in taxpayer subsidies. MORE>>