One of the first political battles over health care this year will be fought on familiar ground.

The Obama administration has proposed cutting what the government pays private insurers to cover about one in five Medicare beneficiaries and using the savings to help finance comprehensive health coverage.

The plan, some say, could lead to fewer options and higher costs for some seniors.

The private Medicare Advantage plans have been a favorite target of Democrats, who point out that the government pays the plans an average of $1,000, or 14 percent, more per beneficiary a year than it would for someone in traditional Medicare.

Republican lawmakers have been strong advocates of the Advantage plans. They support a bigger role for private insurers in Medicare and are likely to resist any effort to trim the government's payments to the companies

"If the Obama administration proposal goes through, you'll probably see fewer Medicare Advantage plans, higher out-of-pocket costs and less coverage," said Terry Warner, president of TexMeds Inc. in Richardson.

"I expect huge changes."

The Advantage plans have proved an attractive alternative to recession-racked seniors. Enrollment increased 14 percent last year.

Medigap policies

Anyone who becomes eligible for Medicare soon realizes it pays only 80 percent of most bills. Some seniors cover the remaining 20 percent by buying supplemental, or Medigap, policies for an average of $200 a month.

Other seniors, turned off by the high Medigap premiums, sign up for an Advantage plan.

The insurance, from companies such as Humana Inc. and UnitedHealth Group Inc., combines Medicare's basic benefits with additional physician and hospital coverage and, often, prescription drug coverage for a single premium.

In some cases, the monthly premium is no more than the $96.40 that seniors pay for Medicare's basic outpatient coverage, though some beneficiaries have encountered shortcomings in their plans.

Enrollment has doubled over the last five years, as the government has increased its payments to insurers. More than 10 million beneficiaries, including 492,000 in Texas, now belong to a plan.

The program draws praise and criticism from Medicare beneficiaries.

Don Chase, a 71-year-old retiree who lives in Highland Park, says he's pleased with the coverage provided by his Advantage plan. When he had heart bypass surgery three years ago, his out-of-pocket expenses totaled only $800.

"I was stunned that I owed so little," he said. "I had been in the hospital for 12 days."

Virginia Leconti of Grand Prairie, on the other hand, joined a Medicare Advantage plan only to discover that her home health care agency wouldn't accept it. To keep her in-home care, she switched back to traditional Medicare.

"When the plan's salesman visited me, he played up the fact that the policy came with dental and vision benefits at no extra cost," she said. "I just assumed that my home health care was part of the package."

Warner says some health care providers don't take Advantage plans because they don't want to deal with more insurers.

Confusing options

Lue Taff, who oversees the elder-support staff at The Senior Source in Dallas, says people easily become confused by the dozens of available plans and sometimes find their insurance isn't as good as it was in traditional Medicare.

"Seniors may sign up for a private plan because of the low premium," she said. "Then they fall, break a leg, and learn that the physical therapy will cost them much more than it would have under original Medicare."

The Obama administration wants to use a system of competitive bidding to pay private insurers for Medicare Advantage plans. Its proposal calls for trimming $177 billion over 10 years from the program's costs.

Democrats say that paying private insurers less would "level the playing field."

Industry officials say those extra payments have helped insurers extend coverage to rural areas, keep premiums low and offer benefits that Medicare typically doesn't provide, like dental and vision care.

"A $177 billion cut would have a devastating effect on seniors in the form of reduced plans, higher premiums and fewer benefits," said Robert Zirkelbach, a spokesman for America's Health Insurance Plans, an
industry group.

Harold Rodgers, a financial planner who sells Advantage plans through The Brokerage Inc. in Lewisville, expects that some insurers would withdraw from unprofitable markets and that others would add $30 to $40 to their monthly premiums.

That would especially hurt lower-income seniors who now rely on the Advantage plans because they can't afford the supplemental policies that many seniors buy to fill Medicare's gaps in coverage, he said.

"They don't have $200 a month to spend on a supplemental policy," Rodgers said.

Long-term savings

Mike Smith, president of The Brokerage, says the proposed payment cuts would be shortsighted, since the private plans emphasize prevention and cover annual physicals and many diagnostic screenings.

The Advantage plans may cost the government more upfront, he says, but they save the health care system some money over the long term by discovering and treating problems early.

Consumer advocates, however, say that the private Medicare plans have been cash cows for the insurance companies and that their additional costs have been unfairly borne by taxpayers and other Medicare beneficiaries.

"Medicare's monthly premium for outpatient services would be $3 less if the government didn't subsidize these private plans," said Paul Precht, director of policy and communications for the Medicare Rights Center.

"It's not right for people to pay a higher premium just so others can get extra benefits," he said.

If Congress reins in the private plans, it should use some of the savings to help lower-income seniors with their out-of-pocket medical costs, says Jacqueline Angel, a professor of public affairs at the University of Texas at Austin.

"Lawmakers could expand some of the assistance programs and do more to spread the word that help is out there," she said. "Many seniors aren't even aware that they're entitled to this help, so they never sign up for
it."

Under the current Medicare savings programs, beneficiaries with annual incomes below $10,644 may qualify for a break on premiums, deductibles and co-payments. Those with slightly higher incomes may get help on premiums.

Angel says the proposal to trim the Medicare Advantage program will be an early test of the president's leadership. The powerful insurance lobby has already warned that "a cut of this scale would jeopardize the
health security of 10 million seniors."

Still, advocates like Precht say public concern over rising medical costs will provide an opening for change. "We only have so many dollars for health care," he said. "We must make sure we don't waste the ones we have."

MEDICARE DETAILS

President Barack Obama's budget blueprint proposes to cut Medicare Advantage payments, which have been 14 percent higher on average than the government's per-patient expenditure for traditional Medicare.

Under Obama's plan:

•Insurers that run the Advantage plans would be required to competitively bid to offer services in different parts of the country.

•The White House estimates the bidding would save the government $177 billion over 10 years. That money could be used to help pay for other health care reforms.

SOURCE: Dallas Morning News research