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Sebelius Defends Medicare Cuts in Health Care Law

6:30 PM, Sep 30, 2010 • By JOHN MCCORMACK
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In addition to pushing back this morning against the Wall Street Journal's story, which reported that McDonald's is potentially dropping its health care plan, HHS secretary Kathleen Sebelius dismissed a report that an insurance provider in New England will cancel its Medicare Advantage plans for 22,000 seniors.

Sebelius Defends Medicare Cuts in Health Care Law

Sebelius said that the health care law, which just turned six months old, is not to blame for the decision by insurance company Harvard Pilgrim. "Companies move in and out of Medicare Advantage all the time," said Sebelius at a breakfast organized by the Christian Science Monitor. "They do it because of business plans. They do it because of other [reasons]." 

"I can guarantee you that in the market where Harvard Pilgrim operated, every Medicare Advantage beneficiary will have the choice of a couple of new plans to choose from," she continued. "They are not losing an opportunity to enroll in an M.A. plan. They may be losing the opportunity to enroll in their plan because, you know, the company chose to pull out. But that’s been the case since the early 90s with M.A. plans, and it will continue to be the case."

But a Harvard Pilgrim official explicitly cited "cuts in Medicare [that] are being used to fund national health care reform" as one reason it was pulling out. The Boston Globe reported that Harvard Pilgrim also objected to a requirement that the insurance company "form a contracted network of doctors who agree to participate for a negotiated amount of money. Under current rules, patients can seek care from any doctor."

Sebelius replied that insurance companies offering Medicare Advantage are "being paid exactly the same that they were being paid in 2010. So they’re not getting cuts from Medicare. We made that clear six months ago before the bidding process started. They are well aware of that. So they can cite, you know, what evidence they want, but it is not based on a cut that they have received from CMS."

But Sebelius later acknowledged that the government will cut Medicare Advantage--or "cease to overpay" for Medicare Advantage--when the health care law begins to go into full effect.

"I find the discussion sort of disheartening and disingenuous," Sebelius said of criticism of Medicare cuts in the health care law. "The 500 million [sic] dollars of various Medicare spending issues really [comes from] two primary areas. Some of it is ceasing the overpayment for Medicare Advantage—companies being paid on average about 12 percent more than fee-for-service Medicare. It was set up that way intentionally by Congress in the early 90s to get private plans to participate and offer some competition and choice, but it has continued. And the data is pretty clear that there are no medical advantages for that overpayment. The health impact is not more significant. The health outcomes are not better. So we are gradually over time going to--not cease to pay them--but cease to overpay them."

If the government simply restrains the growth of Medicare "from a 6.8 percent to a 6 percentgrowth rate," Sebelius said, "you actually get 500 million [sic] dollars."

During the first ten years that the law is in full force, $1.1 trillion will be diverted from Medicare to be spent on Obamacare. Paul Ryan and other Republicans have criticized Obamacare's cuts to Medicare as a rationing scheme. And a number of Republicans have defended Medicare Advantage as a free-market reform that, although somewhat more costly, offers seniors more health care choices.

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