One way to fix Medicare

Medicare is broken and the government is not trying to fix it. If anything they are destroying it. Medicare has 3 different options for its recipients.

  1. Original Medicare and a prescription drug plan. The good news is you can see any Doctor, go to any hospital anywhere in the US as long as they take Medicare. The bad news is Medicare is an 80/20 plan. Medicare pays 80% of the bill and the recipient pays the rest. It is actually a little more complicated than that because when Medicare receives a bill, they use their costing method and reduces the charges to what Medicare allows. That is typically about 15% less than the bill. Then they pay 80% and the recipient has to pay the balance. Additionally, if the Doctor or facility doesn’t take Medicare Assignment of Benefits, then the Doctor, facility can balance bill the part that Medicare reduced. If the Doctor or facility takes Medicare assignment then the Doctor or facility cannot balance bill you the difference. So if you have Original Medicare you get to pay the 20% that Medicare doesn’t cover and perhaps the 15% that Medicare disallowed. Not good for the Medicare recipient. The other bad part of Original Medicare is that there is no maximum out of pocket. Said another way, the Medicare recipient has an unlimited liability for 20% of the remainder of their bill.
  2. Medicare Advantage Prescription Drug (MAPD) plans. These plans are HMO, PPO or PFFS (Private Fee for Services) type plans. The plan type is not the issue; the way the plans get paid is the issue that needs to be addressed. Every year CMS (Centers for Medicare & Medicaid Services) does an audit of the costs done by each county in the US. Then they reduce that amount by about $200 per month, per recipient and they pay that money to the insurance company with the MAPD plan. Said another way, if the plan has 25,000 members and CMS saves about $200 per month, per recipient, the savings are huge. $50,000 per month times 12 months is $6,000,000 per year. (That’s for only one plan in one county in the US.) There are 17.8 million Americans on MAPD’s nationwide. There are 3,086 counties in the US or about 62 counties per state. Each county had different costs for healthcare so the average of $200 is conservative. (NY County or San Francisco County healthcare costs are greater than those in Louisiana or Georgia or Nebraska.) Once that money is paid to the insurance company, Medicare washes their hands of the costs are those costs are now the responsibility of the insurance company. CMS monitors these plans to make sure they do what is required and if they don’t CMS puts sanctions on the insurance companies to bring them into line. Here is where the savings start to mount up. Consider the 17.8 million Americans on Advantage plans with the average savings of $200 per month per recipient and the savings start climbing. Now add the other components and you can start to see the magnitude of the savings. My proposal is to pay the top 2 CPA firms in the US $15 million dollars to audit both CMS and 2 of the larger MAPD’s. Here’s how it would work. Pay the largest CPA firm in the US $10 million and have them audit CMS using AICPA cost accounting procedures and policies. (Currently CMS uses government accounting costing methods which do not take into consideration many of the costing items private business has to consider. The AICPA standards of cost accounting take into consideration the cost of the buildings, fraud and all other typical business costs. Government accounting does not.) Pay the 2nd largest CPA firm $5 million to audit 2 of the largest MAPD plans. My suggestion is Kaiser and United Healthcare. Once those audits are completed, have the same CPA firms compare the costs of CMS to the MAPD’s. I believe you will find that the MAPD’s are more efficient and more cost effective than CMS. Ever heard of an insurance company pay out over $60 billion annually in fraud? I haven’t and neither has anyone one else. To recap, the MAPD’s save CMS $200 per month, per recipient times 17.8 million Americans. Add the $60 billion admitted fraud CMS pays out and even consider that dollar amount to be higher and you have significant money saved to pay for the Affordable Care Act. The other part of the equation is that Original Medicare allows you to go to any Doctor, any hospital anywhere in the US as long as they take Medicare. Here’s where it gets tricky but for this to work, the MAPD network of Doctors have to include what Original Medicare does, allowing you to go to any Doctor, any hospital anywhere in the country. Not too sure how that would be accomplished but it is workable if everyone is willing to compromise to save the US significant money. Of course, there are other factors to consider but if people are willing to sit down and really discuss the issues anything can be accomplished.

Len Barend
702-250-2200
len@insurance4unevada.com

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