President Lyndon Johnson completes the task of signing Medicare into law. (AP photo)

Two fellows at the Urban Institute are keeping up the fight against Medicare Advantage budget allocations.

The fellows, Robert Berenson and John Holahan, contend in a Medicare budget commentary that improving traditional Medicare program benefits makes more budget sense than being generous to the private insurers that provide the Medicare Advantage plans.

Berenson and Holahan acknowledge that Medicare Advantage plan enrollees get richer benefits than enrollees in the traditional Medicare program.

But “improving Medicare’s protection is better addressed by the addition of limits on out-of-pocket  payments” than by maintaining the current Medicare Advantage program funding rules, Berenson and Holahan write in their commentary, which was distributed by the Robert Wood Johnson Foundation.

Congress should consider cutting government Medicare Advantage funding benchmarks to a maximum of 95 percent of traditional Medicare’s funding in the highest cost area and 100 percent elsewhere, the commenters write.

Congress also could reduce the benchmarks proportionately across geographic areas, and restructure the current Medicare Advantage quality bonus program to impose penalties on the plans with the lowest scores. Medicare managers could give the penalty payment money to the best performers and use that source of financing to make the quality bonus program budget neutral, the commenters said.

The Urban Institute has historically been associated with health policy specialists who have written about the potential benefits of the Patient Protection and Affordable Care Act of 2010 (PPACA).

Groups that believe the government can do the best job of running Medicare have been fighting Republicans and Democrats who believe private insurers can provide better, cheaper Medicare coverage for years.

Consumer Reports, for example, blasted private Medicare supplement and private Medicare managed care plan providers in 1998, as the Clinton administration was in the process of starting the Medicare+Choice program, a precursor to the Medicare Advantage program. 

Within a few years, Democrats in Congress had pushed for funding changes in the program that led many insurers to withdraw

In recent years, Democrats have frequently cited reports that the government was actually been paying 12 percent more for each Medicare Advantage plan enrollee than it was paying for each traditional Medicare program enrollee, rather than less.

The gap narrowed to 7 percent in 2012, Berenson and Holahan acknowledged.

Jonathan Blum, the director of the Center of Medicare, recently told Congress that the gap has narrowed to about 4 percent this year.

Insurers and America’s Health Insurance Plans (AHIP) have noted that that Medicare Advantage plans help enrollees living on fixed incomes by eliminating or sharply reducing deductible and coinsurance costs and by protecting enrollees to other traditional Medicare cost-sharing features that can drive up out-of-pocket costs.

Medicare Advantage plans also have provided wellness programs and important ancillary benefits coverage, such as dental benefits coverage, that traditional Medicare has not provided, supporters say.

But Berenson and Holahan argue that Medicare Advantage plans still get an unfair advantage over the traditional Medicare program, by benefiting from a tendency to enroll healthier people. 

“Favorable selection—albeit  reduced relative to earlier years— continues to boost [Medicare Advantage] payments compared to traditional Medicare,  in essence providing [Medicare Advantage] plans an undeserved windfall resulting not from  better management of risk, but rather rewarding them for avoiding risk,” the commenters said. 

CORRECTION: An earlier version of this article described the relationship between the Urban Institute and PPACA incorrectly. The institute has been associated with researchers who have written about the potential benefits of PPACA and other health system change efforts but does not officially take positions regarding legislation, proposals or programs.

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