Democratic leaders are eyeing cuts to private Medicare plans to help pay for their domestic agenda, risking a political backlash and a showdown with health insurance companies that stand to lose billions of dollars in one of their most lucrative lines of business.
The growing focus on generating savings from the private insurers in the Medicare Advantage program comes as Democrats look for ways to pay for their roughly $2 trillion domestic spending package, and after repeated efforts to curb rising drug prices and raise taxes on the wealthy stalled amid opposition from a handful of House and Senate centrists.
That’s opened the door for progressives, who’ve long objected to the government paying private plans generous rates to administer Medicare benefits, and see an opportunity to squeeze savings from a market that has more than doubled over the past decade and now serves 42 percent of Medicare beneficiaries.
But even before lawmakers coalesce around a single proposal, lobbyists for the insurance industry are releasing television ads and dialing up allies in Congress, reinforcing how politically risky the cuts could be for Democrats, who hold slim majorities in both chambers and can ill afford to lose the senior vote.
Doug Heye, a GOP strategist who was communications director for the Republican National Committee in 2010, sees parallels with the debate over the Affordable Care Act, when Republicans hammered Democrats for cutting payments to Medicare Advantage plans to pay for the law, and said the party could do so again.
“Republicans almost always struggle to talk about health care unless they can talk about what they're against,” he said. “This gives them a great opportunity to talk about what they're against in a way that could resonate with voters.”
Industry-allied groups — the Better Medicare Alliance, the Coalition for Medicare Choices and conservative nonprofit America Next — have spent $2.6 million on television advertisements opposing cuts to Medicare Advantage since the spring, and the pace of those ad buys is accelerating, according to AdAnalytics data analyzed by POLITICO.
“It’ll be [insurance] plans’ job to make it as toxic as possible,” said one industry insider close to the negotiations, who talked to POLITICO on background in order to speak freely on the sensitive talks. “We know members are already telling leadership: ‘We can’t take attack ads saying we’re cutting Medicare.’ They know the public isn’t going to distinguish between the private and public pieces of it.”
The Better Medicare Alliance, which receives funding from insurance companies and is behind a national ad campaign, is also airing targeted ads in the home districts and states of Democratic moderates who are seen as potential swing votes, such as Sen. Catherine Cortez Masto (D-Nev.) and Reps. Vicente Gonzalez (D-Texas), Cindy Axne (D-Iowa), Jared Golden (D-Maine) and Antonio Delgado (D-N.Y.).
“You thought you could sneak this through? Trying to raise our premiums, disrespecting us,” the ads say. “We’re watching you.”
UnitedHealth Group, the largest player in the space, declined to discuss their lobbying efforts. Humana, the second largest, did not respond to a request for comment.
The Coalition for Medicare Choices, an organization run by the lobby group America’s Health Insurance Plans, has spent more than $140,000 on three national ads airing in September and October that tout the 27 million seniors enrolled in the private plans and warn lawmakers: “Don’t cut their care.”
The coalition also set up meetings between Medicare Advantage enrollees and House and Senate moderates as well as Senate Majority Leader Chuck Schumer.
“As Congress turns its attention to a budget plan intended to bolster the safety net in America, it’s important to ensure Medicare Advantage is not targeted to pay for other government spending,” said David Allen, an AHIP spokesperson, in an email to POLITICO.
Discussion around proposed Medicare Advantage cuts is mainly taking place in the Senate and has gained new life as moderates balk at proposals to raise taxes on high-income earners and corporations or curb the price of high-cost drugs.
Senate Budget Chair Bernie Sanders (I-Vt.), a longtime critic of Medicare Advantage who backs efforts to expand traditional Medicare, told POLITICO that cuts to the program are under discussion, though he declined to give specifics.
Raymond James analyst Chris Meekins projects Medicare Advantage cuts of $100 billion to $150 billion over 10 years are likely. A recent HHS inspector general report that 20 of 162 Medicare Advantage companies drove a disproportionate share of government payments through questionable medical reviews and risk assessments of clients could increase scrutiny of the program, he noted.
Health care experts at left-of-center think tanks like Brookings and the Center on Budget and Policy Priorities have been urging lawmakers to go after the sector for years, arguing that the plans overcharge taxpayers, underperform for patients, and threaten Medicare’s long-term solvency.
Matthew Fiedler, a fellow at the USC-Brookings Schaeffer Initiative for Health Policy, argues there are several ways Democrats could save “in the low hundreds of billions of dollars” without hurting the millions of patients enrolled in the plans, such as lowering the benchmark reimbursement rates that the government pays the private insurers.
But the political risks and resistance from the insurance industry, which insists the cuts would hurt enrollees, could quash any momentum for policy fixes.
“It’s reasonable to look at the potential savings there, because it’s proven to be so highly profitable — maybe more profitable than it should be,” said House Budget Chair John Yarmuth (D-Ky.), who announced he is retiring from Congress at the end of his term. “I can only get in trouble for saying that, because Humana is based in my hometown and that’s 65 percent of their business.”
Any proposal that affects the bottom lines of the nation’s largest insurers will face long odds. Even before a plan was crafted, a bipartisan group of senators, including Joe Manchin (D-W.Va.), Kyrsten Sinema (D-Ariz.) and five other Democrats friendly to the industry, warned the Biden administration they would block any cuts.
“We’re going to fight in every way we can” to protect Medicare Advantage, Sen. Jacky Rosen (D-Nev.), who signed on to the letter, told POLITICO this week.
Because efforts to take on Medicare Advantage face such entrenched, bipartisan opposition, some insurers are queasy about drawing too much attention to the issue or running ads that could “jeopardize relationships” with Democrats, said one health care lobbyist who asked for anonymity in order to speak about client issues. Instead, they're focusing their attention on helping aides with other Democratic priorities, like expanding Medicaid.
Some plans feel that “if they gin up a lot of activity, it could actually backfire,” she said. “It could bring Medicare Advantage more into the conversation.”
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