Medicare Advantage plans waste billions, report finds

Dec 10 2009

Health insurance companies that offer private alternative Medicare plans, called Medicare Advantage, put billions of dollars toward profits and marketing rather than patient care, according to a report released Wednesday by House Democrats.

Reuters: "From 2005 to 2008, Medicare Advantage insurers reported $27 billion in expenses unrelated to care, according to the report released by [the House Energy and Commerce Committee], which looked at 34 such insurers. It also pointed to millions spent on executive compensation and company retreats in Hawaii, Cancun, Mexico and other exotic locales."

Rep. Henry Waxman, chairman of the committee, said "Medicare Advantage insurers are squandering billions of dollars on overhead costs." Health care reform efforts seek to trim the spending. "Under the House reform bill, health insurance companies could not spend less than 85 cents of every premium dollar on actual patient ... care; if they do, surplus money would be returned to customers through rebates -- essentially capping insurer profits. The Senate bill currently under debate also calls for similar rebates, but could require a 90 cent on the dollar threshold under a compromise deal unveiled late on Tuesday" (Heavey, 12/9).