The Wall Street Journal criticized the health care reform law for limiting government subsidies that fund private health insurance for seniors -- a key aspect of the Medicare Advantage program -- while ignoring the program's failure to contain health care costs. The Journal has repeatedly called for entitlement cuts yet remains a stalwart defender of Medicare Advantage, despite the fact that economists argue that the program is inefficient.
Medicare Advantage, created in 2003, offers seniors access to private insurers that contract with Medicare to provide benefits. The government gives insurers subsidies for offering the same coverage seniors would receive under Medicare.
The Journal, which endorsed Medicare Advantage when it was founded in 2003, continued to defend the program despite the newspaper's frequent calls to contain government spending through entitlement cuts and other cuts, and despite its repeated attacks on the Obama administration's attempts at reducing government health care costs. From the Journal:
The cuts translate into lower benefits, higher premiums or both, and the liberal goal is to induce seniors and insurers to flee the program, much as Bill Clinton starved the Advantage forerunner known as Medicare+Choice in the 1990s. Yet for the past several years enrollment has climbed at an 8% to 10% clip annually, versus 3% for normal fee-for-service Medicare.
The Administration can't abide that Medicare Advantage is stealing customers from government control, while also exposing the failure of traditional Medicare's cost control. Medicare Advantage shows that more dynamic and efficient private alternatives can generate better health-care value than a room of wise men deciding how the government should pay for tens of thousands of services.
But Medicare Advantage has proven to be more costly for the federal government than Medicare. In an October 2012 New York Times Economix blog post, economist Dana Goldman explained that while Medicaid Advantage offers some savings for seniors when compared to Medicare, it costs the federal government much more than Medicare:
Similarly, a Washington Post Wonkblog post noted that since its inception in 2004, Medicare Advantage has been paying private insurers more than Medicare has had to pay for its beneficiaries. The post provided the below graph:
Health care reform attempted to reduce this cost disparity by reducing the government's excessive payments to private insurers participating in Medicare Advantage and rewarding insurers who earn high performance ratings. The Commonwealth Fund, citing the Congressional Budget Office, found that health care reform will bring the cost of Medicare Advantage down and save $132 billion over 10 years. And Factcheck.org noted that changes to Medicare Advantage would not result in its enrollees receiving fewer benefits than Medicare enrollees.