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Insurance industry lobbies its way to Medicare pay raise

April 03, 2013|By David Lazarus
  • Facing a proposed cut in reimbursement from the government, health insurers managed to lobby their way to a Medicare pay increase.
Facing a proposed cut in reimbursement from the government, health insurers… (Getty Images )

What's most impressive about our highly dysfunctional heathcare system is that we're always finding clever new ways to make it worse.

The latest such move comes on the Medicare front, where lawmakers had been trying to rein in costs by modestly lowering the amount that large insurers would be paid for managing Medicare Advantage plans, which are a private-sector version of the government program.

The Obama administration had proposed a 2.3% reduction in payment for the plans, arguing that insurers were making plenty of profit as it was.

But after the insurance industry unleashed its lobbyists and started throwing its considerable political muscle around, it ended up not with a pay cut from the Centers for Medicare and Medicaid Services, but a 3.3% increase.

I have no idea what the correct reimbursement rate should be. But I do know that, as the baby boomers age, Medicare represents a cash cow for insurers with Medicare Advantage plans. That's why the industry is fighting so hard to protect its slice of the pie.

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And that's why Medicare should be using its clout to help lower healthcare costs, which now run about $3 trillion a year.

For example, the program should be aggressively negotiating with drug companies over the prices they charge. But, thanks again to industry lobbying, Medicare isn't allowed to do that.

This is nuts. It's also further proof that a profit-oriented healthcare industry will keep preventing us from rationalizing the delivery of medical treatment. Nothing against insurers or hospitals or drug makers, but their financial well being shouldn't be the top priority of our healthcare system.

Along these same lines, insurance giant WellPoint says it gave its former chief executive, Angela Braly, a 55% pay raise last year to a staggering $20.6 million. Braly resigned last August after a series of controversial rate hikes.

What's wrong with our healthcare system? Let us count the ways.

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