Medicare Advantage plans attacked for profits

The US Government Accountability Office has reported that Medicare Advantage plans made $1.3 billion profit above forecasts in 2006. It  also found that private providers of Medicare coverage cost the federal  government 13% more than the publicly-provided system. Insurers reported  a profit margin of 6.6% versus the 4.1% which had been projected. This  appears to be explained by the lower than expected proportion of  spending on medical expenses. These findings are consistent with the  experience of the Part D prescription drug program, which also reported  reduced costs, partly due to effective pricing negotiations by pharmacy  benefit managers, but also due to a smaller number of subsidized  low-income beneficiaries than anticipated.

The GAO report led the Chairman of the House of Representatives' Ways  and Means Health Subcommittee, Pete Stark (Democrat, California), to  claim that the GAO has "put to bed this idea [that] the plans are  offering extra benefits with the overpayments."

Since the introduction of the Medicare Modernization Act in 2002,  Democrats have made repeated attempts to limit or scrap the Medicare  Advantage program (Marketletters passim), which they argue, provide  subsidies to private health care insurers and fail to deal with the  uninsured population of the USA, which ranges from over 40 million to  about 60 million people, depending on the definition used. One of the  key attractions of some Advantage plans are those that provide coverage  for prescription drugs during the Part D "Donut hole" gap, which in 2006  concerned medicine expenses between $2,250 and $5,100.