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Angie Drobnic Holan
By Angie Drobnic Holan April 8, 2010

Health care law eliminates extra payments for Medicare Advantage

President Barack Obama has said repeatedly that the Medicare Advantage program wastes public money that could be put to better use.

The program pays private insurance companies a set rate to treat Medicare beneficiaries. The idea behind the program was that competition between private insurers would drive down costs for treating Medicare patients. But it turns out that Medicare Advantage plans have consistently cost the government more per beneficiary than traditional Medicare.

The health care law that Obama signed in March phases out extra payments for Medicare Advantage plans and institutes other rules for the program. Generally speaking, the extra payments phase out over the next three to six years. In a few cases, plans will be able to keep current funding if they qualify for special bonuses. The measure is expected to save $136 billion over 10 years.

We rule this Promise Kept.

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Angie Drobnic Holan
By Angie Drobnic Holan March 2, 2009

Private insurers' Medicare subsidy on the chopping block in Obama's budget

During the presidential campaign, Barack Obama singled out the Medicare Advantage program as wasteful spending and said he would curtail it as president.

The program pays private insurance companies a set rate to treat Medicare beneficiaries. The idea behind the program was that competition between private insurers would drive down costs for treating Medicare patients. But it turns out that Medicare Advantage plans have consistently cost the government more per beneficiary than traditional Medicare.

"We spend $15 billion a year on subsidies to insurance companies," Obama said at a debate on Oct. 15, 2008. "It doesn"t — under the Medicare plan — it doesn"t help seniors get any better. It"s not improving our health care system. It"s just a giveaway."

We examined his claim that the program cost an extra $15 billion during the campaign and gave it a True on our Truth-O-Meter. Read our previous reporting for more details on how the plan works and what people say about its utility.

President Obama's first budget outline included his campaign promise to reduce spending on Medicare Advantage. Under his budget, payments to the private insurers would be reduced, bringing them closer to the costs of traditional Medicare. Fans of Medicare Advantage say this will have the effect of killing the program.

The budget outline shows the savings beginning in 2012. Over 10 years, the average savings would be $17.6 billion per year.

Obama still has some heavy lifting to do to get his budget passed. But savings from Medicare Advantage are a prominent part of the budget outline he released Feb. 26, 2009. That leads us to rate this In the Works.

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