Obama: End Subsidies To Insurance Companies Selling Private Medicare Plans

Friday, May 11th 2007, 3:19 pm

By: News On 6

DES MOINES, Iowa (AP) _ Democratic presidential hopeful Barack Obama on Friday proposed cutting government subsidies to private insurance companies under Medicare by $150 billion over the next decade.

Campaigning for support in next winter's caucuses, Obama said the money could be used to strengthen the Medicare program overall, including a reduction in the prices seniors pay for prescription drug prices.

``We don't do that because we are not setting the agenda in Washington, insurance companies and drug companies are. That's what people want to turn the page on,'' the Illinois senator said to loud applause. ``We want a system that's fair and sensible to everyone.''

Obama's campaign said more than 53,000 Iowans are enrolled in private plans under the so-called Medicare Advantage program.

They likely would face a reduction in coverage or an increase in out-of-pocket costs if the government cut its payments to the insurance companies.

Supporters of these programs nationally say they provide additional benefits, such as eyeglass coverage, and often offer better care than the government-run program. Critics contend the government's subsidies are far too generous for the care provided, and should be reduced.

The Medicare Payment Advisory Commission, an independent group that advises Congress on the program, estimates that the government pays $112 a year to cover a Medicare beneficiary in a private plan for every $100 it pays for the traditional fee for service program. Obama proposed eliminating the difference.

At least part of the gap results from legislation that Congress passed in recent years to increase payments in rural areas, an attempt to make sure seniors in sparsely populated regions have a choice of health care.

In a written statement accompanying his appearance, Obama said, ``we shouldn't be rewarding the insurance industry for deceiving and defrauding our seniors, we should be doing everything we can to stop them.''

A campaign spokesman, Bill Burton, said the Illinois Democrat did not intend to label all insurance companies operating Medicare Advantage plans as deceitful.

``Besides some bad actors here, as MedPAC, the independent body that advises Congress on this issue, has pointed out, these overpayments appear to be driving up Medicare costs,'' he said.