Democrats: Private Medicare plans waste billions

WASHINGTON (Reuters) - Private health insurance companies that offer alternative Medicare coverage funnel billions of dollars toward company profits and marketing efforts rather than to patient care, U.S. Democrats said in a report released on Wednesday.

A number of insurers, including Humana Inc and UnitedHealth Group Inc, offer such plans known as Medicare Advantage as an alternative to traditional fee-for-service Medicare coverage for the elderly and disabled.

“But as this report shows, Medicare Advantage insurers are squandering billions of dollars on overhead costs -- in fact, they spend 10 times the amount per beneficiary as traditional Medicare,” said House Energy and Commerce Committee Chairman Henry Waxman.

The report comes as lawmakers push forward on legislation to overhaul the nation’s healthcare system, including cuts to Medicare Advantage and other industry reforms. The House, which passed its version of the bill in early November, is awaiting a final plan from the Senate before a bill can be sent to the White House.

From 2005 to 2008, Medicare Advantage insurers reported $27 billion in expenses unrelated to care, according to the report released by committee, which looked at 34 such insurers.

It also pointed to millions spent on executive compensation and company retreats in Hawaii, Cancun, Mexico and other exotic locales.

Health insurers Aetna Inc, Cigna Corp, Coventry Health Care Inc and WellPoint Inc were among those surveyed by the committee.

The industry’s lobbying group, America’s Health Insurance Plans (AHIP), had no comment on the report but said that the plans offer seniors additional benefits that aim to coordinate care or boost wellness that are not available under traditional Medicare.

“Seniors in Medicare Advantage receive higher quality care compared to fee-for-service Medicare,” said AHIP spokesman Robert Zirkelbach.

Under the House reform bill, health insurance companies could not spend less than 85 cents of every premium dollar on actual patient t care; if they do, surplus money would be returned to customers through rebates -- essentially capping insurer profits.

The Senate bill currently under debate also calls for similar rebates, but could require a 90 cent on the dollar threshold under a compromise deal unveiled late on Tuesday.

The two bills would have to be combined before a final measure could be passed into law.

Democrats posted the report on their website at

Reporting by Susan Heavey, editing by Matthew Lewis, Leslie Gevirtz