McCain shifts position on HMO payments

In a shift, Republican presidential nominee John McCain recently embraced a Democratic policy that would take $15 billion a year away from private health plans that cover 8.2 million Medicare enrollees. 

By taking this position, Sen. McCain (Ariz.) aligns himself with Democratic presidential nominee Sen. Barack Obama (Ill.) and against President Bush, most Republicans in Congress and conservative ideologues.

{mosads}This summer, vulnerable Republicans took significant political risks when they crossed the physician lobby and seniors’ groups by voting against cuts to health insurance companies. Since then, these GOP lawmakers have lost out on valuable campaign cash from doctors and endured unflattering advertisements paid for by medical societies.

The role of private health plans in Medicare is an ideological touch point for members of Congress, making McCain’s shift toward the Democratic plan significant.

The Bush administration and the Republican Congress created generous subsidies for these plans as a way of driving more beneficiaries out of the publicly run program. Conservatives believe that the free market is capable of providing better healthcare, more efficiently.

Unlike many of his fellow Republicans, McCain has crossed swords with the health insurance industry. Early in Bush’s first term, McCain was a leader of the ultimately unsuccessful effort to enact a federal “patients’ bill of rights” regulating insurers, a bill the health plans intensely disliked.

The HMO Medicare subsidies were important enough to Bush and to Senate Republicans that many of them stood firm in their opposition in spite of intense pressure from the physician lobby, the AARP and a slew of other interest groups trying to get the doctor payments fixed.

Democrats point out that it costs an average of 12 percent more per beneficiary to cover people in private plan compared to leaving them in the public program.

Moreover, Democrats believe that the GOP’s zeal for Medicare Advantage is evidence of a conservative desire to eventually privatize the entire program. Rhetorically, those on the left also maintain that the health plans get subsidies as payback for their support of Republican lawmakers.

McCain was not present for the controversial votes this summer but issued a statement opposing the bill, citing the Medicare Advantage cuts he now advocates as a reason to reject the legislation.

The Medicare bill “places 2.3 million seniors at risk of losing the private healthcare coverage of their choice,” McCain said in a written statement issued July 9, the day Senate passed the legislation.

But the Medicare Advantage cuts the McCain campaign now favors would be as much as five times deeper than those passed by Congress earlier this year and enacted only via a veto override.

One of McCain’s most senior advisers revealed the shift in position during a conference call with reporters, but that detail received little notice amid a high-profile debate between McCain and Obama over healthcare reform.

Douglas Holtz-Eakin, a senior policy adviser to the McCain campaign, held a conference call with reporters earlier this month to respond to Obama’s attacks on the Republican’s healthcare platform and to demonstrate that the Republican plan would be paid for without cutting Medicare benefits by making cuts in other areas of the budget.

Holtz-Eakin laid out various ways McCain would seek to reduce healthcare Spending, but his description of McCain’s stance on Medicare Advantage is nearly identical to how Obama explains his own position.

“[W]e see no reason why the Medicare Advantage program should continue to get a $15 billion-a-year subsidy. We’ll put them on a level playing field and save some money there,” Holtz-Eakin said.

During the first presidential debate, on Sept. 26, Obama said, “We right now give $15 billion every year as subsidies to private insurers under the Medicare system. Doesn’t work any better through the private insurers. They just skim off $15 billion.”

A McCain spokesman did not respond to requests for comment.

The House last year passed an earlier version of bill that would have eliminated nearly all of this subsidy, cutting $50 billion over five years from Medicare Advantage, compared to the $75 billion cut apparently sought by McCain and Obama.

Republicans fiercely opposed the bill, leading Democrats to reduce the cut to $14 billion.

A scholar at a conservative think tank said the McCain campaign’s approach to Medicare Advantage is new for the Republican — and wrong.

“I’ve never heard of it before. To the best of my knowledge, I don’t recall McCain being particularly hostile to Medicare Advantage,” said the Heritage Foundation’s Robert Moffitt, who has written an analysis of McCain’s health proposals. “That’s just bad policy,” he said.

A spokesman for America’s Health Insurance Plans (AHIP), a trade group that opposes the cuts, said the organization did not know what McCain’s position was on the Medicare bill before the vote this summer. AHIP did not expect McCain to attend the vote, however, and so did not factor him into its analysis, the spokesman said.

Likewise, a spokeswoman for a left-leaning advocacy group said that while her group did not know where McCain stood on Medicare Advantage, it never counted him as an ally.

“This is news to us,” said Pamela Causey, the communications director of the National Committee to Preserve Social Security and Medicare. “I think this is a new bit of philosophy on his part that is a direct response to pressure politically,” she said.

McCain and Obama found common ground on another Medicare reform opposed by most Republicans and powerful special interests. Both senators voted in 2007 to give the government the authority to negotiate directly with pharmaceutical companies for the prices of drugs sold to Medicare beneficiaries. Currently, private prescription drug plans work out prices with manufacturers and the government is forbidden from interfering.

Despite his views on drug prices and his new position on Medicare Advantage subsidies, McCain differs greatly from Obama on other Medicare policies.

Most strikingly, the Republican has proposed charging higher premiums to wealthier beneficiaries for their drug coverage, akin to how Medicare sets rates for physician coverage. Obama, by contrast, wants to expand the drug benefit in several ways, including closing the controversial “doughnut hole,” a quirk in the program’s design that cuts off coverage when costs reach $2,250, then resumes when costs reach $3,600, leaving beneficiaries to pay the difference out of pocket.