The Administration’s Plan to Slash Medicare Advantage Is a Bad Idea

Traditional Medicare and Medicare Advantage (also known as Medicare Part C) differ in a few important ways, but both could learn a thing or two from the lowly Cavendish banana and its cousin the Gros “Big Mike” Michel banana.

Created as part of the Medicare Modernization and Prescription Drug Act of 2002, Medicare Advantage was a way to inject choice through private market forces into Medicare, which, to that point, had operated as an outright government-run, single-payer program. Indeed, Medicare Advantage and health savings accounts were the only good things to come from the Medicare Modernization and Prescription Drug Act.

Traditional Medicare and Medicare Advantage are the programs that we all look forward to enrolling in when we reach that magic age of 65 when the government steps in to make up for the market inadequacies of covering seniors, who are more likely to have a high utilization of care. 

The Centers for Medicare and Medicaid Services (CMS) recently announced the second planned cut to Medicare Advantage in two years. While on face value, many Americans might be inclined to see these cuts as a form of entitlement reform; this particular cut does not reflect any of the reforms necessary to help keep Medicare and other social welfare programs from continuing to increase the deficit and the debt. Instead, CMS is hoping that the same Panama disease that took out the Gros Michel banana will not upend the status quo.

Unlike traditional Medicare, seniors can choose private insurance plans under Medicare Advantage, which covers Medicare-sponsored services. Premiums are often lower, and Medicare Advantage typically covers other needs – like vision, dental, and sometimes even food or housing. Additionally, Medicare Advantage plans have out-of-pocket maximums where traditional Medicare customers often need to purchase a Medigap insurance product to constrain out-of-pocket costs.

All of this is accomplished for about the same cost as traditional Medicare. As such, it is hardly surprising that 51 percent of the eligible Medicare population now uses Medicare Advantage instead of traditional Medicare. According to the Kaiser Family Foundation, in 2023, 26 states had more than 50 percent of beneficiaries enrolled in Medicare Advantage.

With more than half the states having more than half of enrollees in Medicare Advantage plans, this explains why focus on Medicare Advantage, its benefits, and its advantages for seniors and taxpayers should be intense for leaders ranging from Senate Majority Leader Chuck Schumer and Senate Minority Leader Mitch McConnell, to Speaker Mike Johnson, Majority Leader Scalise and House Ways and Means Chairman Jason Smith, to House Minority Leader Hakeem Jeffries. All represent states where enrollment is above 50 percent.

For those who believe in limited government, preventing the looming debt and deficit crisis (of which Medicare is a significant driver), and minimizing the fiscal burden on taxpayers, Medicare Advantage and other Medicare reforms will help to stave off the Panama disease that is affecting our current fiscal situation. As healthcare utilization among seniors bounces back as pandemic fears among the elderly wane, it is not surprising that some might even advocate for boosting its growth rate.

At a time when the national debt stands at $34 trillion, it’s logical that policymakers would be looking for cost savings. But where health care for senior citizens is concerned, genuine reforms across all Medicare offerings are necessary (as opposed to slashing of Medicare Advantage billed as “reform” for rhetorical effect). There is still time to treat this fiscal disease before we need to change the entire system to the Cavendish Banana.