“Will Obama be able to kill popular Advantage plans?” Whoa! The headline sounded ominous and signaled that the new president might be ready to sock it to Medicare benies who have been reaping fruits from the controversial Medicare Advantage (MA) plans. Sacre bleu! Imagine incurring the wrath of old people in Florida! The story, which read like an industry press release, went downhill from there. The lede:

“More than 855,000 Medicare patients in Florida will see their health coverage change if President-elect Barack Obama follows through on a statement he made Sunday.”

Sunday on This Week with George Stephanopoulos, the president-elect said again what he said during the campaign: that he favored cutting the federal overpayments to Medicare Advantage plans, an alternative to traditional Medicare pushed by advocates of privatization. The government pays the plans to provide benefits but has been paying way more than it costs to provide the same benefits under regular Medicare. The fastest-growing MA plan, the Private-Fee-For-Service (PFFS) option, gets 17 percent more. Obama said that eliminating the overpayments and cutting other programs could possibly save $200 billion that, in turn, could be used in ways that could make people healthier. The savings from MA plans alone is actually closer to $91 billion, according to the GAO.

The story continued. It quoted an executive from a health plan trade group who said “to get rid of them would be a mistake” and a broker/agent who predicted that “the outcry would be unbelievable if they were to take away Medicare Advantage.” The story recited the advantages of Medicare Advantage—the free eyeglasses, dental coverage, refunds of Medicare’s Part B premium (which pays for doctor visits) if the plans don’t need all the money they get from Medicare, full drug coverage with no donut hole, and gym memberships—all paid for by taxpayers, millions of whom have no insurance at all, let alone gym memberships.

Except for a passing reference that the fact that Medicare Advantage requires people to stick with network doctors, the story didn’t mention the significant downsides of the program—PFFS plans, in particular, with their hidden fees and large copayments that people don’t learn about until they get sick. “Some of the benefits may be illusory,” says Bonnie Burns, a training and policy specialist with California Health Advocates. “Benefits for out-of-pocket expenses are invisible until you use them, and when you do, you may find they are less than they would be in another plan that didn’t offer the premium refund.” But to hear the agents tell it during the sales pitch, people never get sick. Bottom line: For many people, MA may not be better or more cost effective than regular Medicare with an old-fashioned Medigap (supplemental insurance) policy.

The bottom line for insurance companies is to keep the gravy train roaring. MA plans are hugely profitable—so profitable, in fact, that last month the GAO said that sellers earned greater profits and spent less on medical care than they had projected. It doesn’t get much better than that. No wonder the industry reps quoted in the News Service story were exuberant. Insurers have lobbied hard to keep the extra payments, beating back one attempt to cut them in 2007 and getting away with only a partial cut in the last session of Congress. This year’s battle is looming, and the News Service story gave the industry some ammo.

Note: A check of the News Service web site now shows a toned-down version of the circulated story I have described. The hed is softer, and there’s an attempt to say that Obama may not really have meant he was going to cut Medicare Advantage entirely but only what the story calls “excess payments.” But as the carriers know, cutting the extra payments dooms the most lucrative options. The new version still did not describe any of the pitfalls of Private-Fee-For Service plans which Florida seniors might want to hear about.

We suggest the News Service try again, and while they’re at it, take a look at what the overpayments will eventually do to jeopardize the Medicare program itself. Overpayments raise overall costs at a time when there is serious concern about Medicare’s long-term finances. That means benefits might be drastically cut and more costs shifted to those now on Medicare, speeding up the drive to privatize the system. A good story, no?

Ends today: If you'd like to help CJR and win a chance at one of
10 free print subscriptions, take a brief survey for us here.

Trudy Lieberman is a fellow at the Center for Advancing Health and a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for The Second Opinion, CJR’s healthcare desk, which is part of our United States Project on the coverage of politics and policy. Follow her on Twitter @Trudy_Lieberman.