A Little Known Fact: Insurers Do Benefit From Medicare

After much hand-wringing, Senate Democrats appear ready to drop the idea of expanding Medicare to people 55 to 64. It shouldn't be that much of a surprise: after all, the powerful insurance lobby is among the loudest critics of expanding Medicare as part of health reform.

But these same companies are among the biggest beneficiaries of the government plan for seniors. Supplemental plans offered by private insurers account for about a quarter of Medicare payments this year. Health care providers complain about the reimbursements that don't cover costs and self-insured employers say they pay for cost shifting caused by those low payments.

Still, Medicare continues to be a steady stream of revenue for insurance companies like UnitedHealth Group Inc. and Humana Inc., big drug makers such as Pfizer Inc., doctors and hospitals.

Medicare benefit payments are expected to be $477 million this year, or about 13 percent of the federal budget and 22 percent of all health care expenditures, according to the Henry J. Kaiser Family Foundation.

The breakdown of government payments looks like this: hospitals get 37 percent and doctors get 13 percent, according to Kaiser.

Twenty-four percent of the plan's budget is paid to the so-called Medicare Advantage programs, the supplemental plans offered by private insurers. Prescription drugs account for 11 percent of the budget. The remainder of payments go to home health care services, skilled nursing facilities and hospices.

Big drug companies showed their muscle by increasing prices on brand-name medicines used by Medicare patients more than 9 percent over the past year, a recent study by AARP shows.

For insurers like Humana, Medicare is a very big business. The company reported $12.3 billion in sales from Medicare Advantage for the first nine months of this year, a 22 percent jump over 2008. That represents 71 percent of the insurer's sales. Some Democrats have criticized the supplemental programs and suggest curbing them as part of reform.

Those who oppose expanding Medicare eligibility to younger people argue that the program is under stress. That's true, according to Kaiser. By 2019, the portion of Medicare that pays for inpatient hospital stays and similar services will run short of money. In the meantime, companies will continue to collect their government checks.