January 12, 2009 11:51AM

Obama Proposes Eliminating Medicare Advantage, Ousting 9 Million Seniors from Their Health Plans

On This Week with George Stephanopolous, president‐​elect Barack Obama proposed eliminating the ENTIRE Medicare Advantage program:

We’ve got to eliminate programs that don’t work, and I’ll give you an example in the health care area. We are spending a lot of money subsidizing the insurance companies around something called Medicare Advantage, a program that gives them subsidies to accept Medicare recipients but doesn’t necessarily make people on Medicare healthier.

And if we eliminate that and other programs, we can potentially save $200 billion out of the health care system that we’re currently spending, and take that money and use it in ways that are actually going to make people healthier and improve quality. So what our challenge is going to be is identifying what works and putting more money into that, eliminating things that don’t work, and making things that we have more efficient.

Medicare Advantage allows seniors to choose a private health plan rather than get their health coverage from the traditional Medicare program. The Left has complained Medicare Advantage costs taxpayers more than if those seniors remained in the traditional Medicare program. (I agree, though the reason is not because government is more efficient than private insurance.) The Left has long dreamt of eliminating Medicare Advantage, in part because it poses a threat to their plans for a completely government‐​run, single‐​payer health care system. Yet the Left has had to settle for attacking and attempting to eliminate the “overpayments” that Medicare Advantage plans receive. Of course, one can eliminate Medicare Advantage stealthily by reducing payments to private plans until none will participate.

For Obama to suggest eliminating Medicare Advantage outright, however, is extraordinary. First, Obama made a campaign promise that he will let Americans keep their current health insurance. Eliminating Medicare Advantage would force 9 million seniors out of their current health plans and back into traditional Medicare. Second, a man who wants to reform America’s health care sector ought not begin the effort by proposing to take something away from seniors, America’s largest and most politically active voting block. Maybe the Obama folks haven’t learned the lessons of the Clinton health care battle.

Eliminating Medicare Advantage would be bad for non‐​seniors, too, because it would block innovations that make medicine better, cheaper, and safer. The main reason that the U.S. health care sector fails to coordinate care, fails to provide patients with electronic medical records, and fails to prevent medical errors is that whenever providers try to do those things, the traditional Medicare program’s change‐​resistant payment system punishes them for doing so. (Universal coverage kills.) Medicare Advantage plans use different financial incentives that actually encourage coordination, EMRs, and error reduction. What a novel thought…

I thought Obama’s remarks were a misprint when I first read them. But then I saw the video.