Attack mounts on high payments to Medicare plans

November 1, 2007

Pressure is mounting on Capitol Hill once again to ax payments to Medicare Advantage plans. The legislators need to save $10 billion in order to rescind a planned cut in Medicare rates for physicians by year-end. Conveniently, the Congressional Budget Office (CBO) estimates that equalizing payments between MA plans and fee-for-service Medicare will save $50 billion over five years. If Congress wants to expand the State Children's Health Insurance Program (SCHIP) and keep physicians happy, "excessive" MA rates are the prime target.

The MA program is seen as "a contributor to unsustainable growth in Medicare," according to White House Health Policy Advisor Julie Goon. Even though MA cuts were dropped from the initial SCHIP bill, "the issue of your payment rates is not going away," she said.

MARKETING MISSTEPS

It doesn't help that PFFS plans cost Medicare almost 20% more than comparable FFS care (compared with a 10% differential for traditional HMOs) and are responsible for much of recent MA program growth. Expansion of this high-cost program is generating support for curbing PFFS advantages, such as exemption from requirements to form provider networks. Former CMS Administrator Mark McClellan, MD, said at America's Health Insurance Plans' (AHIP) September Medicare conference that PFFS should be a transitional program, and that plans should shift to more integrated care models to provide more value to Medicare.

SEEKING REFUNDS

Another criticism of MA plans is that they have been keeping Medicare overpayments instead of returning a portion to the government, as mandated by law. Government Accountability Office (GAO) officials told the House Ways & Means Committee last month that CMS doesn't come close to auditing one-third of all Medicare plans each year, the statutory requirement, and seems to be falling further behind as more new plans join the Medicare program.

GAO estimates that Medicare beneficiaries could have received $35 million in addition benefits in 2003 if the audit process worked correctly and CMS pursued financial recoveries. CMS promised more audits and asked for clearer legislative authority to go after plan overpayments.

Premiums for Medicare Part B will go up next year, although only slightly (up 3% to $96.40 a month). But the cost is significant for many seniors, particularly when combined with a $1,024 hospital deductible plus rising premiums for Part D drug benefits. Part D premiums will increase an average 21% to $40 a month, according to analysis by Avalere Health, as previously low-cost drug plans boost premiums more than 50%.

As a result, more than 1 million low-income dual-eligible seniors will have to pay more or shift to a different plan. CMS automatically assigns duals to low-cost plans in their area, but now many plans that currently cover duals will have premiums that are too high to qualify for auto-enrollees.

Jill Wechsler, a veteran reporter, has been covering Capitol Hill since 1994.