Congress hopes to cut MA excess

January 1, 2009

Congress is looking to reign in excessive payment to MA plans, especially PFSS, in order to bring them closer to FFS rates

President-elect Barack Obama agrees with this assessment, as do many Congressional leaders. In discussing ways to pay for health reform last month, Obama pointed to the MA program as not necessarily "giving a good bang for the buck."

GROUP PFFS PLANS

The MA program has provided more choice, particularly in rural areas, but at added cost and with little evidence of positive effects on quality, according to Marsha Gold, senior fellow at Mathematica Policy Research, at a recent briefing. Ovations CEO Simon Stevens noted that managed Medicare has the potential to save money for the health system overall.

The MA program is slated to cost $100 billion this year, and critics say that about $15 billion is excessive. MedPAC analysts reported that in 2009 CMS will pay MA plans 14% more than comparable FFS costs; the difference is even higher (18%) for local PPOs and PFFS plans, and a little narrower (13%) for HMO plans.

At the briefing, a Senate staffer predicted further cuts to MA plans because instead of providing more efficient, coordinated care at lower cost, some insurers are in the program "to make a quick buck."

The main offenders are PFFS plans, which get higher rates and don't have to form provider networks or meet quality reporting standards. Group PFFS plans are responsible for much of the growth in this area because of their appeal to employers that want to offer uniform coverage across the country to workers and retirees.

Nearly 1.7 million Medicare beneficiaries were enrolled in group PFFS plans as of June 2008, nearly double the 900,000 in 2006, according to Avalere Health. Legislation enacted last year requires most PFFS plans to establish provider networks by 2011, and everyone is watching to see if that prompts a big exit.

PRUNING PAYMENTS

Policy makers say they don't want to push out the good plans but must refine payments and increase accountability and transparency. Bryan Dowd of the University of Minnesota says that MA plans are more flexible than FFS Medicare in coordinating services, but should not have to be "propped up" with special subsidies.

MedPAC analysis points the finger at high benchmarks that ratchet up higher every year. The advisory panel wants MA benchmarks set at 100% of prevailing FFS costs, as with original Medicare managed care. But because it is difficult for HMO-type MA plans to operate in low-cost and rural markets, competitive bidding approaches and other rate-setting methods are under review.

A competitive bidding system might work, Dowd says, if there is a level playing field between FFS Medicare and MA plans with comparable quality reporting requirements and accounting for administrative costs.

MedPAC will lay out these issues in its March report to Congress and prepare a proposal for comparing quality measures between Medicare FFS and MA plans. Gold noted that "there probably will always be a role for private plans in Medicare;" the question is "at what options and at what cost."

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