Jill Wechsler
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In enacting legislation to delay a reduction to Medicare physician fees, Democratic leaders on Capitol Hill demonstrated their
intent to undermine the role of private insurers in providing care to seniors. Although all sides agreed on the need to avoid
a big cut in Medicare payments to doctors, Republicans fought efforts to fund the fees by reducing payments to Medicare Advantage
plans.
Senate Finance Committee Chairman Max Baucus (D-Mont.) described the MA reductions as "cutting the fat" from fees to private
plans. All MA plans will lose payments to cover the cost of indirect medical education at teaching hospitals. Private fee-for-service
(PFFS) plans face new requirements to establish provider networks and report quality measures, which will make it difficult
for them to operate in many areas.
These and other MA funding changes will reduce Medicare spending by $13.8 billion over five years (2009 to 2013) and by nearly
$50 billion over 10 years, according to the Congressional Budget Office (CBO).
This covers more than half of the five-year, $20 billion cost of the Medicare package. Some of the savings reflect projections
that 2.3 million fewer seniors will sign up for private plans by 2013. CBO had predicted 14.3 million MA plan enrollees in
five years, up from 9.6 million in MA plans today, but now expects only 12 million seniors in MA plans. That's still a substantial
increase, but Senator Orrin Hatch (R-Utah) termed the change, "the beginning of the end for Medicare Advantage," at a public
policy conference last month. Senator Hatch predicted that the Democrats will disassemble the MA program, a move he considers
"a tragic mistake." PFFS LOSES EXEMPTION
A main target of reformers is the fast-growing PFFS plans, which enjoy higher payments and reduced regulatory requirements
compared with other MA plans. The Medicare bill requires PFFS plans to form provider networks by 2011, except those plans
operating in areas with less than two MA plans. PFFS plans also will have to report certain quality data to the Centers for
Medicare and Medicaid Services (CMS), a difficult task without provider contractual arrangements. These provisions are expected
to force private fee for service out of many markets. Instead of attracting 5 million beneficiaries by 2013, CBO now projects
3.2 million seniors in PFFS plans, up from 2.3 million today.
Many health policy experts as well as MA opponents applaud this outcome. CBO and others claim that PFFS plans are paid too
much—17% more than comparable costs for patients in traditional Medicare and higher than other MA plans. At a July conference
sponsored by the Center for Studying Health System Change (HSC), Wall Street analyst Christine Arnold questioned whether it's
fair to "deplete the Medicare trust fund by overpaying these plans."
PFFS "was never intended to be a long-term product," observed analyst Robert Laszewski at the HSC conference. The idea was
to help establish these plans in underserved areas and then make them compete with other plans and providers. Laszewski considers
the Medicare bill a "reasonable approach" to MA reform by giving plan sponsors several years to establish networks and by
retaining "deemed status" for plans in rural areas.
Health Policy Expert Alexander Vachon questions why Republicans have fought for PFFS plans and laments that they and insurers
missed a "huge opportunity . . . to establish MA as sustainable, uncontested high-value improvement over original FFS Medicare."
Jill Wechsler, a veteran reporter, has been covering Capitol Hill since 1994.
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