Jill Wechsler
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The Obama administration is moving faster than expected with initiatives to cut excessive payments to insurers. The aim is
to use the resulting savings to support broader healthcare initiatives. Nearly 11 million seniors, 22% of Medicare beneficiaries,
obtain coverage through MA plans, attracted largely by lower costs and extra benefits, which might disappear.
In a January interview, President Obama criticized MA as an example of "programs that don't work." The White House's 2010
federal budget plan unveiled in February proposed to reduce "overpayments" to private Medicare plans by more than $175 billion
over 10 years. The strategy is to switch to a competitive bidding system instead of basing payments on administratively determined
benchmarks that generally run above the cost of providing comparable fee-for-service benefits.
In addition, CMS recently signaled that the Obama administration would start imposing curbs on MA payments that don't require
Congressional action. CMS took a big swipe at MA rates in February by authorizing an unexpectedly low 0.5% increase in the
MA per capita growth rate for 2010—much less than the expected 4% hike. Insurers responded that such a low increase could
result in a 5% drop in MA plan reimbursement, which could lead to higher premiums or more limited benefits for seniors.
CMS also said it would revise risk adjustment factors that raise payments for plans that enroll sicker beneficiaries. That
move involves efforts to identify excessive insurer "upcoding" that has been criticized for generating higher payments without
providing additional care. BIDS AND BENCHMARKS
The Medicare Payment Advisory Commission (MedPAC) supports these changes based on mounting evidence that the government overpays
private plans. According to MedPAC's March 2009 report to Congress, Medicare will pay MA plans 14% more per enrollee this
year compared with FFS beneficiaries, up from 13% extra in 2008.
But different from the White House bidding proposal, the Commission proposes to set MA rates at 100% of FFS, which would achieve
financial neutrality between the two programs. Under this approach, HMOs, which still often bid below FFS costs, could do
well, while more costly private FFS plans might not survive. Insurers object that in some areas of the country, FFS costs
are so low that plans cannot bid any lower and would have to drop out.
With lower benchmarks and payments, one can assume that "there will be fewer MA plans, and that generous benefit plans will
be less generous," said MedPAC Executive Director Mark Miller at a recent briefing. He says that the MA payment system encourages
inefficient plans, but that those plans able to document quality care should be rewarded through pay-for-performance initiatives.
Insurers point to extra benefits as justifying higher payments. Miller counters, though, that the government pays $3 for each
$1 in extra benefits, a heavy subsidy shouldered by Medicare and by beneficiaries not enrolled in MA plans.
Congressional Democrats appear ready to implement some of the MedPAC and White House proposals. Ron Pollack, executive director,
Families USA, sees a consensus developing between the White House and Congress that plans have to achieve economies to justify
higher payments. "How deeply cuts go, remains to be seen," he says.
Jill Wechsler, a veteran reporter, has been covering Capitol Hill since 1994.
Posted 2009-04-13 15:49:08.0
