Congress' upcoming battle on Medicare reform may boil down to not as much a philosophical debate as a clash over whether private health plans can win more market share from the government-run fee-for-service program.
That message has been made clear in the general backing health plans have given to the "premium support" proposal from the National Bipartisan Commission on the Future of Medicare and the opposition they have raised to HCFA's experiments with competitive bidding among health plans.
The conflict over Medicare market share probably will take on greater significance when President Clinton introduces his own Medicare reform plan. Clinton is expected to propose giving HCFA wider authority to award contracts based on competitive bidding while protecting the status quo on the Medicare fee-for-service program.
Medicare+Choice plans have expressed support, in theory, to the premium support proposal drafted by Sen. John Breaux (D-La.), the chairman of the Medicare commission. Under that proposal, the government would pay most, but not all, of Medicare beneficiaries' premiums to join health insurance plans, and the beneficiaries would pay the rest.
Also under that proposal, plans would be required to submit bids to cover the Medicare benefit package for enrollees. The government contribution would be set at 88% of the average of the health plans' premium proposals, and beneficiaries would have to pay a bigger premium to enroll in plans that are more expensive than average.
But most significant, under the Breaux plan, the traditional Medicare fee-for-service program would have to compete on the same basis as private plans. Like the private plans, if the fee-for-service costs are higher than the average of health plan premiums, beneficiaries would have to pay more to remain part of the fee-for-service program.
Managed-care plans hope that under the premium support arrangement, the prices and benefits they offer will be more attractive to seniors than the traditional fee-for-service program.
That's in contrast to the competitive bidding demonstrations HCFA has tried to institute in four cities. In those experiments, the plans would compete only against one another, while Medicare fee-for-service plans would not compete.
HCFA has withdrawn two of those proposed projects, in Baltimore and Denver, because of opposition from local plans and providers. In a third market, Phoenix, a local advisory board has called for a one-year delay.
Robert Berenson, director of HCFA's center for health plans and providers, argued that the competitive bidding plan isn't different from premium support.
"The idea is to have plans compete over the price of benefits," Berenson told a meeting of the American College of Emergency Physicians last week. "We're trying to simulate on a local level what the bipartisan commission was looking to do on a national level. Many providers and physicians and health plans in Phoenix are not welcoming this, and we don't know why."
But managed-care plans don't believe HCFA's framework for competitive bidding sounds lucrative.
"The end game is to drive down the government contribution on our side," said Karen Ignagni, president and chief executive officer of the American Association of Health Plans. "You continue to competitively disadvantage the Medicare+Choice side. That may be the objective of many: to kill off Medicare+Choice."
Others argue that health plans are partial to the existing payment system-in which health plans are paid capitation fees based on local costs in the fee-for-service program-because it is more predictable than a competitive bidding system and can be influenced politically.
"They like administered prices where the prices can be manipulated with (political action committee) money," said Princeton University healthcare economist Uwe Reinhardt.
Meanwhile, the Breaux plan contains some danger for providers. It would allow the traditional Medicare fee-for-service program to negotiate contracts with select providers in areas where the costs of the program make it unattractive to seniors.
But the market power of the Medicare fee-for-service sector, in which 83% of 40 million beneficiaries still are enrolled, could damage providers' bottom lines.
"Once you let the government loose in the market to negotiate prices, they'll crush everybody," said Thomas Scully, president and CEO of the Federation of American Health Systems.