With the war in Iraq winding down, some lawmakers last week turned their attention to domestic matters, including Medicare reform, re-igniting the debate that began a month ago when President Bush proposed a radical overhaul of the program.
At the heart of the debate is whether Medicare would save money and increase quality of care by drawing private insurers into the program. At a time when hospitals' excess capacity is diminishing, so, too, is their willingness to sign managed-care contracts with less than optimal rates, according to research by the Washington-based Center for Studying Health System Change.
Last month, Bush proposed a restructuring of the Medicare program under which beneficiaries could select a private managed-care plan for prescription drugs and other services not currently covered by the federal health program for the elderly and disabled (March 10, p. 6). That proposal sparked an immediate and intense debate in Congress and in healthcare policy circles over the degree to which the private sector can and should administer a Medicare benefit-and whether Medicare would save money as a result.
As the Senate and House prepare for deliberations on reforming Medicare, the health plan community argues it can play on Medicare's field, and that doing so will both lower costs and boost quality. Others, including powerful lawmakers from sparsely populated rural states, aren't so sure.
On April 11, Sen. Max Baucus of Montana, the ranking Democrat on the Senate Finance Committee where Medicare issues are hashed out, expressed concern that private plans would not be able to lower costs for the overall Medicare program. In a letter requesting information on the subject from the nonpartisan Center for Studying Health System Change, Baucus also said he worries that rural Medicare beneficiaries will not have sufficient access to in-network physicians and hospitals.
"If these plans could not negotiate lower payment rates, spending by the federal government for beneficiary care would be higher than under current law," Baucus wrote in a letter to Paul Ginsburg, president of the center.
In his response to Baucus, Ginsburg said that during 2000 and 2001 private plans in eight communities paid higher rates than Medicare while plans in four communities paid less. Every two years the center surveys 12 communities, interviewing hospital and health plan executives.
According to the center's current survey, which now is mostly complete, health plans in two communities that previously paid less than Medicare now pay more, and none of the communities that paid more than Medicare two years ago pay less now.
In addition, Ginsburg said in his letter to Baucus, "many hospital executives indicated that lack of excess capacity had given them the leverage to decline managed-care contracts with unattractive payment rates."
A Baucus aide said last week the Senate Finance Committee's research confirms that hypothesis. "When you have tight constraints on beds, it's much harder for a private entity to come in and say we'll pay you less than Medicare. ... Most hospitals will say, `No way.' "
American Association of Health Plans President Karen Ignagni sees things differently. She said last week that private health plans use drug formularies and disease-management programs to keep people healthier and reduce costs to the system. Without such mechanisms in place, Ignagni said, the Medicare program can't similarly contain costs and improve quality. She said government regulators have yet to see how disease management can reduce costs, but they eventually will get the idea as new evidence from employers and consumers becomes available.
Some industry observers were more skeptical that health plans are interested in helping Medicare improve quality.
"In the quality and safety debate, some government and accrediting agencies and targeted initiatives seem to be moving more effectively and aggressively than the insurance industry," said Jim Tallon, president of the United Hospital Fund, a New York-based philanthropy and health research group. "Insurance carriers are part of this discussion, but they are not in the forefront of the underlying system change that will be necessary for us to really have quality improvement take off."