Despite a federal report questioning the efficacy of PPOs, the CMS will continue its mandated effort to create a PPO option in Medicare, as Congress has shown little interest in scrapping a provision aimed at making such health plans available to seniors in 2006.
Last week's report from the Government Accountability Office cast doubt on the benefits of PPOs to Medicare beneficiaries and concluded they may be more expensive to the federal government and patients than traditional Medicare coverage. It further suggested that seniors would not avail themselves of PPOs if given a chance through Medicare.
While the report generated some rumbling in Congress, particularly among Democrats, all signs indicate that plans to bring PPOs to the Medicare market will proceed as mandated by the Medicare Modernization Act of 2003.
Proponents of the provision creating the PPO option in 2006 say such plans would allow beneficiaries greater flexibility in their choice of providers. But in an examination of a CMS PPO demonstration project launched last January, the GAO report found that PPOs in the project cost Medicare $650 to $750 more per year for each beneficiary than traditional Medicare. In addition, the report said that of the 10.1 million eligible beneficiaries living in areas participating in the demonstration project, only 98,000-or less than 1%-of the eligible enrollees signed up with a PPO as of October 2003. Of those who did, only 26% moved from traditional fee-for-service Medicare. The rest came from a Medicare HMO.
The report created only a minor tremor among legislators. Sen. Max Baucus (D-Mont.), a main author of the Medicare reform law, said in a news release that the report "does not give me confidence that rural areas, which currently are not typically served by private plans, will have access to a new regional PPO option in 2006," and added that greater monitoring of the law's implementation is needed.
Rep. Benjamin Cardin (D-Md.) said the report is further proof that traditional fee-for-service Medicare remains the most efficient health plan for seniors. The report "is particularly disturbing because the administration hopes to triple enrollment in private plans in the next five years," Cardin said.
According to a senior staff member of the House Ways and Means Committee, the report further fuels ongoing misgivings about the Medicare reform law passed last year, especially from Democrats. At deadline, though, no one had taken the lead in possibly introducing new legislation to repeal the provision that created the PPO option, nor was anyone suggesting any legislative action was imminent.
In a letter to the GAO responding to the report, CMS Administrator Mark McClellan disputed some of the report's criticisms and said the administration would proceed to add PPOs to Medicare's menu of health plans.
In addition to questioning the benefit of adding PPOs to Medicare, the report said the CMS overstepped its authority when it allowed 29 of the 33 PPOs in the demonstration project to refuse coverage if beneficiaries went out of network for care.
"We have learned a great deal from conducting this demonstration and we look forward to applying these valuable lessons in implementing the new Medicare Advantage regional PPO plan option in 2006 as a choice for Medicare beneficiaries throughout the country," McClellan said.
Mohit Ghose, a spokesman for America's Health Insurance Plans, said that its members remain committed to participating in Medicare and to offering PPOs to Medicare members.
"We know that our members have achieved a lot of experience during this demonstration project and that's what a demonstration project is supposed to do," he said.