The Medicare Modernization Act of 2003 is the gift that just keeps on giving-that is, if you work in the drug industry or managed care. If on the other hand you are worried about federal budget deficits, future provider payments or the long-term viability of Medicare, you may have cause for alarm.
The latest news tucked into the Bush administration's fiscal 2006 budget plan is that another $8.3 billion will be doled out to Medicare managed-care plans over the next five years to keep them participating in the re-christened Medicare Advantage program. Basically, the CMS is delaying until 2011 a plan to return savings from risk adjustment in health plan reimbursement to government coffers.
Apparently, it isn't enough that the law already contains a minimum of $14 billion in extra payments to Medicare Advantage plans over 10 years-a figure disputed by the CMS' own actuary, who says it will really be closer to $46 billion. Right now there is a 15% differential between payments to health plans and those given to providers in traditional Medicare. Therein lies that "Medicare advantage."
Perhaps we can chalk this latest incentive up to extreme caution. It's not as if plans weren't already jumping at the chance to get in on the extra 15% reimbursement. The CMS says it received applications for 141 new local Medicare Advantage plans this year. It seems that having staked so much on privatization, there is no limit to the incentives the administration is willing to offer to ensure private sector participation.
The idea behind this expensive experiment is that in the long run the marketplace can deliver better services to seniors at lower cost than traditional Medicare. So far, plans have responded with lower premiums and some extra services to beneficiaries while talking about preventive care and disease management. If health plans can get traction in dealing with the chronically ill, who account for half of all health spending, that would be quite an achievement. CMS' pilot projects in disease management have, however, lacked much traction to date.
The experience of Medicare+Choice, created as part of the Balanced Budget Act of 1997, is no harbinger of success for Medicare Advantage. When payments to these plans fell behind rising costs, health plans abandoned seniors in droves. Today only 11% of beneficiaries are in managed care.
Anticipating how many seniors will jump at the promise of lower premiums is anyone's guess. In one way it would be a natural for them. They will have to join a private plan anyway to gain access to the prescription drug benefit next year, and many insurers are offering both forms of Medicare coverage.
Health plans have been given a golden opportunity to prove they can deliver better coverage at a lower cost than traditional Medicare, thus living down their reputation in the private market for driving up premiums and reaping huge profits.
The window for changing that image is very small indeed. Medicare faces a long-term unfunded liability measured in the trillions of dollars, a picture made much worse by the uncontrolled spending of the drug benefit. This year's budget contains no funding for a reversal of planned cuts to physicians under Part B, a situation everyone knows will be remedied.
Deficit hawks are on the warpath, looking for social services to slash. Spending billions of extra dollars on higher-priced Medicare managed care is going to stick out like a sore thumb when painful cuts are being made to other programs.
What do you think?
Write us with your comments. Via e-mail, it's [email protected]; by fax, 312-280-3183.