Plans under way on Capitol Hill to redirect payments away from Medicare Advantage to pay for broad healthcare reform could signal the beginning of the end for a program that has frustrated many lawmakers since its inception, analysts say.
The latest dagger came last week, after a series of reform blueprintssomewhat modeled on an approach favored by President-elect Barack Obamacalled for continued tightening of federal payments to the private plans that operate within the program (See story, above).
The Medicare Payment Advisory Commission has said that the government pays Medicare Advantage plans on average 13% per beneficiary more than it does if that same person were enrolled in traditional Medicare. Over the course of five years, those overpayments amount to $62 billion, and $169 billion over 10 years. Federal lawmakers view those numbers as a means to pay for expanding federal mandates for coverage. Without those payments, however, health plans may not be able to use the extra dollars to offset the costs of bonus services that are so enticing to many seniors, like added wellness plans, hearing and vision coverage and other managed-care-type initiatives.
Bob Laszewski, president of consultancy Health Policy and Strategy Associates in Washington, said fiscally, the math doesnt add up for the insurers. Medicare Advantage plans are averaging 5% profitability and (13%) in overpayments with some payment variations, he said. But theyre 10% to 17% overpaid and theyre making 5%, so if you take the extra payments away, theyre 10% in the hole.
New cuts would be added to recent trims in payments. In July, Congress approved a Medicare bill that phases in reductions starting in 2010. Experience has shown since the last time Congress cut the program significantly that many plans ended up leaving the market, said Robert Zirkelbach, a spokesman for Americas Health Insurance Plans, whose members include many companies participating in Medicare Advantage.
The resulting gap left by those plans affects not just the seniors enrolled in them, but also physician practice groups and hospitals that stand to lose dollars because of cost-shifting and underpayments, Zirkelbach said. Policymakers need to consider the impact that cuts to Medicare Advantage would have on seniors across the country.
But Laszewski said its a done deal. The Democrats are going to get it, he said. The only question now is what are they going to use it for and will the cuts be phased in over two, three or five years.