Its no secret that the Obama administration and other Democratic leaders have had their sights set on the Medicare Advantage program for a while now. Few, however, expected them to pounce so quickly.
Fee-for-service punching bag
As the Obama administration sets out to reform healthcare, Medicare Advantage is one of the first and most prominent targets
Since January, President Barack Obamas administration has rolled back Bush administration proposals seen as lax toward the private plans, proposed a new competitive bidding program for them meant to lower federal reimbursement and just last week announced that Advantage plans would be paid less in 2010 then they are this year.
All of this comes on top of changes lawmakers made in 2009 that are set to go into effect next fiscal year. Congress eliminated payments to the plans for indirect medical education payments, ended the deeming status for certain types of plans and drained the program of its regional stabilization fund. As a candidate, Obama singled out the program as an example of wasteful government spending, instantly marking it as a targetand a potential source of fundsfor an even broader initiative to overhaul the nations healthcare system.
Congress and advocacy groups have looked at one particular type of plan as the prime target: private fee-for-service, or PFFS, plans. They say these plans operate almost unfettered, resulting in cases of poorly coordinated care, a dearth of quality data and an overall drag on the healthcare economy. The changes could tighten federal control over PFFS offerings and create upheaval for the rest.
Is this the beginning of the end for Medicare Advantage? asked Cheryl Matheis, senior vice president for health strategy at AARP, doubting that it would be. I would say that it could be the beginning of the end for private fee-for-service, Matheis said in reference to the rapidly growing type of plan that typically operates outside of provider networks.
And that would be OK with Albert Fisk, medical director at the Everett (Wash.) Clinic, who last year stopped seeing patients who have PFFS coverage. Fisk said that there are too many loopholes that are entrenched in the program, which made it impossible to negotiate with the plans.
Private fee-for-service doesnt work for us, Fisk said. It doesnt pay us enough to break even.
Other Medicare Advantage plans, however, have worked favorably with the Everett Clinic. Fisk said that the HMO and PPO models help the clinic offset low payments from traditional Medicare. He said that the clinic loses about $400 for every traditional Medicare patient that it sees treated at the hospital.
Im sure the policymakers in D.C. have nothing but the best intentions, Fisk said about Congress stepped-up regulation of Medicare Advantage. For usthe organization that Im a part ofwere not going to be able to survive on fee-for-service Medicare alone. We lose so much money.
In PFFS, Medicare pays $3 for every $1 in additional benefits that are offered. Created in 2003, the plans operate largely unattended by Medicare. Their rapid growthwith enrollment totaling more than 2.3 million in 2008, up 35.3% from 1.7 million a year earlierhas cost the Medicare program billions of dollars. A Robert Wood Johnson Foundation-backed study found PFFS plans in 2008 cost $2.5 billion more than it would have under traditional Medicare.
AARPs Matheis, a critic of the way PFFS plans operate, said that it has become a lucrative playing field for health plans because of their expansion into more rural parts of the country and the numbers of seniors theyve been able to attract.
Data continue to pour in that supports the argument that the Medicare Advantage program as a whole costs too much. Last week, the Medicare Payment Advisory Commission said that so far this year, federal payments to Medicare Advantage plans continue to exceed what is spent on traditional fee-for-service Medicare. On average, Medicare Advantage plans are paid 114% more than Medicare. And while they offer added benefits, the costs for those services are paid for by other seniors.
To reform Medicare Advantage would require a deft touch by the president and other politicians, and each change would be carefully watched. There are roughly 10 million seniors, about 23% of all Medicare beneficiaries, enrolled in 595 Medicare Advantage plans. Naturally, changes are considered political hot potatoes on Capitol Hill.
Unfair playing field?
Still, the Obama administration took additional steps to level what it sees as an unfair playing field between the private plans and traditional fee-for-service Medicare. Essentially, the CMS said it would cut reimbursement to the plans next year while tightening beneficiary protections.
Health plans such as Aetna, Humana and UnitedHealth Group will have to comply with the changes in order to participate in the program.
In a conference call with reporters, CMS officials said they would continue to adjust the annual growth percentage to assume a scheduled 21% physician pay cut in 2010 even though Congress almost certainly wont allow that to happen. Still, under current law, the CMS said the growth percentage would be 0.81% for 2010, a slight change from the 0.5% predicted weeks earlier in its preliminary assessment.
Under that formula, Medicare Advantage plans will see reduced payments next year, said Robert Zirkelbach, spokesman for Americas Health Insurance Plans. Because they are based, in part, on scheduled cuts to physician payments that Congress will never let go into effect, these rates could impact seniors in ways Congress never intended, he warned.
Nevertheless, once Congress deals with the physician fix, the CMS will readjust the dollar amounts for 2010. This isnt really about cutting the program, Zirkelbach said. If Congress fixes that this year, then next year the plan payment will be adjusted to reflect that.
But in the interim, seniors benefits are going to be on a roller coaster ride over the next couple of years, Zirkelbach said.
Longtime Medicare Advantage observers say that being in flux is business as usual for the program. It constantly changes on a year-to-year basis, said Bridget Maehr, a senior financial analyst with A.M. Best Co. She added that the plans that participate in the program are aware of the annual change-ups and have adapted to them over time. Its like healthcare in general, everything keeps moving and changing.
Insurers didnt help their cause with reports of irresponsible marketing of Medicare Advantage reaching Congress. In 2007, lawmakers held Coventry Health Care, Humana, Sterling Life Insurance Co., UnitedHealth and others responsible for a series of complaints over shady marketing practices and unscrupulous sales techniques.
Seniors, many of them low-income, were surprised at times to find themselves enrolled in one of the PFFS plans and quickly lamented their loss of traditional Medicare. Together, the plans identified as troublesome make up almost 90% of the PFFS program. Shortly after, the CMS tightened marketing guidelines in an effort to stomp out bad sales agents (Oct. 20, 2008, p. 42).
Paul Precht, director for policy and communications at the advocacy group Medicare Rights Center, said he doesnt think the latest tweaks to the program are meant to move it closer to the end. No, its not the beginning of the end and no, its not the goal, he said. Rather, he said the latest moves are meant to rein in some plans that operate too far outside the domain of the CMS.
The efficient plans will survive, Precht said. The plans that are committed to the marketplace and the Medicare Advantage program will become more efficient to survive. And thats how it should be.
The complaints are still there, Precht said, adding that there has been a reduction in the number of marketing issues that have surfaced since the CMS tightened its sales and marketing guidelines. He said that most complaints come from low-income beneficiaries, some of whom fall prey to shady sales techniques. Thats still quite prevalent, he said.
But if the White House and Congress draw back some of the plans funding, then it could eventually shake out insurers. With fewer dollars coming their way, health plans will be faced with having to streamline in order to continue, Precht said. When it really comes down to having to do it, its an open question as to whether they are willing to take the steps to do it, he said.
Matheis said it is unlikely that Congress would cut overpayments to the plans in one fell swoop. Were thinking that Congress will decide what is an appropriate amount that they can get from Medicare Advantage, she said.
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