Medicare health plans' unfair advantage

Congress has a major Medicare payment policy choice to make. Physicians face reimbursement cuts estimated at 10% next year and about 40% over the next decade. Meanwhile, the program is paying health plans, on average, 12% more than it spends on beneficiaries in its traditional fee-for-service system.

Lawmakers must decide whether physicians get adequate payment updates or whether private health plans continue to receive large Medicare subsidies. The evidence points to a clear answer. Congress should put Medicare Advantage, the program's private health plan component, on equal footing with regular Medicare. Failure to do so would have serious repercussions.

If continued, plan overpayments, worth $922 per beneficiary, will further strain program finances. Medicare Advantage enrollment will grow from 19% of Medicare's 42 million beneficiaries to 26% in 2017, the Congressional Budget Office predicts. Private fee-for-service plans are expected to drive the growth. This is especially troubling because these plans, on average, are paid 19% more than Medicare spends on traditional fee-for-service patients.

The hefty overpayments for Medicare Advantage plans means that any increase in enrollment will boost Medicare spending. The subsidy's elimination would save the federal government $65 billion over five years.

There is also the basic issue of fairness. Why should an industry that serves only 19% of the Medicare population get subsidies, while doctors, who care for all Medicare patients, get hit with a 10% cut next year?

Without adequate payment increases, physicians would be unable to maintain their practices. Access for all patients, not just Medicare beneficiaries, would suffer. The AMA is calling on Congress to pass legislation that would provide reimbursement increases that reflect growing practice costs.

Health plans argue their high pay is worth it, that they offer seniors extra benefits not included in regular Medicare. But a new online AMA Member Connect survey of 2,200 doctors calls into question health plans' record on providing benefits. Fifty-two percent of respondents with Medicare Advantage patients said that health plans had denied coverage of services typically covered by traditional Medicare.

All this comes among evidence that Medicare plans aren't paying doctors what they should and are engaged in inappropriate, sometimes fraudulent, marketing and sales practices.

In the AMA survey, nearly half the physicians with private fee-for-service patients said they were paid below the regular Medicare rate, even though the law requires plans to pay doctors at least that much.

Meanwhile, at a Senate Special Committee on Aging hearing in May, state insurance commissioners detailed marketing abuses. They include door-to-door sales, even at nursing homes; sales by unlicensed agents; and forged signatures. In some cases, the commissioners testified that agents went so far as to trick seniors into signing enrollment forms.

This behavior adds to beneficiaries' general confusion about how these plans, especially private fee-for-services products, work and about their risks. Eight out of 10 doctors who treat private fee-for-service patients said their patients have difficulty grasping how the plan operates. Even doctors have trouble getting good information about these plans' terms and conditions.

In response to the criticism, the trade group America's Health Insurance Plans announced at the Senate hearing a new initiative for its members to make sure agents are qualified and follow standards of conduct, and to ensure physicians get necessary plan information. Insurers also discussed their individual efforts to address complaints.

It remains to be seen whether these self-regulated efforts will stop the abuses. Part of the problem, say insurance commissioners, is that Medicare Advantage is largely regulated by the Centers for Medicare & Medicaid Services, rather than the states. Insurance regulators and the AMA say CMS is not doing enough policing. The agency responds that it has begun working more closely with state regulators and has undertaken efforts to strengthen its oversight.

But no amount of regulation can correct the essential unfairness and the Medicare market distortions caused by the health plan subsidies. An unfortunate tradeoff is being made. The damage to fair physician reimbursement, patient access and Medicare finances is too great to allow these overpayments to continue.