Pressure builds for further slashes to Medicare Advantage spending

Washington -- Sporting a long list of health priorities but facing a shortage of funding, Democratic lawmakers once again are looking toward squeezing Medicare private plans to secure more health dollars for new spending proposals.

Some lawmakers preparing for a busy 2009 session on health system reform have recently renewed their charges that Medicare Advantage, the private insurance alternative to traditional fee-for-service, is overpaid and overrated. Congress in July 2008 approved billions in cuts from the program to help pay for the 18-month physician payment patch that will last through the end of this year, but more reductions might be in store.

Democrats seized on a Government Accountability Office report in December 2008 that investigated private fee-for-service plans, one type of Medicare Advantage plan offered to beneficiaries. GAO concluded that not only are such plans generally paid the highest rates in Medicare for a typically less costly group of enrollees, but those beneficiaries also might be subject to higher out-of-pocket costs than are other seniors.

"PFFS plans are the most worthless aspect of the 'Medicare Advantage' program," Pete Stark (D, Calif.), House Ways and Means health subcommittee chair, said in a statement. "These are the most overpaid plans of all and yet they offer the fewest benefits."

Private fee-for-service plans on average will be paid 118% of standard fee-for-service rates this year, and all Medicare Advantage plans will be paid an average of 114%, the Medicare Payment Advisory Commission reported in December 2008. The add-ons were designed years ago to attract more insurers and to provide more benefits for seniors who opt in.

Another GAO report released earlier in the month found that Medicare Advantage plans made roughly $1.3 billion more in profits in 2006 than expected.

The latest GAO finding that many private fee-for-service enrollees may be on the hook for higher cost-sharing levels if they don't follow special prior authorization rules unique to PFFS gave more ammunition to lawmakers trying to cut the plans down to size.

"I hope the next Congress and new administration will work together to protect beneficiaries from this egregious behavior and root out the waste in the Medicare program," said Rep. Henry Waxman (D, Calif.). Starting this month, he will chair the House Committee on Energy and Commerce, which helps oversee Medicare.

More dollars to be had

The additional subsidies to Medicare Advantage -- and to private fee-for-service plans in particular -- remain a prime target for cuts because the subsequent billions in savings could be used to offset new health spending.

With doctors facing an estimated 21% pay cut in 2010, physicians are keeping up the pressure to find more dollars to address the problem. The AMA and other physician organizations support equalizing payments so that all Medicare Advantage plans are paid the same as fee-for-service rates, a move that would free up additional billions that could go toward physician pay. Democratic lawmakers also want to find money to expand the State Children's Health Insurance Program and fund other initiatives to cover the uninsured.

Medicare Advantage is considered by lawmakers to be one of the few clear candidates for belt-tightening at a time when many want to expand government health coverage in other areas, said Brian Biles, MD, MPH. He is a health policy professor at George Washington University, in Washington, D.C., and former chief of staff for the House Ways and Means health subcommittee.

Budgeters know exactly how much could be captured as savings if Medicare Advantage pay were to be on par with standard fee-for-service.

"You've got this bright line there," he said. "It unequivocally costs more for people to be in these plans."

What is less clear is the true value of the added benefits Medicare private plans provide with their additional federal subsidies. Insurers insist they offer valuable services to many seniors and that these benefits will dry up if lawmakers eliminate subsidies. Opponents in Congress say most of the additional dollars simply go toward boosting insurers' profits.

More money, more value?

Dr. Biles' research found the subsidies on average amount to about an additional $1,000 per Medicare Advantage plan beneficiary per plan year. In some cases, the dollar value of the added benefits the enrollees receive is exactly the amount of the additional federal payments. But while this means insurers are putting the extra dollars toward enhanced services as Congress intended, it brings up the question of whether some seniors should be receiving better benefits than others, he said.

All seniors have the option of signing up for some type of Medicare Advantage plan, but not all plans are available in all areas.

Insurers will be losing a strong ally on this issue when President Bush leaves office. Bush staunchly defended the enhanced choices the private side of the program offered, and he vetoed the bill that held off doctor pay cuts through 2009 because it cut Medicare Advantage in order to do so. Congress overrode that veto in July 2008.

President-elect Obama does not share Bush's stance. Dr. Biles noted that when asked during the campaign to name an area where he would cut government spending rather than expand it, Obama cited Medicare private plan subsidies.

Still, it is too early to tell what the new Congress and the White House will do, and insurers will continue to cite the added value that they provide to Medicare beneficiaries, said America's Health Insurance Plans spokesman Robert Zirkelbach. AHIP also notes that Congress already made deep cuts to Medicare Advantage that will not take effect until 2011. That's when most private fee-for-service plans will be required to maintain physician networks instead of automatically "deeming" doctors to be participants as soon as they see a patient enrolled in those PFFS plans.

"Private fee-for-service as we know it today is not going to be around when these cuts go through," Zirkelbach said.