By Mary Agnes Carey, CQ HealthBeat Associate Editor

November 30, 2006 -- Medicare managed care plans last year cost the government $5.2 billion more than if their enrollees had remained in Medicare's traditional fee-for-service program, according to a Commonwealth Fund report released Thursday.

Additional payments to Medicare Advantage (MA) plans exceeded fee-for-service costs by 12.4 percent or $922 for each of the 5.6 million beneficiaries enrolled in those plans, the report found. In some parts of the country, Medicare paid MA plans more than twice the fee-for-service amount, the report said.

Karen Ignagni, president and chief executive officer of America's Health Insurance Plans (AHIP), a trade group representing insurers, said the study's methodology—also used by the Medicare Payment Advisory Commission in a June report—was flawed. Ignagni said the methodology overestimated the differences between MA payment rates and fee-for-service payment costs.

Ignagni said MA plans are able to provide better benefits at lower costs and are returning billions of dollars to both the government and beneficiaries. In rural areas, MA plans may be paid more than fee-for-service providers, but in urban areas payments are often equal to or less than traditional Medicare, she said.

According to the Centers for Medicare and Medicaid Services, beneficiaries in MA plans saved an average of $82 per month compared with those in fee-for-service, for a total of approximately $6.4 billion this year. In addition, MA plans have saved the government approximately $2 billion in payments, according to CMS.

The Commonwealth Fund report's authors estimated that eliminating higher payments to private plans could save Medicare about $30 billion over the next five years, funds that could be used to fill in the "doughnut hole" prescription drug coverage gap in some plans or reduce beneficiaries' Part B premiums by $10 per month.

"While encouraging enrollment in private plans was billed as a way to reduce costs for the program, Medicare Advantage in fact costs Medicare money because of the extra payments," Brian Biles, the study's lead author, said in a statement. "If traditional Medicare and private plans are ever to compete fairly, they need to compete on a level playing field, which would require the elimination of these extra payments." Biles is a professor of health policy at George Washington University.

Rep. Pete Stark, D-Calif., who is expected to chair the House Ways and Means Health Subcommittee next year, said he hopes to "work in a bipartisan fashion to level the playing field" when Democrats assume control of Congress in January.

"When managed care plans were first allowed into Medicare, they said they could provide better care for less and they agreed to accept 95 percent of the fee-for-service rate," Stark said in a statement. "Now, instead of getting savings, taxpayers are getting bamboozled."

Ignagni said that if Congress tries to reduce MA payments, members who support such plans "will have a great deal to say in this discussion about whether these benefits should be changed because their constituents have relied on these programs."

By Michael Teitelbaum, CQ Staff

Nov. 28, 2006 -- Quality is more important to consumers than cost when making health care decisions, according to a study released Tuesday by the Blue Cross and Blue Shield Association (BCBSA).

Among 1,600 consumers surveyed, 86 percent searched for quality information compared with 47 percent who searched for cost of treatment information. Slightly more than three-fourths of consumers (77 percent) also ranked quality over cost (53 percent) when it came to selecting a hospital or clinic, according to the study. Both Blue Cross subscribers and non-Blue Cross subscribers were surveyed.

"Transparency in health care information is a growing trend and consumers want increased access to information so they can make the best decisions regarding their health care options," said Scott P. Serota, BCBSA president and chief executive officer.

Transparency in health care quality and prices has been a major focus for President Bush. In August, he issued an executive order requiring providers and plans doing business with federal health programs to make public data on the cost and quality of their care and to organize billing and insurance claims in a way that allows the cost and quality of medical procedures to be easily compared. Medicaid was exempted from the executive order. Administration officials also have called on private employers to push for greater transparency with health care providers.

A separate study published earlier this month by the Employee Benefit Research Institute found that nearly 9 of 10 consumers would give more weight to quality than to total cost when choosing a provider for procedures such as open-heart surgery and cancer treatment.

In the BCBSA survey, quality information consumers selected included average length of stay in a hospital or clinic, patient satisfaction with the quality of care they received, and patient satisfaction on care coordination across medical teams and hospital complication rates.

The report also noted that people are doing more research and obtaining data on such items as treatment success rates and on the treating physician when making their health care decisions.

Women were more likely than men to use the Internet to gather health information, and 88 percent of consumers said they would search for treatment information if they were diagnosed with a medical condition.

The Blue Cross study was conducted in February 2006.

Mary Agnes Carey contributed to this story.

By Cheyenne Hopkins, CQ Staff

Nov. 30, 2006 -- More than half of the nation's uninsured are ineligible for public programs and do not have enough resources to purchase coverage themselves, a report released Thursday by the Urban Institute found.

The report, released on the journal Health Affairs' Web site, found that of the 46.6 million uninsured Americans, 56 percent are ineligible for public programs, such as Medicaid, and have insufficient incomes to afford coverage on their own. Twenty-five percent of the uninsured are eligible for public programs and the remaining 20 percent have incomes high enough to afford coverage, according to the study, which was funded by the Robert Wood Johnson Foundation.

"Sometimes you hear arguments that all but a small minority of the uninsured could either purchase coverage or are already eligible for assistance," said lead author Lisa Dubay, a research scientist at the Johns Hopkins Bloomberg School of Public Health. "But our study shows that the affordability problem is far more serious than that."

Dubay and the study coauthors used an income level of 300 percent of the federal poverty level to define "affordability." In 2004, that level amounted to $28,935 for a single person and $57,921 for a family of four.

Childless adults consisted of the largest block—69 percent, or 25 million—of those uninsured and ineligible for public assistance, the study found. This group faces the largest barriers because they are generally not covered under Medicaid, the State Children's Health Insurance Program (SCHIP), and other public programs.

The affordability barriers facing uninsured parents are only slightly less severe, according to the report. Of the 11.1 million uninsured parents, 56.9 percent cannot afford coverage and have no access to public assistance.

Children were best off in the study. Only 11.3 percent of the nation's eight million uninsured children cannot afford private coverage and have no public options available.

The study also found that individuals at the "moderate" level of income have fewer opportunities for employer-sponsored coverage, which constitutes less than 5 percent of income for this income level. Overall, employees contribute 16 percent and 26 percent of the cost of health insurance for individuals with employer-sponsored coverage, according to the report.

Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured, said the study raises the issue that public programs exclude childless adults. She proposed basing public assistance on income, not on family situation, and expanding the Medicaid matching funds waiver to be regardless of a family situation.

This study shows the uninsured are not a homogenous population and policy should reflect the difference, Rowland said. She advocated a combination of public and private assistance to target the groups.

The report proposes extensive outreach efforts and simplified enrollment and redetermination procedures, including easing requirements for documentation of income, assets, and citizenship and possibly various types of incentives or penalties to reduce the 25 percent of uninsured who are eligible for public programs.

The report criticizes the budget savings law (PL 109-171) for requiring proof of citizenship as part of the eligibility determination process.

The 56 percent of uninsured who need financial assistance present a "more difficult public policy challenge," the Urban Institute argued.

The group proposes some form of partial assistance such as sliding-scale subsidies, income-related tax credits, and expansions in public programs. But in the absence of expansion of public coverage, the report recommends health insurance market changes, purchasing pools, or high-risk pools or some combination. The group supports the possibility of mandating coverage, such as has been enacted in Massachusetts.

William Vaughan, a senior policy analyst at Consumers Union, expressed support for several of the proposals but cautioned moving too quickly.

"The good news is 11 million people, many children, could be covered by using IRS income data to presumptively enroll them in public programs," Vaughan said. "But the data also warns that Congress should be very careful of individual mandates to buy health insurance, unless the mandate is accompanied by substantial financial help. Otherwise, for many lower-income people, mandating health insurance would be like mandating no car to get to work, crummy housing, and poorer diets."

Rowland also cautioned mandating coverage.

"The key is to mandate but to make sure it's affordable to those incomes," Rowland said.

This is not the first proposal for the incoming Congress to cover the uninsured.

On Nov. 13, the insurance industry lobbying group America's Health Insurance Plans unveiled its plan to cover the uninsured. AHIP proposed first pushing SCHIP to cover all uninsured children in the U.S. The next steps in the group's $300 billion, 10-year plan would expand state and federal Medicaid programs and offer tax credits to lower-income Americans who purchase insurance coverage.

Mohit Ghose, spokesman for AHIP, said the Urban Institute study identifies the types of people whom their plan could help. He also said studies such as this should further the health care discussion on the Hill.

By John Reichard, CQ HealthBeat Editor

Nov. 27, 2006 – The last time affluent Medicare beneficiaries were singled out to pay higher premiums for Medicare benefits, the howl of public protest was so strong that Congress quickly repealed the higher charges. Now, 17 years later, notices are once again hitting the mailboxes of affluent elderly Americans telling them they will have to pay more for Medicare—and the Social Security Administration (SSA) is bracing for thousands of calls and visits protesting the higher charges.

While no one is predicting a backlash of the magnitude that led to the November 1989 repeal of the Medicare Catastrophic Coverage Act of 1988 (PL 100-360) —which Congress passed in July of that year to add a drug benefit to Medicare—analysts say protests caused by the higher premiums will be made worse because Social Security officials won't be able to handle the added workload. Key lawmakers also are crossing their fingers that Social Security will be able to accurately calculate the higher premiums given tight deadlines and a tight operating budget facing the agency.

At issue is a provision of the Medicare overhaul law (PL 108-173) that charges beneficiaries higher monthly premiums starting Jan. 1 for Part B of Medicare if their annual incomes exceed $80,000 in the case of individuals and $160,000 in the case of married couples.

Lawmakers added the provision in part to help pay for the new Part D prescription drug benefit, but it's also widely viewed as a test of how feasible it will be politically to address Medicare's long-term financial woes by making the rich pay more for the program. If the squawks aren't too loud, "income-relating" of premiums eventually could see wider use in the program.

SSA spokesman Mark Lassiter said Monday that by the end of this week or soon thereafter, a total of 1.6 million of the 40.7 million Medicare beneficiaries enrolled in Part B will have received the notices. Part B covers various services and products provided to beneficiaries who aren't admitted as hospital inpatients.

While there is no flood of calls yet, notices "are just starting to hit people's mailboxes," Lassiter said. Overall, SSA estimates that the higher charges will prompt 337,000 "inquiries," 35,000 requests to recalculate incomes on which the higher charges are based, and 141,000 requests to change premium charges because of a "major life-changing event" that affects income, such as divorce, death of a spouse, or retirement.

Federal agencies have issued a few press releases about the higher premiums and the "Medicare and You" handbook sent to beneficiaries earlier this fall also notifies seniors of the change. But it is likely that this week's notice will be the wake-up call for hundreds of thousands of beneficiaries. And if it doesn't dawn on them this week, it's less likely to escape their attention in January when the higher charges will be subtracted from Social Security checks.

The overhaul law eases the bite by phasing it in over a three-year period. While Part B premiums will rise from $88.50 this year to $93.50 next year for most beneficiaries, the affluent will have to pay between $105.80 and $130.90 per month in 2007 depending on how well-off they are. By 2009, the numbers get much bigger, with individuals making between $80,001 and $100,000 a year paying $130.90 per month and those making more than $200,000 paying $299.20. The estimates are based on 2007 dollars, and the actual premiums charged in 2008 and 2009 are likely to be somewhat higher.

A new Government Accountability Office study notes that SSA had just one month between the time it received income data from the Internal Revenue Service and the mailing of the notices to calculate premiums. The chairman and the chairman-to-be of the Senate Finance Committee say that may prove to be too little time to get the numbers right.

Chairman Charles E. Grassley, R-Iowa, and ranking member Max Baucus, D-Mont., emphasized the importance of accurate calculations in a Nov. 17 statement. Beneficiaries will have 60 days within the time they receive the notices to file an appeal if they think the numbers are wrong. "This process ought to be seamless given that we passed the law three years ago," Baucus said. However, beneficiaries who have a "life-changing event" or who have amended tax returns may have more time to appeal.

Lassiter said Social Security will be able to handle the added visits and calls by shifting workloads among offices. That's because some offices in less affluent areas are likely to get fewer protests. But the GAO analysis said SSA staff shortages and a current hiring freeze could make it difficult to respond to increased volume. If beneficiaries are kept on hold waiting to question SSA's math, the volume of protest faced by congressional offices may be that much higher.

By John Reichard, CQ HealthBeat Editor

December 1, 2006 -- Incoming House Ways and Means Health Subcommittee Chairman Pete Stark shed crocodile tears Friday for many of the physicians facing a 5 percent cut in Medicare payments Jan. 1, saying he tries to relate to their suffering, but can't quite pull it off.

The California Democrat expressed indifference about the issue at a Washington, D.C., conference as congressional aides in both chambers of Congress tried to put together a deal that would block the cut.

Stark intimated after the speech that the position of Democrats on the issue may not matter much to its outcome in the lame-duck session of Congress that resumes Dec. 4. But his lack of a sense of urgency about the cut may become more significant if dealing with it is put off until next year.

"I don't know what the Republicans plan to do in the lame-duck session about the cut," Stark said in Q&A after a speech to the meeting, which was sponsored by the National Committee for Quality Assurance. But he said he personally is having a hard time finding a "proceduralist" whose income is actually declining.

"What we're finding is that they got about a 10 percent increase in gross fees," he said. "Now maybe they're giving up their golf games, maybe their upcoding more than I think they should be, but . . . the total income has gone up," he said. "So I should feel sorry?"

Stark mused that "if they have higher productivity, maybe we ought to cut the price a little bit." He allowed as how he'd read recently that top radiologists at a hospital in Indianapolis were making annual incomes between $490,000 and $620,000 a year. "It's hard for me to suffer with those people, you know?" Stark told tittering audience members. "I just try . . .," he said without completing the thought, the audience erupting in nervous laughter.

Stark voiced more sympathy for pediatricians, internists, and family practitioners, but said, "I just think this is the AMA trying to shake down their membership for more fees."

For those unaccustomed to Stark's routine skunk-at-the-garden-party potshots, his remarks might seem to bode ill for blocking the cut, but he shied away after the speech from saying he'd let it take effect. Stark said that if the issue were put off until next year, he might not erase it entirely. But when asked if that meant he would allow a small cut to take effect, Stark wouldn't be pinned down.

If Stark's remarks rankled doctors, they probably weren't alone. Incoming House Speaker Nancy Pelosi, D-Calif., may not be thrilled with Stark's prediction that the House Democratic health agenda "may be more modest than most people think."

"We have some priorities that were set by our campaign rhetoric, and I suspect that we are going to try very hard to perform on those," he said. Stark said he expected that Pelosi during the first 100 hours of the new Congress would offer bills ending the prohibition on allowing the Department of Health and Human Services to negotiate Medicare prescription drug prices and widening research on human embryonic stem cells.

"At the rate the far right of the evangelical church is disintegrating, we'll probably get the stem cell research through pretty quickly," he quipped. "As for drug price negotiation, I much don't care which way they do it, my guess is they just knock the prohibition out and we'll see what happens, but that will be decided by the leadership at a higher pay scale than mine."

But he added that legislation creating a government-run Medicare drug plan to compete with private plans might be too "radical" to avoid a presidential veto. "I don't look at that as very likely," he said of the legislation. And concerning a top Democratic priority, he added in passing, "I don't think that we can eliminate the doughnut hole"—referring to the coverage gap at which beneficiaries must pay out of pocket for drug costs between $2,250 and $5,100.

"Beyond the negotiating authority, I think there are some minor changes we could make to the Part D program," Stark said. Among the possibilities he listed were changing the penalty for late enrollment in Medicare, limiting the ability of Medicare drug plans to make coverage changes during the year, and possibly changing the asset test required to qualify for the low-income Medicare drug benefit.

Stark added that "we could equalize" payments to Medicare managed care plans, saying in effect that they could be trimmed to be equal to fee-for-service payment levels. And he predicted that his committee would perform oversight hearings, saying there had been "no real oversight hearings in the last six years."

Stark said he didn't know whether the Centers for Medicare and Medicaid Services would be more forthcoming than it has been in the past to his information requests. "When they do give us information we request, which is seldom, they often lie," he said. "Maybe that will come to an end."

Stark's hosts at the event were not spared his in-your-face assessments. NCQA is a leader in developing performance measures to assess the quality of care, but Stark said that he wanted to make clear his views on tying Medicare payments to performance on quality measures, an objective of the Bush administration and of many on Capitol Hill.

"My staff wanted me to be sure that I said this right," he said. "The entire concept of pay for performance is offensive. We shouldn't ever expect anyone to get paid more for doing what they were . . . paid to do," he said. Medicare "must demand the highest quality and no less." Quality should be expected "from each and every provider. And my solution would be to the provider who can't provide quality care, to defrock 'em."

By John Reichard, CQ HealthBeat Editor

Nov. 28, 2006 -- The American Medical Association said Tuesday that it's got the quid in the quid pro quo, and now it's time for Congress to come up with the dough. The physicians lobby released a letter mailed earlier this month to incoming House Ways and Means Committee Chairman Charles B. Rangel noting that physicians have now developed 150 quality-of-care measures and are asking his help in erasing a 5 percent cut in Medicare payments to doctors starting Jan. 1.

"The physician community has not shied away from developing new quality measures per our agreement with congressional leaders, and we hope Congress does not miss the opportunity to address the cuts facing physicians and their patients," AMA Executive Vice President Michael D. Maves wrote Rangel, a Democrat from New York. "We have fulfilled our promise to create new physician performance measures that will become the foundation of a new reporting regime that will lead to improved quality in the Medicare program."

Rangel has said he would like to see legislation passed this year erasing the scheduled cut but that he didn't know where the money would come from. Congressional GOP aides see a chance that lawmakers will vote to erase the cut when they return the week of Dec. 4, but also warn that finding money to pay for such legislation will be difficult.

Maves said half of the nation's doctors are facing a cut of more than 5 percent because of factors other than the physician payment formula. Imaging cuts mandated by the budget savings law (PL 109-171), expiring geographic adjustments in Medicare physician payment, reassignments of "value scores" for different types of physician care, and changes in payments for expenses incurred by physician practices also affect many doctors, according to Maves.

"Nearly half the nation's physicians face total cuts next year of 6 percent to 20 percent" because of the combined effects of the various factors, he said.

Administration officials have consistently said they expect physician reporting on the quality of their care to be a part of any action to erase cuts.