Skip to main content

Advanced Search

Advanced Search

Current Filters

Filter your query

Publication Types



December 8, 2008

Washington Health Policy Week in Review Archive c0bfa3e4-4fa2-47ee-8d41-4f5729d9b3f4

Newsletter Article


Governors Officially Mum on Size of Medicaid Spending Request

By John Reichard, CQ HealthBeat Editor

DECEMBER 1, 2008 -- On the day before a scheduled meeting in Philadelphia between President-elect Barack Obama and the nation's governors, state officials stopped short Monday of specifying how much added federal Medicaid spending should be included in a massive new economic stimulus package to be taken up by the 111th Congress, other than to say it should exceed the sum states received in 2003 tax legislation.

The 2003 measure (PL 108–27) provided a total of $20 billion in aid to the states in 2003 and 2004 on the heels of the last economic downturn—$10 billion in added federal Medicaid spending and $10 billion for a general relief fund for government services. Medicaid money in the upcoming package should be "north of that," Gov. Jim Douglas, R-Vt., told a press conference Monday.

The remarks by state officials followed their meeting earlier in the day with House Speaker Nancy Pelosi, D-Calif., and House Education and Labor Committee Chairman George Miller, D-Calif., to discuss stimulus legislation.

The governors released a paper Nov. 13 saying that Congress should boost outlays through the "Federal Medical Assistance Percentage" (FMAP)—the percentage of Medicaid funding paid by the federal government—by a least $20 billion a year for two years. Gov. Janet Napolitano, D-Ariz., said at a House hearing the same day that the "FMAP" increase should total $25 billion a year over a two-year period.

NGA officials said after Monday's briefing that the two-year figure of $40 billion in the association's Nov. 13 paper fell short of the status of an official NGA policy position. "We're not going in with a unified ask," NGA Executive Director Raymond Scheppach said of Tuesday's meeting with Obama. Scheppach added that governors are trying to link the size of their FMAP request to the budget shortfalls they are expecting in the current downturn. The sum they are looking for is 20 to 30 percent of projected state budget shortfalls, Scheppach said.

How big those shortfalls will be is unclear, as is the size of the economic stimulus package Obama and congressional leaders will agree to seek. Gov. Edward G. Rendell, D-Pa., told Monday's briefing that estimated shortfalls range between $140 billion and $200 billion over the next two years. Rendell is chairman of the National Governors Association and Douglas the vice chairman.

Governors aren't looking to the federal government to make up the entire amount of their budget shortfalls. "We understand that we have to do this ourselves," Rendell said. Douglas noted that Vermont has cut its overall appropriations by two percent and is now looking at added cuts of three percent. "States are not just coming to Washington with our hands out," he said.

In addition to added money from Medicaid, food stamps, and unemployment insurance, states are looking for up to $136 billion in funding for infrastructure improvements, 70 percent of which would be applied to transportation-related outlays including improvements in bridges and roads, Rendell said. The funds also would include spending on school construction and promoting the development of renewable energy sources. "There are tons of jobs to be created in green energy," he asserted.

It's unclear how much added FMAP money congressional leaders will seek, but Senate Majority Leader Harry Reid, D-Nev., made a pitch for stimulus legislation in late November that included $37.8 billion in added Medicaid money. Douglas said Monday that he's "optimistic" Obama will support a large temporary increase in federal Medicaid spending and Rendell noted that as a senator Obama favored the inclusion of FMAP money as part of aid to the states to stimulate the economy. Rendell said that the aim is to have an economic stimulus package ready for Obama to sign when he takes office Jan. 20.

Publication Details

Newsletter Article


He Wrote the Book on Health Care

By Alex Wayne, CQ Staff

DECEMBER 1, 2008 -- When Tom Daschle was the Senate's Democratic leader, he wasn't known for his health care expertise. He had other, more pressing worries—mainly keeping his caucus together when it was balanced on a simple one-vote majority. So he mainly deferred on the issue to Massachusetts Sen. Edward M. Kennedy, who had long advocated for comprehensive national health insurance.

Now, though, Daschle is President-elect Barack Obama's choice to head the Department of Health and Human Services (HHS), where he will live and breathe health care policy—especially because Obama also expects him to spearhead a new initiative to overhaul health care early next year. And thanks to a book that the former South Dakota senator published this year, readers can glimpse the likely shape of a Daschle-driven bid to remake the system. That book, "Critical: What We Can Do About the Health-Care Crisis," plainly sets forth the reasons the American health care system is broken, in Daschle's view—together with his accounts of why previous attempts to fix it have failed, and his own plan for a health care overhaul.

Daschle has not responded to interview requests, and an Obama spokesman declined to comment since the HHS nomination is not yet official. But Daschle's book offers some clues to his plans for attacking health care as HHS secretary. And while Obama will obviously have ultimate authority over next year's big health care push, it's also reasonable to assume he and Daschle are pretty much on the same page, since "Critical" also boasts a glowing blurb from the president-elect.

Daschle counsels a basic shift in political tactics for lawmakers pushing a fresh effort to fix the system. The cost of health care, he writes, is the one problem "burdening the most people" and thus the best issue to drive an effort to remake the system. So it seems a safe bet that Daschle and Obama will press Congress to pass legislation to impose new controls on those costs—in addition to the more politically palatable option of expanding insurance coverage.

Daschle also writes at length about the failures of President Bill Clinton's 1993 health care revision effort, but he focuses most intently on one: Clinton waited too long to get started, he argues. So Obama and Daschle would seem determined to move rapidly on the issue shortly after Obama's inauguration. Daschle suggests in his book that Congress might even attach an overhaul plan to the federal budget, which could protect it from filibuster in the Senate and speed its passage.

Daschle's own plan for expanding insurance coverage is mostly standard centrist-Democrat fare: Combine expansions of Medicaid and Medicare—to cover more people who are old or poor—with a new program that would give all Americans the option to purchase the same insurance offered to federal employees. He also endorses requiring all Americans to purchase health insurance, a measure that Obama has said isn't a necessary condition for a health care overhaul but is something that many Republicans support.

To get at the tricky issue of reducing costs, Daschle proposes a solution that hasn't gotten the backing of his boss—at least not yet: creating a new Federal Health Board, modeled on the Federal Reserve Board, that would have sweeping authority to regulate the entire health care sector, thus relieving Congress of politically onerous decisions about which treatments government health programs should cover and how much to pay different health providers.

This might seem to add up to an ambitious bid to create a de facto White House monopoly on health care and thereby block out the many for-profit players that, in Daschle's judgment, have stymied past overhaul efforts. But health policy experts who know him and his proposals insist that's not so.

"It's perfectly fine in Tom Daschle's world to make money," said Len Nichols, director of health policy at the centrist New America Foundation. "You just have to make money adding value."

Daschle thinks there's little value in a lot of what doctors and hospitals do now and in the drugs and procedures that insurance companies and the government buy. "Health care is a complex topic, but we have to face a simple truth: We're paying top dollar for mediocre results," he writes.

The Policy Players

The people he blames for the status quo are many of the familiar culprits fingered for the upward spiral in health care costs: doctors prescribing costly treatments of dubious use, drug companies stoking demand with overhyped direct-to-consumer ads and hospitals inflating costs for uninsured or underinsured middle-class patients.

Daschle also contends that insurers bear a big responsibility for the health care mess, since they regularly "employ underwriting strategies that exclude or charge the highest rates to people who need coverage the most."

Still, these pronouncements aren't exactly sending advocates on either side of the issue to the barricades.

"I don't think 'blame' is the right word," says David Mechanic, director of Rutgers' Institute for Health, Health Care Policy and Aging Research, whom Daschle cites repeatedly in his book. "The system is set up in which a very large proportion—millions and millions of people—live off the health care system and are concerned about their futures.

"Everyone agrees that the system is poor and has all these pathologies and doesn't provide value for money; on the other hand, when their interests are at stake, they work hard at protecting their interests."

Nor are the targets of Daschle's wrath especially distressed about the specter of him in charge of HHS.

"We believe the nomination of Sen. Daschle is very encouraging because it signals that the new administration is thinking big on health care reform," said Robert Zirkelbach, a spokesman for America's Health Insurance Plans, the insurance industry's trade association.

"Daschle's a politician," said Joseph Antos, a health care scholar at the conservative American Enterprise Institute. "He's more aware than most people who aren't politicians that you cannot have a health system without all of those interests. And furthermore, you can't have health reform unless all those interests not only grudgingly cooperate, they've got to be enthusiastic about what you're doing. Otherwise, it's not going to work."

Daschle's proposal to move health care forward comes out of his firsthand experience of the debacle of Clinton's 1993 health care overhaul. A year before Clinton came to Washington, Daschle had introduced his first health care overhaul bill, which was similar to the plan he proposes in his book—part of a boomlet in congressional health care proposals as public interest in the issue spiked in the early 1990s. As Daschle recounts, much of Congress' reawakened attention to the issue stemmed from the surprise victory in a 1991 special election of Harris Wofford, a lightly regarded Democrat who had been appointed to fill out the term of Pennsylvania GOP Sen. John Heinz, who had died in a 1991 plane crash. Wofford had made health care issues central to his campaign, and when he overtook former Gov. Dick Thornburgh, the well-funded GOP front-runner who had served as attorney general under Presidents Ronald Reagan and George Bush, lawmakers rushed to display their own credentials as health care reformers.

When the Clinton administration came to power courtesy of a similar mandate to remake health care, the moment for change seemed ripe, Daschle recalls. But the fight over Clinton's plan in 1993 and 1994 impressed Daschle with lessons that were mostly negative.

Too many people were involved in writing Clinton's bill, Daschle writes. Deliberations were too secretive, and as a result, damaging leaks were frequent. Congressional leaders weren't involved from the outset. The legislation itself, at 1,342 pages, was too long and too complex. Lobbying by supporters, Daschle writes, was "anemic," while opponents, led by the National Federation of Independent Business, "mounted a skillful campaign against it." Most of all, Daschle maintains, Clinton didn't move swiftly enough to advance his plan; the legislation didn't drop until the fall of his first year in office—and when Clinton needed to put serious momentum behind it, he was distracted on the foreign policy front, when 18 U.S. Army rangers were killed on a peacekeeping mission in Somalia.

Daschle suggests that significant changes to the health care system can come via budget reconciliation, which can protect legislation from filibuster in the Senate. But the procedure may be too constraining for a separate health care bill; it requires the legislation to fit within the fiscal limits of the congressional budget resolution. "It's not surprising—he was a senator," Antos said. "That's the first thing he would think about."

Board Certified

As HHS secretary and the point man in Congress for Obama's health care overhaul push, Daschle will be in an excellent position to see some of his ideas embodied in legislation—even if one key proposal, the establishment of a powerful new Federal Health Board, is designed to take Congress out of the picture when it comes to efforts to contain health care costs.

Daschle offers a detailed breakdown of how the board would work. Much like the Federal Reserve, it would be led by a presidentially appointed board of governors serving fixed 10-year terms.

A system of regional boards would promote the decisions made by the national board at the local level. Its most controversial power would be to conduct research on which health procedures and treatments are most effective and to make recommendations about which ones should be covered under public and private insurance plans.

The point, Daschle writes, is to insulate technical health policy decisions from political forces. "Which really means getting them away from the lobbyists, so you have a better chance that science can win the day, instead of very, very focused special interests," Nichols says.

But Antos is skeptical of the idea. With national health care spending approaching $2.5 trillion a year, too much money is involved for Congress to remove itself from health policy decisions, he says.

"We're talking ultimately about the vast expenditure of public dollars, and Congress is not going to disentangle itself from meddling with those sorts of things," Antos says.

Daschle disagrees: "I suspect that most members of Congress would be glad to be rid of their responsibility for controversial health policy decisions," he writes. In the years ahead, he'll have ample opportunity to put that suspicion to the test.

Publication Details

Newsletter Article


Hospital Initiative Could Reduce Patient Mortality, Increase Reliability of Care, Company Says

By Stacey Skotzko, CQ Staff

DECEMBER 3, 2008 -- Premier Healthcare Alliance's QUEST hospital initiative could reduce patient mortality by 17 percent and could improve reliability of care by 13 percent if the nationwide project obtains its goals, according to an analysis the company released Wednesday.

The three-year initiative, which currently connects 166 hospitals in 31 states through benchmarks and technologies, was launched in 2007. This recent analysis, though not an official study of first-year outcomes of the program, does show the "impressive potential" of the collaboration, according to CEO and Premier President Richard A. Norling.

"Effectively, we're creating an improvement community of hospitals," he said at a Wednesday forum that featured panelists from Premier, the Institute for Healthcare Improvement (IHI), Alegent Health, the Joint Commission, Inova Health System and Vocera Communications, a wireless communication system for hospital staff.

Premier said QUEST, which stands for quality, efficiency and safety with transparency, maintains five main goals in improving medical care: saving lives, reducing the cost of care, delivering reliable and effective care, improving patient safety and increasing patient satisfaction.

The panelists stressed the potential of QUEST to change the nation's health care system, but also mentioned hurdles it would have to overcome.

"[QUEST could] move to change the whole game," said Donald Berwick, the president and CEO of IHI, which is in alliance with Premier on the QUEST system. " . . . What we don't understand is how to make quality go to scale."

Berwick said QUEST does address "system performance" in health care, but there is still a "long road ahead."

Jerod M. Loeb of the Joint Commission said the medical community has been living in "a culture of low expectations," due to the lack of a strong organization culture, ineffective ways to measure outcomes and the broad lack of knowledge in utilizing data.

"[QUEST] requires us to identify what works and diffuse those strategies," he said.

Premier also announced six health care suppliers that would be in QUEST's "first wave" of its Comparative Innovation Program, which would test specific medical technologies and validate them within the hospital network, said Susan DeVore, Premier's chief operating officer.

DeVore said these six suppliers, whose products range from a Bard Medical Division catheter to Vocera's communication system, were chosen from 85 applicants. DeVore said the goal of the Comparative Innovation Program is to merge the data and analyses the suppliers already have developed with the information from QUEST participating hospitals, with the goal of accelerating "patient access to technologies proven to be safe and effective."

DeVore said she anticipates two to three more rounds of suppliers to be chosen for the project and that given the supplier interest, there is the potential for more to be incorporated, depending upon the continuation of QUEST beyond its three-year goal.

Stephen Moore of Inova Health System said QUEST's main success is its transparency, in that other professionals can view other participants' successes and failures.

"This is by no means the solution to the entire health care system, but this is a major first step," he said.

Publication Details

Newsletter Article


Insurers Offer Own Proposal for Health Care Overhaul

By Drew Armstrong, CQ Staff

DECEMBER 3, 2008 -- It seems as though hardly a day goes by without someone putting out a plan to overhaul the American health care system, and Wednesday the health insurance lobby stepped up with its own version.

The industry's proposal would preserve a role for private insurers, require individuals to buy coverage, and focus on reducing health spending by private and public programs.

Karen Ignagni, chief executive of America's Health Insurance Plans, the industry lobby, called the individual mandate an "important goal. ... We also think it's important to build on what's working now."

President-elect Barack Obama thus far has opposed a mandate on individuals to purchase health insurance, though former Senate Majority Leader Tom Daschle, D-S.D., his pick to head the Health and Human Services Department, has supported such a requirement.

The insurance industry has been blamed for helping to kill past health care overhaul proposals, notably the plan put forward by the Clinton White House in 1993 and 1994.

"We are doing things differently, and we will do things differently," said Ignagni. "I hope that demonstrates the seriousness of our resolve but also the fact that we can actually help move the ball down the field. That's the test of whether we rise to the occasion and earn a seat at the table."

The insurance industry's 11-page proposal is broad in sweep but light on details, especially when compared with an 89-page "white paper" put out last month by Senate Finance Committee Chairman Max Baucus, D-Mont.

For example, it calls for a 30 percent reduction in the projected growth of national health expenditures, but offers only broad suggestions about efficiency and value instead of specific policy proposals.

Under the industry plan, Congress would set a target for sustainable national health spending, then set up an advisory group to make policy proposals on how to bring spending into line with that target.

Medicare already has a similar system in place for setting payments to physicians who treat seniors and other beneficiaries of the giant federal program. Doctors are supposed to be paid according to the sustainable growth rate, a formula crafted by Congress in 1997 (PL 105–33). But as spending has grown faster than the target rate, Congress has stepped in repeatedly to block cuts in physician payments required by the formula. The latest such action came in July, when lawmakers overrode President Bush's veto and blocked for 18 months a scheduled 10.6 percent cut in Medicare's payments to doctors (PL 110–275).

An advisory board, the Medicare Payment Advisory Commission, has made proposals to overhaul the physician payment system, but Congress so far has not acted on those.

The insurance industry proposal makes no mention of that Medicare system, nor of private insurer-run Medicare plans, known as Medicare Advantage. The plans are paid a subsidy well over the costs of traditional Medicare. Democrats have sought to cut those payments, and are almost certain to do so again in any health overhaul plan that emerges from the incoming Congress.

James Roosevelt, co-chairman of AHIP's policy committee and chief executive of Tufts Health Plan, said that the lobby wanted to focus only on the under-65 population not covered by Medicare. An AHIP spokeswoman said the group would have a statement on Medicare Advantage later this week.

Democrats Welcome Input

Congressional leaders praised the insurance industry's participation in the process.

An aide to Baucus said the Senate Finance chairman was "very glad to see the insurance industry come to the table to participate and looks forward to what he hopes will be constructive discussions. This proposal certainly adds to the momentum for everyone to come together."

A spokesman for Senate Health, Education, Labor and Pensions Committee Chairman Edward M. Kennedy, D-Mass., echoed Baucus' sentiment. "There's a spirit of optimism about our work to ensure quality, affordable health care for all Americans—and today's announcement adds to that optimism. The insurance industry has advanced serious proposals that deserve serious analysis and consideration," said Kennedy spokesman Anthony Coley.

Roosevelt said the proposal was the result of several years of work and a multi-city "listening tour" conducted by health insurers.
"This isn't something we've just rushed to do lately," said Roosevelt.

In fact, the proposal was the third from the insurance group since Democrats took control of Congress in the 2006 election.

In November, the industry proposed a mandate for individuals to buy health insurance, along with a guarantee that people with pre-existing conditions would be able to buy insurance.

Two years before, following the 2006 mid-terms, insurers put forward an overhaul plan to cover all Americans by expanding public programs like the State Children's Health Insurance Program and Medicaid, and providing tax credits for Americans to purchase private insurance coverage.

That was not the first time insurers proposed such an expansion, however.

In 2001, patient advocacy group Families USA and the Health Insurance Association of America, the precursor to AHIP, proposed a plan calling for an expansion of Medicaid to cover those ineligible for it, using the State Children's Health Insurance Program to cover more children and tax credits to help businesses provide coverage for low-income workers.

Mary Agnes Carey contributed to this report.

Publication Details

Newsletter Article


LBJ Could Be Obama's Guiding Light for Health Care Overhaul, Experts Say

By Emily Ethridge, CQ Staff

December 2, 2008 -- To ensure a successful overhaul of America's health care system, President-elect Barack Obama should take a page from the playbook of President Lyndon B. Johnson, who used a combination of political savvy and sheer will to help enact Medicare and Medicaid programs in 1965, say two policy experts in the latest issue of the New England Journal of Medicine.

"Policymakers focus a lot on other health reform missteps but little attention is paid to the successful lessons of Lyndon Johnson and Medicare," said David Blumenthal, who served as an adviser on the Obama campaign. Blumenthal, director of the Institute for Health Policy at Massachusetts General Hospital, co-wrote the article along with James Morone, chairman of political science at Brown University.

Johnson was deeply committed to passing Medicare, and moved quickly on the legislation, the authors said. He chose to make the bill his first priority—it was designated HR 1 in the House and S 1 in the Senate—and said he would pass it whatever the cost.

"Johnson made passing Medicare a priority and he worked tirelessly to get it done," Morone said.

Cost may be one of Obama's biggest challenges in passing significant health care overhaul. According to a November 2008 estimate from the PricewaterhouseCoopers accounting and consulting firm, Obama's proposed plan would cover 30 million Americans without health benefits at a cost of $75 billion if enacted in 2009.

To help pass Medicare, Johnson went so far as to underestimate its true cost and avoided projecting the legislation's economic impact so the bill could more quickly. "An accurate economic forecast might have sunk Medicare," Blumenthal and Morone wrote. Johnson decided "to expand coverage now and worry about how to afford it later."

However, Obama faces a much bleaker economic situation than Johnson did. The Congressional Budget Office, which did not exist in 1965, will be reviewing the economic impact of any legislation Obama introduces, as will the White House's Office of Management and Budget.

For a health care overhaul bill to succeed, Obama will need to use much of his political capital, the authors noted. Johnson was victorious because he was personally committed to passing Medicare, and willing to spend money and energy as well as use his clout. "Only a president with a deep emotional commitment to improving our health care system would start down such a risky and dangerous path," they said.

In addition, Obama must move quickly. Any delay gives the opposition time to form attacks that will defeat the bill, Blumenthal and Morone advised. One of the problems with President Bill Clinton's health care overhaul plan, they said, is that he waited nine months to introduce it, allowing opponents to assemble and defeat it. In contrast, Johnson got to work right away on the Medicare bill, because he saw his mandate as "fragile and fleeting," they said.

After Johnson was elected, along with large liberal Democratic majorities in the House and Senate, the powerful House Ways and Means Committee Chairman Wilbur Mills, D-Ark., switched his position on health care and promoted the Medicare system. Johnson worked closely with Mills, allowing him and other members of Congress to figure out the specifics of the plan, while Johnson stayed true to basic principles, the article noted. For example, when Mills suggested a bill with a Social Security cash benefit, a hospital benefit and an expansion of health care for the poor, Johnson agreed to all those things but also pushed for a bigger, more complete Medicare bill.

Johnson gave Mills and other members of Congress credit for the bill. A former senator, he understood how Congress worked, and assembled a skilled legislative team to navigate through the lawmakers. While he created political momentum, he allowed Congress to work out the details to give the bill a better shot, the article said. He also tracked the bill's progress nearly daily.

Johnson's keys to success—moving quickly, using political capital and ignoring costs—could put Obama on the right path, Blumenthal and Morone said, but added that even with employing such actions, the president-elect faces a tough path on health care.

Publication Details

Newsletter Article


MedPAC Private Plan Costs Rise Compared to Traditional Medicare

By John Reichard, CQ HealthBeat Editor

DECEMBER 5, 2008 -- Federal outlays for the private health plans in Medicare will rise slightly next year compared to spending on the traditional fee-for-service part of the program, according to data released Friday by the Medicare Payment Advisory Commission (MedPAC).

While those plans say their higher payments generate enhanced benefits for Medicare beneficiaries, a commission analysis also found that the government pays as much as three dollars for every dollar in enhanced benefits beneficiaries receive from the plans.

The findings won't help bolster managed care industry arguments against likely efforts by congressional Democrats next year to trim payments to the plans, which collectively make up Medicare's Medicare Advantage (MA) program.

According to a presentation by MedPAC staffers Scott Harrison and Carlos Zarabozo, payment levels for MA plans next year will average 114 percent of payments to providers in the fee-for-service part of Medicare. In 2008, MA payments averaged 113 percent of fee-for-service reimbursements.

Payments for specific types of MA plan will average the following next year, compared to payment levels in traditional Medicare: HMOs, 113 percent; local PPOs, 118 percent; regional PPOs, 112 percent; and private fee-for-service plans 118 percent.

Arguably, MA plans collectively also became less efficient at delivering benefits to Medicare enrollees, the data suggest. In 2008, their bids to deliver benefits came in at a cost that averaged 101 percent of the cost of delivering care under the fee-for-service program; bids for 2009 averaged 102 percent of the expected cost of care under the fee-for-service program.

Robert Zirkelbach, a spokesman for America's Health Insurance Plans (AHIP), said the lobby is still reviewing the numbers released Friday by MedPAC but said MA is a vital option for seniors across the country. "They are benefiting from lower out-of-pocket costs and additional benefits such as hearing, vision and dental coverage. As policy makers look at the MA program they should consider the added value that these plans have for seniors." AHIP is the nation's largest health insurance lobby.

The commission has a standing recommendation to Congress that it trim MA payment rates so that they are at 100 percent of payment levels in the fee-for-service program. The House passed a measure in 2007 that would have lowered MA payments to that level, saving an estimated $160 billion or so over 10 years to fund wider coverage of uninsured children and block a Medicare payment cut to doctors, among other purposes.

AHIP countered that the cuts would raise out-of-pocket costs and reduce benefits for MA enrollees, particularly among those with modest incomes. The Senate did not go along with the cuts. Congress eventually passed other legislation in 2008 subjecting private fee-for-service plans in the MA program to new requirements expected to reduce spending on that type of plan relative to sums they otherwise would have received from Medicare.

Data released at Friday's commission meeting addressed the issue of how much it costs Medicare to obtain those enhanced benefits for enrollees. MedPAC's analysis showed that it will cost taxpayers an average of $1.30 for every dollar in enhanced benefits delivered by MA plans in 2009. Subsidy levels for enhanced benefits will vary by type of MA plan, according to the MedPAC analysis. Medicare will have to pay HMOs an added 97 cents for every one dollar in enhanced benefits they deliver; local PPOs $1.91; regional PPOs $2.23; and private fee-for-service plans in the MA program $3.26.

Originally, managed care plans in Medicare were paid at rates lower than fee-for-service levels, and they said their more efficient care allowed them to offer extra benefits while saving Medicare money at the same time.

Meanwhile, the MA program continues to grow at a healthy clip, according to enrollment data presented at the meeting. MA enrollment totaled 9.9 million as of November 2008, up 16 percent compared to November 2007. HMOs, the type of managed care plan that has operated the longest in the Medicare program, rose modestly in enrollment, rising 7 percent to 6.5 million. Private fee-for-service plans meanwhile grew 35 percent in enrollment, reaching a total of 2.3 million people.

In his presentation, Harrison also noted a wrinkle in MA payment policy that aroused concern on the part of commissioners but no policy recommendations, at least for now.

Harrison noted MA plans in the Miami-Dade area of Florida will collectively see an additional $150 million to $200 million in payments next year, and said that some of that increase can be attributed to fraudulent billing in the traditional fee-for-service program. Here's why: MA payment levels vary directly with spending levels in the fee-for-service program; a five-year average of fee-for-service payments in the Miami-Dade area included hundreds of millions of dollars of payments for claims later proven to be fraudulent. Medicare now has no authority to lower its “benchmark” figures used to set MA payment levels, so to the extent outlays for claims later identified as fraudulent were counted in setting the benchmark, it can't be lowered later by removing the fraudulently billed sum from the calculation.

Publication Details