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Extra Payments to Insurer-Run Medicare Plans Draw More Scrutiny

By Kerry Young, CQ Roll Call

December 10, 2015 -- An influential federal panel appears poised to urge Congress to change certain policies that may make it more expensive for older and disabled Americans to enroll in the insurer-run Medicare plans than to stick with the traditional government-run version of the program.

Members of the Medicare Payment Advisory Commission (MedPAC) on Thursday signaled broad support for two draft recommendations for changes to the so-called Medicare Advantage plans. The panel will vote in January on a broad series of recommendations, including its annual suggestions on payment rates for hospital care and other services. MedPAC's recommendations also include targeted proposals on specific issues, such as those discussed Thursday.

At issue are the design of a system of bonus payments tied to quality measures and the coding procedures used to evaluate the health of people enrolled in Advantage plans. These have been criticized for making people in Advantage plans appear to be in worse medical condition than they actually are, thus drawing larger payments.

The payments may contribute to the higher cost of having people enroll in Medicare Advantage as opposed to the traditional fee-for-service program. MedPAC last year estimated that Medicare would pay about $8 billion more this year in total toward the care of people in Advantage plans than it would have spent had they stayed in the fee-for-service program.

Enrollment in insurer-run forms of Medicare such as Humana and UnitedHealth Advantage plans have been rapidly growing, making it one of the largest single health accounts for the federal government with about $160 billion spent last year. About 18.7 million people are expected to enrolled in these plans next year, roughly one-third of the Medicare population.

During Thursday's discussion, MedPAC members expressed support for a plan to eliminate certain caps and bonuses, a move intended to make payments more level between insurer-run and traditional Medicare. Plans operating in certain counties seeing an increase in payments and others likely would see reductions if this change were made, according to MedPAC staff.

MedPAC commissioners generally supported the concept of another Advantage proposal put forward by MedPAC staff but a few raised objections to the draft recommendation. It would advise Congress to direct the secretary of Department of Health and Human Services (HHS) to develop a risk adjustment model that uses two years of diagnostic data from both Advantage and traditional fee-for-service (FFS) Medicare. HHS could then apply "a coding that fully accounts for the remaining differences between FFS Medicare and Medicare Advantage plans," the draft recommendation says.

MedPAC member Scott Armstrong said there is too little effort to fully assess the health status of people in traditional Medicare, which may leave some diseases and health problems unknown to doctors and nurses caring for the elderly and disabled.

"I would argue that the real problem is less overcoding in Medicare Advantage than underdocumentation, undercoding in fee-for-service, which results in horrible problems in our health care system," said Armstrong, who also is president and chief executive of Seattle-based Group Health Cooperative, one of the nation's largest consumer-governed health care systems.

MedPAC member Kathy Buto, a former senior health adviser at the Congressional Budget Office who also served in HHS, questioned why the recommendation would be directed to Congress instead of directly to the federal health agencies involved. This approach could prove cumbersome as a path to changing a health policy, as Congress can be prone to "mischief" and sometimes clears legislation that differs greatly from what policy advocates had proposed, she said. The end result could be a new coding policy set in law that becomes quickly outdated as technology advances.

"I just don't think it's appropriate for Congress to be telling the secretary how to do risk adjustment," she said.

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