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AMA, AARP Take Aim at Medicare Private Fee-for-Service Plans

By Mary Agnes Carey, CQ HealthBeat Associate Editor

October 10, 2007 – The American Medical Association and AARP are continuing their campaign to convince Congress to cut Medicare Advantage payments, holding a briefing Wednesday highlighting problems with Medicare private fee-for-service plans in rural America.

Among the criticisms the panelists levied at the plans were that they often reimburse rural providers at rates far lower than that of the traditional Medicare program, and that the policies are so complex, beneficiaries do not understand them, in particular the higher cost-sharing that may be required for some services, such as cancer treatment or home health care.

Brock Slabach, board member of the National Rural Health Association, said that many Medicare private fee-for-service plans do not comply with cost-based reimbursement requirements for critical access hospitals that Congress established in 1997. He said other problems with the plans, for example, are that they impose burdensome pre-certification requirements for care and delay payment or pay the incorrect amount for services, problems that, if not corrected, will weaken rural health care providers' ability to provide services.

Of the approximately 8.9 million Medicare beneficiaries enrolled in Medicare Advantage plans, 1.7 million are in private fee-for-service, with much of the growth of those plans in rural areas, panelists said at the briefing, which was held in the Senate Finance Committee hearing room. The committee is drafting legislation that is widely expected to prevent a scheduled 10 percent in Medicare physician payments, financed in part by a reduction in Medicare Advantage reimbursements.

Lawmakers and health care analysts who say Medicare Advantage plans are overpaid have leveled their strongest criticisms at private fee-for-service plans because they say the care they provide is loosely managed and the plans are reimbursed at much higher rates. On average, Medicare Advantage plans are paid 112 percent of the rates paid in traditional Medicare, while private fee-for-service plans are paid 119 percent of those rates, according to the Medicare Payment Advisory Commission (MedPAC).

Backers of such plans say they offer additional benefits, such as eye and hearing exams, limits on out-of-pocket spending, reduced Part B premiums, and lower cost-sharing on preventative exams for cervical cancer, prostate cancer, and breast cancer. Mohit Ghose, a spokesman for America's Health Insurance Plans (AHIP), a trade group representing insurers, said seniors enrolled in Medicare Advantage are saving on average $86 per month, or a total of $1,032 a year.

On Monday, AMA and AARP announced a new television ad campaign to encourage Congress to cut $54 billion from Medicare Advantage plans. The groups argue that while one of five seniors is enrolled in Medicare Advantage, "these excess payments to insurers are coming out of everybody's pockets." The extra funds, the groups said, could be used to prevent the scheduled cut in Medicare physician payments. Eliminating that cut could force beneficiaries' Medicare Part B premiums to rise to $100 monthly.

In conjunction with UnitedHealth, AARP is a major player in the Medicare prescription drug plan market. Starting next year, AARP plans to sponsor a Medicare Advantage plan as well, said Brian McGuire, AARP associate regional director.

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