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MedPAC Again Targets Medicare Advantage for Cuts

By Jane Norman, CQ HealthBeat Associate Editor

March 1, 2010 -- The Medicare Payment Advisory Commission in its annual report to Congress issued Monday rapped the continuing payment disparity that benefits private Medicare health plans over traditional Medicare.

The report was released as President Obama and congressional Democrats mount a fierce onslaught on payments for the private health plans as they seek funding for their proposed health care overhaul.

The plans, known as Medicare Advantage plans, continue to enroll members, are widely available, and offer enhanced benefits, MedPAC said. "However, taxpayers and beneficiaries in traditional fee-for-service Medicare subsidize these benefits, often at a high cost," said the report. Meanwhile, Medicare Advantage continues to swell, with 24 percent of all Medicare beneficiaries enrolled in the program as of November, for a total of 10.9 million people.

Yet commissioners also reminded Congress that fundamental problems remain within the traditional system, and recommendations included in the report for changing the base rates paid by Medicare to providers won't solve those problems, they said. Providers are paid more for delivering additional services whether or not they add to quality or value, said MedPAC Chairman Glenn Hackbarth in his letter submitting the report to Congress.

"While the commission maintains that Medicare's payment systems must be reformed, in the interim it is imperative that the current fee-for-service payment systems be managed carefully," he said. And such reform is unlikely to happen "without steady pressure on the level of prices paid by Medicare as well as attention to the relative values assigned to different services," Hackbarth said.

The commission has made many recommendations to increase the quality of care and improve coordination among scattered providers, including the beginning of bundling of payments for multiple services, "medical homes" and accountable care organizations.

The idea of the medical home is to have chronically ill patients under the supervision of physician practices that deliver effective preventive care and improve coordination of services. Accountable care organizations would creates teams of providers to better coordinate treatment.

MedPAC, as it's known, is a non-partisan and independent congressional agency set up to advise Congress on issues surrounding Medicare. While its recommendations are not binding, they are widely quoted in health care policy debates and the agency's data is relied upon by members of Congress.

The report said that the Medicare Advantage program continues to be more costly than fee-for-service Medicare. While commissioners support private plans they also believe that the Medicare program should not pay Medicare Advantage plans more than fee-for service plans. The higher spending results in additional government spending and higher Part B premiums for all beneficiaries "at a time when both the Medicare program and its beneficiaries are under increasing financial stress," said the report.

Specifically, if currently scheduled 21 percent cuts to physician reimbursement payments take effect in 2010, Medicare Advantage payments per enrollee would be an estimated 113 percent of comparable fee-for-service spending in 2010, the commission said. If the physician fees are not cut, the payments would be a projected 109 percent of comparable fee-for-service spending.

While the recommendations on Medicare Advantage are not a new stance, the slap at private plans comes while Democrats in health care overhaul measures approved in both the House and Senate are attempting to cut funding for the plans. They do so in the face of opposition from the industry and from some in Congress. "Millions of seniors. . .who have chosen Medicare Advantage will lose the coverage that they now enjoy," said Rep. Paul Ryan, R-Wisc., at a bipartisan health care summit at the White House on Feb. 25.

But President Obama said that money saved by cutting Medicare Advantage could be used to fill the prescription drug "doughnut hole" encountered by seniors who exhaust their regular benefits. He said, "I just want to focus on Medicare Advantage because I haven't seen an independent analyst look at this and say seniors are healthier for it or taxpayers are better off for it."

At a briefing for reporters, Mark Miller, the executive director for MedPAC, also highlighted what he said are press accounts that in the past have overstated the problems that Medicare beneficiaries have finding primary care physicians. Miller said that MedPAC surveys have found 6 percent of beneficiaries report they are seeking new physicians. Of that group, about a quarter say they are having trouble finding a doctor — which he said translates to roughly 1 to 2 percent of all beneficiaries. Commissioners, however, remain concerned about the access issue and the direction in which it might be heading, Miller said.

The report also includes recommendations on provider payment rates that commissioners voted on at their January meeting, including those for hospitals, physician services, dialysis, hospices and more.

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