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MedPAC Chairman Criticizes Higher Payments to MA Plans

By John Reichard, CQ HealthBeat Editor

March 11, 2008 -- As Democrats contemplate reducing payments to private insurers in Medicare, the chairman of the Medicare Payment Advisory Commission told a House panel on Tuesday that paying the plans more than traditional fee-for-service providers increases the threat to Medicare's long term viability.

Medicare spends about $10 billion more each year on beneficiaries enrolled in the plans, known as Medicare Advantage, but there is little data to show added value worth the extra investment, commission Chairman Glenn M. Hackbarth told the Ways and Means Health Subcommittee.

While the commission, known as "MedPAC," supports private plans in Medicare as a way to offer beneficiaries choices for coverage, MedPAC has also advocated that Medicare pay the same amount, adjusted for risk, whether a beneficiary chooses a private plan or gets care from Medicare's traditional fee-for-service program. In 2008, MedPAC projects Medicare Advantage payments will be 113 percent of expected fee-for-service expenditures, while payments to private fee-for-service plans will be 117 percent.

"By increasing payment to levels significantly above traditional Medicare, we have changed the signal we are sending to the market: Instead of efficiency-enhancing innovation, we are getting plans (for example, private [fee-for-service] plans) that are not well designed to manage care or improve quality and have higher cost," Hackbarth said in prepared testimony on the commission's March report to Congress.

Plans entering Medicare in 2004 or later also show poorer performance than older plans on clinical indicators of quality, and some plan types, such as private fee-for-service plans, are exempt from quality reporting requirements, which makes it difficult for either the beneficiary or the program to judge their value, Hackbarth said.

The fastest growth in "MA" plans is in private fee-for-service plans, which have no requirement to coordinate care or report quality measures, and special needs plans, which have not yet been fully evaluated, the MedPAC chairman testified.

Subcommittee Chairman Pete Stark, D-Calif., said he'd try to implement MedPAC's recommendations on MA payments, a step he tried to take last year in legislation to reauthorize and expand the State Children's Health Insurance Program (SCHIP). The proposed cuts to MA plans were ultimately dropped due to Republican opposition. Senate Finance Committee Chairman Max Baucus, D-Mont., and other Democrats have proposed cutting payments to Medicare Advantage plans as part of Medicare legislation this spring.

President Bush and congressional Republicans are sure to once again oppose any sizeable reductions in MA payments. At Tuesday's hearing, ranking subcommittee member Dave Camp of Michigan said that cuts the size that MedPAC recommends would "leave 22 states without a single senior enrolled in Medicare Advantage" and those who still had coverage "would see their benefits slashed and out-of-pocket costs increase."

But Camp didn't rule out evaluating how Medicare currently pays the plans. "I want to be clear that I'm not suggesting we shouldn't look at savings opportunities in the Medicare Advantage arena, including adjusting benchmarks to recognize true market forces," Camp said.

Separately, Camp and Rep. Jim McCrery, R-La., the ranking Republican on the full Ways and Means panel, have sent a letter to Acting Centers for Medicare and Medicaid Services (CMS) Administrator Kerry Weems asking CMS to issue tougher regulations on the marketing of MA plans.

The proposed regulations include requiring all beneficiaries who enroll in MA plans to be called within 10 days of enrollment to make sure they understand how the plans differ from traditional fee-for-service, and allow beneficiaries who have been "intentionally misled" by a MA plan sponsor or sales agent to un-enroll from the plan. MA insurers have also asked Congress to pass new regulations that would ban sales techniques such as door-to-door sales and cold-calling.

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