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PPOs A Plenty in Medicare Next Year?

APRIL 5, 2005 — Preferred provider options (PPOs) may be offered to Medicare beneficiaries in as many as 21 of 26 regions throughout the country next year, government officials said Tuesday. Critics had charged there might be very few PPOs offered on a regional basis, but the new applications—if they receive CMS approval—may defy such predictions. In addition, over 90 percent of Medicare's 41 million beneficiaries could have access to Medicare coordinated health care plans and other plan options this year, according to CMS.

In testimony Tuesday before a Senate panel, CMS Administrator Mark B. McClellan said he was "confident that, throughout the country, beneficiaries will have access to prescription drug plans on schedule." The full drug benefit begins next Jan. 1.

McClellan also told the Senate Homeland Security and Government Affairs Subcommittee on Oversight of Government Management that the "fallback" provision in the drug bill (PL 108-173) would not be needed "because all areas of the nation are on track for having sufficient health plans."

The "fallback" provision requires the government to provide beneficiaries with Medicare drug coverage if private plans do not do so. McClellan said Tuesday CMS has received over 130 new Medicare Advantage plan applications in 2005, including 50 plans completely new to the Medicare program and about 80 new PPOs. The agency has also received more than 70 proposals for expanded service areas, with Medicare Advantage plans operating in 49 states this year.

"And it's not just in the big cities anymore—three-fourths of rural beneficiaries will have access to a Medicare Advantage plan, and one-third of rural beneficiaries will have access to a coordinated care plan," McClellan said.

Late Monday, CMS officials announced that on average Medicare payments to Medicare Advantage plans would rise 4.8 percent in 2006. Plans that enroll sicker beneficiaries may receive higher rates as part of CMS' ongoing effort to use "risk adjusters" to account for differences in expected drug costs based on patient demographics, chronic diseases, low-income status, and institutional status.

In 2005, the average increase in Medicare Advantage payment rates was 6.6 percent and in 2004 it was 10.6 percent.

One health insurance industry source said Tuesday that plans may leave Medicare Advantage at the end of 2007 if they "find that they can not attract enough enrollment to recoup their start up costs and make a profit."

Many of the new local HMOs and PPOs enter into markets that are already crowded and they cannot succeed, he said.

Mohit Ghose, vice president for public affairs at America's Health Insurance Plans, a trade group representing insurers, said the high number of health plans now participating in Medicare Advantage demonstrates the industry's willingness to "maintain and build on the public–private partnership for Medicare beneficiaries."

Lawmakers' Concerns
During Tuesday's hearing, Democrats on the panel said the drug benefit could hurt poorer beneficiaries who now receive coverage under Medicaid but will be forced to get their drug coverage under Medicare once the drug benefits begin.

Some Democrats also criticized the "video news releases" that the Department of Health and Human Services (HHS), CMS' parent agency, had used to promote the drug law.
Last May, the Government Accountability Office, then known as the General Accounting Office, ruled that HHS violated federal laws when it produced and distributed videotaped segments touting the new Medicare prescription drug law (PL 108-173). GAO said that portions of television spots HHS distributed to local broadcasters amounted to "covert propaganda" and thus violate federal statutes. A subsequent Department of Justice ruling said HHS did not violate federal law.

Sen. Daniel K. Akaka, D-Hawaii, said Hawaii residents who now receive drug coverage under Medicaid would have to make copayments under the new Medicare drug plan, which could create a hardship.

Akaka also expressed concern that formularies in the Medicare drug plans—lists of drugs approved for coverage—would exclude some drugs that Medicaid beneficiaries currently rely on.

McClellan responded that CMS is working to identify "dual eligible" beneficiaries now in hopes of helping them and their caregivers identify a Medicare Advantage plan that meets their needs. He also said CMS officials want to make sure that "medication transitions [are] handled efficiently" for beneficiaries.

Concerning video news releases, McClellan said CMS will "fully comply with the law" as interpreted by the Justice Department, which interprets the law for the executive branch.

Sen. Frank R. Lautenberg, D-N.J., who asked GAO to investigate the matter, said CMS should clearly label any video as provided by the government and refrain from calling any government-issued materials news releases.

"It's not news," Lautenberg said. "It's government propaganda."

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