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Report Finds Different Payment Rates for Medicare Private Fee-for-Service Plans

By Lauren Phillips

September 7, 2007 -- Low-income people enrolled in Medicare private fee-for-service plans and living in poorer counties pay more for their health care than those enrolled in the same plans in neighboring, more affluent areas, according to a new study from the Medicare Rights Center.

The report, which compares U.S. Census Bureau demographics data with plans' premiums and benefit packages in eight counties in four states, cites examples where Medicare private fee-for-service plans in affluent counties receive greater federal subsidies per enrollee than those in nearly poorer counties where more minorities live. For example, Ohio's fairly affluent Clermont County has no monthly premium for a private health plan, but the same plan's premium is $69 in neighboring county that has twice as many people living in poverty.

"Current members of Congress and the insurance lobby have been working overtime to sell the argument that overpaying insurers is in the best interest of poor and minority Americans," the center's president, Robert M. Hayes, said in a news release. "But it is a misleading, untruthful strategy to keep the overpayments to Medicare private health plans flowing."

Payments to private plans, known as Medicare Advantage (MA), now average 112 percent of traditional rates, according to the independent Medicare Payment Advisory Commission (MedPAC). The commission, which is on record as supporting the Medicare Advantage program, has repeatedly recommended equalizing payment levels between Medicare Advantage and traditional Medicare.

Centers for Medicare and Medicaid Services (CMS) Spokesman Jeff Nelligan said the agency was "uncertain how representative eight counties are of a nation containing more than 3,140 counties." He said the Medicare Advantage program offers a wide variety of premiums across the country with a significant number of beneficiaries, including those with low-incomes, having the choice of a zero premium plan.

Nationally, 27 percent of Medicare Advantage beneficiaries are minority versus 20 percent of traditional Medicare fee-for-service beneficiaries, Nelligan said, and that on average beneficiaries who choose Medicare Advantage plans receive over a $1,000 a year in benefits not available in the traditional fee-for-service program.

Mohit Ghose, a spokesman for America's Health Insurance Plans (AHIP), said studies such as the Medicare Rights Center report "do not represent the reality for millions of beneficiaries who depend on Medicare Advantage plans for better benefits and lower out-of-pocket costs. We know from CMS data that 49 percent of MA beneficiaries have incomes below $20,000. MA plans remain the most popular option for beneficiaries with incomes between $10,000 and $20,000 who are less likely to have access to Medicaid or employer-sponsored coverage."

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