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Stark Mulls Medicare Advantage Cuts

By John Reichard, CQ HealthBeat Editor

February 14, 2007 -- Hunting for details to flesh out his rationale for cutting payments to Medicare Advantage plans, Rep. Pete Stark, D-Calif., invited the head of the Medicare program to quantify the extra benefits those plans provide.

Questioning acting Centers for Medicare and Medicaid Services (CMS) Administrator Leslie V. Norwalk at a Tuesday hearing on the CMS fiscal 2008 budget proposal, Stark said he doubted the value of those added benefits comes close to the amount of money the plans receive in "overpayments."

"We have not been able to get a list from you of those extra benefits," Stark complained, echoing bipartisan criticism of the Department of Health and Human Services that months go by before it responds to letters from Capitol Hill—if it responds at all.

Norwalk told the hearing by the House Ways and Means Health Subcommittee that she would provide the information Stark seeks and that CMS plans to be more responsive to Hill inquiries. But she also rattled off a variety of statistics on the added benefits and politely differed with Stark's characterization of reimbursement levels for Medicare Advantage plans as "overpayments."

She said, for example, that Medicare Advantage plans in many instances cover some drugs in the "doughnut hole" gap in standard prescription drug coverage, that unlike traditional Medicare most plans do not require a three-day hospital stay before covering skilled nursing facility care, and that most cover routine physicals and eye and ear exams.

Stark replied that he also wanted an estimate of the dollar value of the added benefits to compare with overpayments he said would total $50 billion at reimbursement levels set in current law. But Stark wants to lower those levels, faulting the administration's budget for omitting cuts to Medicare Advantage plans and noting that he needs to find savings in Medicare to pay for blocking scheduled physician payment cuts.

The subcommittee's ranking member, Michigan Republican Dave Camp, also expressed concern about finding funds to pay for a physician payment fix. Although less critical of the administration's budget proposal than Stark, Camp asked Norwalk why CMS couldn't change they way it calculates the spending target Medicare sets for outlays for physician care. Removing spending on drugs from the calculations would lower the target, in turn reducing payment cuts that would be needed to recoup amounts spent above the target.

Norwalk didn't play that up as a fix, saying CMS lacks legal authority to remove spending on drugs from past calculations of the target—a step that would whittle down the dollar value of past spending overruns CMS must recoup in future physician payment cuts. And Norwalk said removing drugs from future calculations of the target wouldn't lower cuts any time soon.

Norwalk also took exception to Stark's statement that Medicare Advantage plans were spared in the administration's proposed budget cuts, saying that cuts in the fee-for-service part of the program affect Medicare Advantage payment rates, lowering them by a total of $15.2 billion over five years.

In her testimony, Norwalk also defended the Medicare Advantage program by saying it is a "particularly important" program for lower-income Medicare beneficiaries. "Fifty-seven percent of beneficiaries enrolled in Medicare Advantage report income between $10,000 and $30,000 compared to 46 percent of fee-for-service beneficiaries," she said.

"Minorities represent 27 percent of total Medicare Advantage enrollment, compared with 20 percent in fee-for-service," she added. Enrollment in Medicare Advantage now totals 8.3 million, up from 5.3 million in 2003.

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