Skip to main content

Advanced Search

Advanced Search

Current Filters

Filter your query

Publication Types



Newsletter Article


Stark Plans July Bill to Cut Medicare Advantage Payments

By Alex Wayne, CQ Staff

April 25, 2007 -- The chairman of a powerful House subcommittee said Wednesday that he plans to introduce legislation by July to cut spending on Medicare to free money to avert a large reduction in the program's reimbursements to doctors and increase benefits for seniors.

Democrat Pete Stark of California, the chairman of the Ways and Means Subcommittee on Health, clarified that he plans to find some of the savings he needs in Medicare Advantage (MA), a program that pays private insurance plans to provide health insurance coverage to seniors instead of traditional Medicare.

In recent weeks, at least three independent, nonpartisan agencies—the Medicare Payment Advisory Commission, the Congressional Budget Office (CBO), and Medicare's own actuaries—have reported that the government pays private plans an average of 12 percent more, per beneficiary, than it costs to cover people in traditional Medicare.

Medicare's chief actuary, Richard S. Foster, told Stark's subcommittee Wednesday that if payments to the private plans equaled costs in traditional Medicare, the system's financial condition would be improved and beneficiaries would pay less. Medicare's hospital insurance trust fund, he said, would remain solvent for an additional two years, and beneficiaries would pay about $2 less per month for premiums.

Medicare's trustees reported Monday that the trust fund is projected to be exhausted by about 2019. The base premium this year for Medicare's supplemental insurance, or Part B—which most seniors obtain—is $93.50 per month.

"I think it would be irresponsible for me not to at least take a look" at cutting spending on Medicare Advantage, Stark said after Foster's testimony. According to the CBO, making payments to Medicare Advantage plans even with the costs of traditional Medicare would yield about $54 billion over five years.

Stark said he would use any savings he can find to reduce or avert a scheduled 10 percent cut in 2008 in the rate Medicare reimburses doctors, and to enhance benefits for seniors. He said he'd like to provide them more preventive care and give low-income seniors more help with deductibles and premiums. If any money remained, that could be used for a planned $50 billion, five-year expansion of the government's Children's Health Insurance Program.

House Speaker Nancy Pelosi, D-Calif., indicated Monday that she favors reducing payments to Medicare Advantage plans. Stark said he does not support eliminating Medicare Advantage altogether; some of the plans, he noted, are paid less per beneficiary than it costs Medicare to cover people.

Insurers and President Bush are sure to oppose any cuts to Medicare Advantage, which they say is increasingly popular with seniors. And Senate Finance Chairman Max Baucus, D-Mont., who would control any Medicare bill in his chamber, has not indicated similar zeal to cut the program.

The Blue Cross and Blue Shield Association released a study Wednesday that found that reducing government payments to Medicare Advantage plans could cause more than three million people—roughly one-third of all beneficiaries enrolled in the plans—to lose their private coverage and be forced back into traditional Medicare.

According to the study, beneficiaries in Ohio and Pennsylvania would be hardest hit, with approximately 196,000 people in each state losing coverage. Michigan and Texas also would face large reductions, with 180,000 and 173,000 beneficiaries, respectively, losing their private coverage. "Congress should not take any action that would jeopardize care for the millions of people who are overwhelmingly satisfied with their Medicare Advantage coverage," said Scott P. Serota, president and chief executive officer of Blue Cross and Blue Shield.

Mary Agnes Carey contributed to this story.

Publication Details