WASHINGTON — With Congress scrambling to avert a physician fee cut in July, it appears once again that Medicare Advantage is being eyed as funding source by Democrats but as sacrosanct by Republicans, setting the stage for several months of political wrangling.
It also may portend a repeat of last year's battle, one that ended with President Bush refusing to sign a legislative package that restored physician reimbursement but slashed Medicare Advantage payments.
The debate played out at a March hearing of the House Ways and Means Committee's Subcommittee on Health where recommendations from the Medicare Payment Advisory Commission's (MedPAC) recent report to Congress were discussed, including a bid for Congress to increase physician fees by 1.5% in 2008 and 2009.
MedPAC said it supported Medicare Advantage (MA) plans—which let beneficiaries receive coverage from private plans such as HMOs and PPOs, and from private fee-for-service insurers. MedPAC also made the case that, for the third year in a row, the MA plans are overpaid relative to traditional fee-for-service (FFS) Medicare.
MedPAC Chairman Glenn Hackbarth told the subcommittee that the commission estimates that Medicare has paid the plans $10 billion more than it would have under traditional FFS for each of the last 3 years. Overall, MA plans will be paid 13% more than conventional Medicare providers in 2008, a 1% uptick from 2007.
The profit potential in those plans has fueled a rush into the market and a 101% increase in enrollment from 2006 to 2007, according to MedPAC. Coordinated care, such as HMOs and PPOs, saw an 8% enrollment increase, although those plans still account for the largest group (20%) of beneficiaries in an MA.
MA plans, with their added benefits, are increasingly attractive to beneficiaries, so MedPAC is concerned about the growth of high-cost FFS plans, said Mr. Hackbarth.
The plans are rewarded for their costs, and there is no penalty for poor quality, he said. “Payment policy is a powerful signal of what we value,” Mr. Hackbarth said. He added that MedPAC “supports financial neutrality” between payment rates for the FFS and the MA programs. He noted that about half of overpayments to MA plans are going to insurers' bottom lines.
That fact has not been lost on the subcommittee chairman, Pete Stark (D-Calif.), who has held hearings questioning the value and integrity of the MA plans. Republicans defended the MA program, however.
Rep. Dave Camp (R-Mich.) intensely questioned Mr. Hackbarth, eliciting the admission that MA plans had been successful in rural areas. Rep. Sam Johnson (R-Tenn.) added, “my seniors have asked me not to mess with their Medicare Advantage plans.” At one point, he accused the MedPAC chairman of saying the government is a more efficient insurer than the private sector. Mr. Hackbarth disagreed and clarified his position. “The problem with this payment system is we are rewarding inefficient private plans,” he said.