Medicare Advantage Pay Eyed for Fee Fix Again

WASHINGTON — With Congress scrambling to come up with the funds to avert a physician fee cut scheduled for July, it appears once again that Medicare Advantage is being eyed as a 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 was front and center 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) spring report to Congress were discussed, including the recommendation that Congress increase physician fees by 1.5% in 2008 and 2009.

MedPAC said in its report that 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. The Commission 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 on average will be paid 13% more than conventional Medicare providers in 2008, a 1% uptick from 2007. The profit potential in those plans has stimulated a rush into the market and huge enrollment growth—a 101% increase from 2006 to 2007, according to MedPAC. Coordinated care plans, such as HMOs and PPOs, saw only an 8% increase in enrollment during that period, although those plans still account for the largest number of beneficiaries enrolled in an MA. Currently, about 20% of Medicare enrollees are in an MA plan.

Because MA plans are increasingly attractive to beneficiaries—they often offer additional benefits—MedPAC is concerned about the growth of the high-cost private FFS plans, said Mr. Hackbarth.

The plans are being 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, adding, "The benchmarks we use are a signal of what Medicare wants to buy." The Commission "supports financial neutrality between payment rates for the FFS program and the MA program," he said.

That fact has not been lost on the subcommittee chairman, Pete Stark (D-Calif.), who has held multiple hearings questioning the value and integrity of the MA plans. Republicans defended the MA program, however. Ranking minority member 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.) told Mr. Hackbarth that "my seniors have asked me not to mess with their Medicare Advantage plans." Rep. Johnson at one point accused the MedPAC chairman of saying that 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.