Paying Medicare Advantage Plans Same Rates As Traditional Medicare Would Delay Program Insolvency By 18 Months, Medicare Actuary Says

Main Category: Medicare / Medicaid / SCHIP
Article Date: 03 Apr 2008 - 5:00 PDT

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If private Medicare Advantage plans were paid at the same rate as traditional Medicare, the program's hospital trust fund would remain solvent for an additional 18 months past the projected insolvency date of early 2019, CMS Actuary Richard Foster said at a House Ways and Means Health Subcommittee hearing on Tuesday, CQ HealthBeat reports. Under current law, MA plan payments this year are projected to be 13% higher than payments to traditional Medicare plans. Foster also testified that Medicare Part B premiums for physician care and other services would be $3 lower if MA plan payments were the same as traditional Medicare payments. The average Part B premium is $96.40 this year. Premiums typically are deducted from beneficiaries' Social Security checks.

Foster said that if current law were changed to pay MA plan payments more directly based on what they bid to provide care, the plans would save money for Medicare in some markets and cost more in others, but overall, the change would reduce Medicare spending.

In addition, Foster testified that the 10-year cost projection for the Medicare prescription drug benefit is 37% lower than projected in 2003 when Congress approved the law that created the benefit. He added that the projected costs are 17% lower than Medicare analysts estimated a year ago. According to Foster, about 11% of the lower projection could be attributed to greater-than-expected competition among drug plans, 19% stemmed from lower estimates of national prescription drug spending and seven percentage points stemmed from lower-than-expected Part D enrollment.

Foster also said that the "funding warning" triggered by a recent Medicare trustees report "should not be interpreted as an indication the trust fund financing is inadequate," adding, "That assessment can be made only by comparing each trust fund account's expenditures with all sources of income provided under current law." He also noted that the funding warning does not directly address the effects of higher MA plan payments on Medicare's fiscal health, but he said such an analysis could be useful (Reichard, CQ HealthBeat, 4/1).

Comments
Subcommittee ranking member Dave Camp (R-Mich.) touted the reduced Medicare drug benefit cost projections as the "lone bright spot" in the trustees report. He said, "If we are looking for ways to reduce program spending, we can certainly apply some of these market-driven and competition-based reforms to the rest of the Medicare program."

Subcommittee Chair Pete Stark (D-Calif.) criticized President Bush's proposal to increase Medicare solvency, saying, "I think this trigger dance is a political exercise. Medicare is not in financial trouble," adding, "It was intentionally designed to be predominately funded by general revenues" (Johnson, CongressDaily, 4/1).

Senate Medicare Bill
In other Medicare news, Senate Finance Committee Chair Max Baucus (D-Mont.) on Tuesday said that the committee will "probably mark up" legislation "soon" to stop a 10% cut to Medicare physician fees rather than take the measure straight to the Senate floor, CQ HealthBeat reports. The cut will take effect on July 1 if Congress does not intervene (Grimaldi/Reichard, CQ HealthBeat, 4/1). The American Medical Association is in Washington, D.C., this week for its annual effort to lobby for Congress to find a permanent fix to the physician fee formula (CongressDaily, 4/1). Senate Minority Whip John Kyl (R-Ariz.) at the AMA conference said that he supports an 18-month fix and that he expects Congress to pass a short-term solution.

"While our goal has to be long-term reform, I think that this year, an 18-month package would provide Congress with the best opportunity to continue to keep the program moving forward and not have to address a short-term cut situation, and put us into a position to have more time to develop a longer-term solution," Kyl said (Grimaldi/Reichard, CQ HealthBeat, 4/1).

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