Efforts To Reduce Payments To Medicare Advantage Plans Expected From Obama Administration, Congress

Main Category: Medicare / Medicaid / SCHIP
Article Date: 26 Nov 2008 - 5:00 PDT

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The incoming Obama administration and Democratic-led Congress likely will cut payments to private Medicare Advantage plans in 2009, an aide to Senate Democrats said Monday during a briefing sponsored by the journal Health Affairs, CQ HealthBeat reports (Weyl, CQ HealthBeat, 11/24). According to The Hill, a "longstanding ideological battle between liberals and conservatives over the propriety of turning over a growing portion of the Medicare entitlement to private companies is meeting head-on with the need for Congress to make cuts to certain programs in order to finance other priorities."

Federal payments to MA plans cost the government $94 billion annually. Democrats say $15 billion of that amount is excessive and the so-called overpayments could be used for other things, such as overhauling the U.S. health care system, The Hill reports (Young, The Hill, 11/24). Private MA plans on average are paid an estimated 13% more per beneficiary than what the same beneficiaries would cost in traditional Medicare, according to the Medicare Payment Advisory Commission (CQ HealthBeat, 11/24). The Democratic aide said, "Further cuts are coming to the program. The payments are so high that they really don't make any sense right now. There really is no rationale for the level of payments" (The Hill, 11/24). Democratic staffers already are rethinking the payment system "quite extensively," the aide said (CQ HealthBeat, 11/24).

A Republican aide at the meeting defended MA and private fee-for-service plans, saying, "Choice in plans matters." The aide added that MA plans particularly have benefited rural areas by expanding private insurers' ability to provide services. Robert Zirkelbach, a spokesperson for America's Health Insurance Plans, also defended MA plans, saying, "Beneficiaries have received additional benefits and services and have lower out-of-pocket costs than the traditional fee-for-service program" (CQ HealthBeat, 11/24).

Marsha Gold, a senior fellow at Mathematica Policy Research and author of a study published on Monday about private MA plans, said, "Assuming that Congress decides to continue MA in some form, a better system to promote oversight and encourage transparency and accountability would be valuable" (CQ HealthBeat, 11/24). Gold said that private plans play an important role in Medicare, particularly in helping to coordinate beneficiaries' care, but Congress needs "to decide first when private plans are valuable and at what cost" (The Hill, 11/24).

A separate study by University of Minnesota School of Public Health professor Brian Dowd and Robert Berenson, a senior fellow at the Urban Institute's Health Policy Center, provided a detailed history of private MA plans and found that both private plans and traditional Medicare are beneficial. At the briefing, Dowd said, "It would not just be bad politics, it would be bad economic policy ... to eliminate either one" (CQ HealthBeat, 11/24).

An abstract of the study is available online.

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