Two timely topics are in the news; the likelihood of cuts in the additional payments for Medicare Advantage programs and reductions in Medicare reimbursement rates for physicians.
The juxtaposition is just too…obvious to pass without comment.
Medicare Advantage (MA) programs are paid 12% more than regular-old-fee-for-service Medicare (and this excess payment goes to “managed care” plans??!!). The rationale is to encourage the private sector to become engaged in medicare programs, with the ultimate goal of demonstrating the private plans will reduce costs compared to the FFS system. That has not happened. That is one of the reasons Congress is very likely to slash MA payments, with the reduction amounting to about $65 billion over five years.
Meanwhile, we’re entering the annual ‘Medicare cuts physician reimbursement’ discussion period, with Pres. Bush’s health care proposals cutting $79 billion in health care funding, primarily by reducing provider reimbursement. Physicians look to be the hardest hit, with physician payments scheduled to drop by a whopping 8% at the beginning of 2008
Notably, the Bush budget proposal did not reduce funding for Medicare Advantage.
Politically, this is about as likely as a Bill Clinton memorial in Crawford Texas. And practically it makes even less sense. Physician incomes have been on a steady decline for several years, while health plan profits have enjoyed the opposite trajectory.
Now, there’s lots of hand-wringing and pleas of poverty from the MA plan sponsors, noting they have already suffered from previous cuts. While I can sympathize wiith their plight, I’m not sure I get the logic of their arguments. If MA plans are supposed to be a viable alternative to FFS, why have only 17% of eligible recipients enrolled, and why do they need a subsidy?
What does this mean for you?
MA is an attempt to demonstrate how effectively the private sector can manage health care.
So far, it has not been impressive.
You’re being generous, Joe. At its Investor Day in December, Coventry let it slip that its MA private fee-for-service reimbursement is 21 PERCENT above its true costs. I’ve got the transcript. I had to rub my eyes the first time I read it.
Nice work if you can get it.
And I’m speaking as one who does believe that private managed care firms bring value to the table. But not no 21 percent. The government is allowing itself to be raped by making the reimbursement so high.
Don’t believe everything you read.
There are really two worlds in Medicare – urban areas — where managed care can (and does if you read MedPac reports closely) reduce the costs of providing health care to seniors, providing more services for lower cost to both the government and in the form of lower premiums to the senior.
The other world is the rural areas where the government sorely underfunds Medicare. The HMO “overpayments” were a conscious decision of Congress to pay more than fee-for-service in rural areas where rural providers are underpaid.
To provide services in rural areas, physicians and hospitals demanded from managed care plans “market” rates — not artificially low Medicare rates. Result – no health plans in rural areas.
So Congress stepped in with the Medicare Modernization Act and increased rates above FFS in rural areas to allow health plans to operate. Is it a subsidy or is it an overpayment? You decide.
The real problem is Medicare is underfunded in rural areas — not that the health plans are overpaid.