Analysis: Medicare HMO debate heats up

WASHINGTON, July 12 (UPI) -- As Congress takes a crack at Medicare reform this summer, some experts have labeled one area of the complex web a money drain.

Enrollment in Medicare Advantage plans -- in which Medicare beneficiaries obtain coverage through private insurance plans -- has fluctuated but reached an all-time high this year of 8.3 million, or about 19 percent of all Medicare beneficiaries.

Although these private plans were supposed to save the government money, it has ended up paying 12 percent more for Medicare Advantage plans than the average traditional package.

"Current Medicare payment policy clearly favors the MA program over traditional Medicare, which is unfair to the majority of beneficiaries, who participate in the traditional program," William Novelli, CEO of AARP, said during a speech he delivered Wednesday at the Center for American Progress, a left-leaning think tank. "We believe that Medicare payments should be neutral with respect to coverage options."

Enrollees in Medicare Advantage have increased about 6 percent since 2004 -- a reflection of changes made by the Medicare Modernization Act of 2003, said Henry Aaron, a senior fellow at the Brookings Institution, a non-profit research organization.

"They kicked up payment levels in 2003 and that led many insurance companies to provide plans where they previously had not," Aaron said.

Although Aaron said he thinks some MA enrollees opted for the plan because it works well for them. He said he thinks others simply moved over because the extra money going into the program lowered their premiums.

"The current policy is bribing people to move into a system they've indicated they choose not to be in when Medicare is paying the same to both plans," Aaron told United Press International.

But Alissa Fox, vice president of legislative and regulatory policy for the Blue Cross and Blue Shield Association, disagreed, saying the only reason those people weren't in MA plans before was because providers couldn't afford to offer them.

"Congress made an explicit decision to pay extra, mostly in rural areas," Fox said. "Fee-for-service payments in those areas were just very low, and in order to encourage plans to participate in those areas, they had to increase the payment levels."

Because MA plans cost more to fund, as the number of Medicare beneficiaries with private plans grows, so will the piece of budgetary pie devoted to providing public healthcare. And the numbers are expected to increase. The Congressional Budget Office projects the number of beneficiaries in MA plans will grow to 26 percent by 2016.

Some lawmakers think equalizing the prices for all Medicare plans would save money and yield better outcomes.

"(MA plans) should be paid what is paid for the same benefits in other Medicare plans," said Rep. Pete Stark, D-Calif., chairman of the House Ways and Means Health Subcommittee.

Doing so would decrease Medicare spending by $8 billion in 2008 alone, the CBO estimates.

Medicare Advantage plans generally offer more benefits than traditional plans, including routine checkups, hearing tests and dental services. But Stark said he's not convinced the patients in these plans actually benefit from the services to the amount the government is charged.

"It's one thing to offer the benefits," he said. "But it's another thing for people to actually use them."

But cutting the funding ultimately has negative effects on the beneficiaries, who save, on average, $1,000 per year by being on an MA plan instead of traditional Medicare, said Kris Haltmeyer, managing director of policy for the Blue Cross and Blue Shield Association, who said those savings are according to Medicare's own estimates.

"Potentially millions of people will lose coverage because of this," Haltmeyer said. "It's going to have a devastating effect on Medicare beneficiaries."

In addition, the price difference between MA and traditional Medicare is misleading, said Steven Hahn, spokesperson for the Centers for Medicare & Medicaid Services, because those in regular plans often buy supplemental private insurance, called Medigap, to cover the holes in Medicare plans.

"(MA plans) offer things that people in traditional Medicare are paying for with Medigap," Hahn said.

If the price of Medigap were factored into the cost for traditional Medicare, the price disparity would decrease, he said.

Proponents of the current MA price system also herald its coordinated care. The traditional Medicare system pays on a fee-for-service basis that focuses on individual procedures, rather than coordinated care among an array of healthcare professionals.

Although MA plans offer different options, in general, enrollees have a more stable network of doctors than traditional enrollees. By providing comprehensive primary care, Hahn said CMS hopes MA plans will eventually lower healthcare costs by treating patients in a preventative manner.

"The idea behind coordinated care is future costs," Hahn said.

Different Medicare Advantage options have different levels of coordinated care. HMOs probably provide the best coordination, but even private fee-for-service, the most expensive and fastest-growing option, places some emphasis on it, Hahn said.

"The private fee-for-service still has a network of physicians," he said.