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HEALTH PLANS/POLICY: Lawmakers Should Not Reduce Funds for Medicare Advantage Program, apparently (with quick UPDATE)

Who says so? Well it’s the BCBSA CEO. Lucky that’s not self -serving or anything. Perhaps he’d like to explain how his members and the other health plans valiantly stayed in the Medicare market last time, took huge losses but stuck it out all the way to 2004 when rates were put back up. But this time they’ll quit instead. (BTW here’s the WSJ original to those of you with access)

After all, if we’re going to have revisionist history….

UPDATE: I was rushing to an interview (which you’ll hear tomorrow) so I didn’t get a chance to add one thing Mr Serota appears to have missed out in mentioning regarding the subject. Just like much of the American health care system Medicare Advantage is a good deal for its members, a great deal for its vendors (including but certainly not limited to the Blues) but not such a good deal (according to the CBO et al) for the poor saps who have to pay for it. And who would they be? Yup, it’s that taxpayer fellow again, and of course—due to the accounting and financing techniques of the con-artists who wrote the 2003 MMA, took us into Iraq et al—it’s also going to be paid for in the years to come by their children and grandchildren. But who cares about them when the Blues and other insurers are richer than they’ve ever been?

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DeanMatthew HoltjdSkeptic Recent comment authors
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Dean
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Dean

According to the Center for Budget and Policy Priorities: Leading Medicare expert Dr. Robert Berenson of the Urban Institute, who previously oversaw Medicare payment policy at the Health Care Financing Administration (since renamed the Centers for Medicare and Medicaid Services), recently wrote that changes contained in the 2003 prescription drug law have significantly increased the excessive Medicare payments being made to private plans. In essence, Berenson observed, the law is “throwing money at the private insurers.” So instead of saving money (private plans were originally designed to be paid 5 percent less than the cost of fee-for-service in order to… Read more »

Skeptic
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Skeptic

Matt wrote: “If the private plans are any good at what they do, they should be able to provide extra goodies for the Medicare recipients in their plans AND do it for less than the average taxpayer-funded per capita amount for the FFS system, because their job is to drive out waste from the system” and “If we want to further subsidize seniors–who are already the only group who’s health care costs are uniformly subsidized by the taxpayer–we should be explicit about that. ” Sure, and if the Medicare FFS system does cost taxpayers less than private plans, then researchers… Read more »

Matthew Holt
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Skeptic. To be honest I haven’t gone into the guts of the analysis lately to see whether if you look at the “total” costs of Medicare recipients it changes the analysis (although I think that the “total” number is the number that the CBO looks at), but in the end I don’t really care. The taxpayer pays a set number for the 90% of recipients in the main FFS program and pays a higher per capita number for the other 10% in the private plan. If the private plans are any good at what they do, they should be able… Read more »

Skeptic
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Skeptic

Matt: There are two main concerns about Medicare payments to private health plans. The first concern is how do payments to private plans compare to the payments that the Federal government would otherwise incur if private plan enrollees stayed in the FFS program. The second concern is efficiency: does the Medicare FFS program generate total costs (including beneficiary out-of-pocket costs) which are lower or higher than the total costs generated by private plans? Both of these concerns are legitimate, but you miss my point: even if Medicare payments to private plans are higher than what the FFS program would pay,… Read more »

Matthew Holt
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JD & Skeptic. Of course I’m not saying that HMO profits are a big slice of overall health care costs. They are however not nothing & in Medicare they in whole exceed what the same Medicare recipients would cost the taxpayer. (i.e. the margins are entirely part of the “extra” payment that CBO complains about) What I am saying is that if private Medicare plans cannot be profitable if being paid the same as FFS Medicare per recipient–including giving all the added bells and whistles for enrollees–by making savings over the main FFS program (by for instance reducing excessive care… Read more »

Skeptic
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Skeptic

Nothing in Matt Holt’s response refutes my basic point: a large chunk of the “extra” payments to private plans cover the costs of lower beneficiary co-pays and deductibles. If we are going to conduct an apples vs. apples comparison of Medicare FFS and private plan costs, along with adjustments for risk selection and quality of care we need to have adjustments for beneficiary out-of-pocket costs. For example, if Medicare FFS enrollees are incurring costs for supplemental policies, or if impoverished Medicare eligibles have to rely on Medicaid to incur certain costs associated with the provision of acute care services (a… Read more »

jd
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jd

Not that anyone is paying attention, but I feel the need to make clear how my first and second posts in this thread are consistent on the matter of managing care. Managed care companies do offer services that are better than nothing, and in limited cases are quite good. But with a few exceptions, such as cardio-related programs, they do not save money. And we still find ourselves in a system where patients are not given care according to best practice guidelines 50% of the time, and that’s when there even is a best practice guideline.

jd
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jd

Matt, Tonality aside, we seem to agree on the biggest problem with managed care companies: they don’t do a good job at managing care. Part of the problem is that they never learned to do it well at all, and part of it is that the law and the market (in terms of resistance to utilization controls, limited networks, etc.) has taken away many of the tools that would be effective. But all of this is different and independent of going after managed care companies for being greedy. It’s all well and good to think McGuire and a few dozen… Read more »

Matthew Holt
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The concept that Medicare Advantage (or more accurately Medicare payments to private insurers over time) doesn’t help private insurers is tosh. The best example of this is Pacificare which was 50%+ a Medicare HMO plan. Pacificare’s stock rallied through the 1990s, but then fell into the tank in 2000 after the BBA cuts to Medicare Risk HMOs in 1998. It needed a severe corporate restructuring to stay alive through to 2003, when the MMA dropped a bunch of money into its pockets, created another huge stock rally and persuaded UNH to take it out. And of course the MMA also… Read more »

jd
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jd

Skeptic is right. Medicare Advantage is just the latest scapegoat. And by Medicare Advantage, I mean traditional HMO-based MA, not Private Fee For Service (PFFS), which is a joke as far as I can tell. I don’t see how you can look carefully at the HMO-based MA program and not come away with the following: 1. MA has slightly higher admin costs than traditional FFS Medicare, primarily due to additional marketing and DM expenses, on the order of a couple of percentage points of premium. 2. MA provides additional services that FFS Medicare does not provide, including disease management and… Read more »

Skeptic
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Skeptic

Yes, Mr. Serota’s Wall Street Journal editorial is self-serving but his article makes at least one perfectly valid observation: a large chunk of the extra payments which Medicare pays to private plans cover the cost of lower co-pays and other enrollee benefits. In other words, contrary to the mythology spread by opponents of “privatization,” all of the extra payments that CMS gives to private health plans do NOT end up in the pockets of health plan CEOs or stockholders. Reasonable people can disagree about whether the additional payments to private health plans are justified (that is a complex question I… Read more »