GAO Report Criticizes Bush Administration for Problems With Medicare PPO Demonstration Project
The Bush administration "improperly" allowed some private health insurers participating in a Medicare PPO demonstration project to limit beneficiaries' choice of health care providers, according to a new report from the Government Accountability Office, the New York Times reports.
The demonstration project was launched in January 2003 in 214 counties nationwide and is scheduled to run through 2005. In negotiating the new Medicare law last year, the Bush administration "pressed for more money and authority to foster the growth" of PPOs, saying that the plans provide "the best hope for Medicare's future" because, the administration contended, they offer more choices to beneficiaries, improve coverage and save money over time, according to the Times.
GAO's study, the "most comprehensive assessment" to date of the project, noted that although 10 million Medicare beneficiaries were eligible for the demonstration project, only 105,000 had enrolled as of August 2004, the Times reports.
According to the report, the Bush administration "exceeded its authority" by allowing PPOs to limit patients' choices of providers offering such services as skilled nursing and home health care, dental care and routine physical exams. The report found that in a number of cases, the PPOs covered the services only when beneficiaries used in-network providers, leaving beneficiaries who used out-of-network providers "liable for the full cost of their care."
The report noted that by law, the PPOs "should have been required to cover all services in their benefit packages, even if those services were obtained from providers outside the plans' provider networks," but the Bush administration waived this requirement for 29 of the 33 Medicare PPOs in the demonstration project. The Bush administration "did not have the authority to allow plans to restrict enrollees' choice of providers" and deny coverage of services obtained from out-of-network providers, the report said.
The Times reports that PPOs "[n]ormally" encourage patients to use in-network providers but allow them to use other providers for an additional cost.
The report also found that the PPOs raised out-of-pocket costs for beneficiaries while failing to achieve the cost-savings for the government that Bush administration officials had predicted. According to investigators, Medicare is spending $650 to $750 more annually for each beneficiary enrolled in a PPO than it would have spent if the beneficiaries were in traditional fee-for-service Medicare.
The report said that to encourage private insurers to offer Medicare PPO plans and participate in the demonstration project, the Bush administration offered higher reimbursement rates, waived quality-of-care standards and eliminated limits on beneficiaries' out-of-pocket costs. Because of these actions, the report said, the PPOs were "subject to no statutory or regulatory limits on cost-sharing" for beneficiaries. GAO said that to comply with the law, CMS should immediately instruct PPOs to cover "all plan services furnished by any provider" willing to accept payment.
CMS Administrator Mark McClellan said, "We will comply with the recommendations made in the report," adding that CMS will work with private health plans to ensure that they are in compliance with the law. However, McClellan reiterated the Bush administration's view that PPOs are "an attractive option" that can save money and improve coverage. He said that in the future, "PPOs will be a familiar and popular choice."
Sen. Max Baucus (D-Mont.), who requested the GAO report, said that the administration's claims about the benefits of PPOs were "not based on reality." He added, "While I believe in choice, I also believe that private plan options, including PPOs, should be added to Medicare only if they bring value to beneficiaries and taxpayers." Baucus noted that auditors have found that PPOs "are more expensive to both taxpayers and enrollees" (Pear, New York Times, 9/28).
In related news, CMS has clarified a provision in the 1997 Balanced Budget Act that says only licensed physical therapists are eligible for Medicare reimbursement for providing physical therapy to beneficiaries. According to the Wall Street Journal, about 3,000 athletic trainers employed by doctors in their offices provide physical therapy services to Medicare beneficiaries, a situation that has raised quality-of-care concerns among Medicare officials and physical therapists. The clarification is included in this year's update of the Medicare physician-reimbursement schedule, which will take effect Jan. 1. CMS said the provision "already should have been enforced and is designed to ensure that seniors get physical therapy from the most qualified providers," according to the Journal.
The American Physical Therapy Association also supports the clarification. However, the American Academy of Family Physicians expressed concern that the change will cause problems in rural areas, where patients might not have access to licensed physical therapists (Rubenstein, Wall Street Journal, 9/28).