Medicare HMOs Likely To Reduce Rates, Increase Benefits in Response to Subsidies in New Medicare Law
Medicare HMOs are expected to make "substantial rate cuts and benefit increases" this year as a result of $500 million in federal subsidies included in the new Medicare law (HR 1), the AP/Hartford Courant reports. The subsidies amount to a 10.6% increase in payments to insurers, according to the AP/Courant (Sherman, AP/Hartford Courant, 2/3). The law established a new reimbursement formula that will increase Medicare reimbursements to HMOs by an estimated $500 million this year and a total of $14 billion between 2004 and 2013. Federal officials and lawmakers hope that the new reimbursement levels will encourage private health plans to continue to participate in Medicare (California Healthline, 1/20). Under the Medicare legislation, insurers are required to use the higher payments to reduce premiums, increase benefits or raise payments to providers, the Pittsburgh Post-Gazette reports (Sabatini, Pittsburgh Post-Gazette, 2/3). Insurers are expected to lower premiums by as much as 50%, cut copayments for doctor visits and hospitals stays and expand prescription drug coverage for Medicare beneficiaries, according to the AP/Courant. The changes are expected to affect at least 1.25 million seniors in 15 states, the AP/Courant reports. California-based PacifiCare Health Systems on Monday announced reductions in premiums and improvements in benefits for most of its 700,000 beneficiaries in eight states. Officials for Connecticut-based Aetna, California-based Health Net and insurers in Massachusetts and Rhode Island said their companies also plan to cut premiums and improve benefits for beneficiaries, the AP/Courant reports (AP/Hartford Courant, 2/3). Other insurers that have filed new rate plans with the federal government include Pennsylvania-based Highmark Blue Cross Blue Shield, UPMC Health Plan and Health America (Pittsburgh Post-Gazette, 2/3). The planned changes, which require approval from CMS, will take effect March 1. Gail Shearer, director of health policy analysis for Consumers Union, said, "You would expect to see some fine-tuning of benefits here and there," adding that the Medicare law "throw[s] money at insurance companies" but fails to "build in performance and efficiency standards" (Gellene, Los Angeles Times, 2/3).
Auto parts maker Delphi recently announced that its financial obligations for retiree health coverage are expected to fall by $500 million in 2004 as a result of the Medicare law, the Wall Street Journal reports (Schultz/Francis, Wall Street Journal, 2/3). A provision in the law, intended to encourage employers to maintain retiree drug benefits, calls for the federal government in 2006 to begin to provide subsidies to companies to cover 28% of the cost of prescriptions that exceed $250 for each retiree; the companies can receive as much as $1,330 per retiree each year (California Healthline, 1/8). Delphi had $8.5 billion in retiree benefit obligations as of Dec. 31, according to the Journal. Delphi's announcement, included in the company's annual report filed last week with the Securities and Exchange Commission, is "a sign" that the employer subsidy included in the new law "will give some corporate finances a big boost," according to the Journal. According to Mercer Human Resource Consulting, companies can expect their liabilities for retiree medical plans to drop 8% to 12% before taxes. Although the subsidies will not begin for another two years, companies "can benefit right away from anticipated payments ... because under established accounting rules, companies can estimate how much money they will receive from the government in the future ... and use that estimated value to reduce their liability for retiree medical benefits programs," the Journal reports. The Journal reports that impact of the subsidies "could easily reach hundreds of millions of dollars" at companies with large retiree populations, such as Lucent Technologies and General Motors, (Wall Street Journal, 2/30).
The Government Printing Office will proceed with plans to print an HHS flier designed to explain the Medicare drug benefit to beneficiaries, despite complaints from Sen. Frank Lautenberg (D-N.J.) and four other Democrats on the Joint Committee on Printing that the flier "violates rules regulating public funding for printed materials" and misrepresents some provisions of the new law, CongressDaily reports (Congress Daily, 2/3). Lautenberg and the other Democrats requested that the GPO delay printing and mailing the flier, in part because they say it violates a federal law banning the use of federal funds for propaganda and publicity because it "minimizes" the gap in prescription drug coverage and indicates that seniors will pay a $35 monthly premium for drug coverage, a figure not specified in the law. Senate Minority Leader Tom Daschle (D-S.D.) and Sen. Edward Kennedy (D-Mass.) earlier this month sent a letter to HHS Secretary Tommy Thompson "questioning the propriety of the flyer's contents" (California Healthline, 2/2). CongressDaily reports that the GPO determined the flier is "all in proper order" and does not violate the law. The flier, which will cost $10 million and will be mailed to 36 million beneficiaries, will be printed by Feb. 16 or Feb. 17, according to a GPO spokesperson (CongressDaily, 2/3).
House Majority Whip Rep. Steny Hoyer (D-Md.) said he will press for an investigation by the House Committee on Standards of Official Conduct into bribery accusations related to the November House vote on the Medicare law, the Washington Post reports (Smith, Washington Post, 2/3). In December, retiring Rep. Nick Smith (R-Mich.) said that unnamed Republican leaders promised to donate $100,000 to his son's congressional race in exchange for his support on the Medicare bill. However, Smith later backed away from that comment, saying that suggestions that he was bribed are "technically incorrect." He added that some Republican lawmakers had said they would oppose his son's campaign but did not offer to donate any money to the campaign as had been previously reported. Smith voted against the Medicare legislation. In a Jan. 20 letter to House Speaker Dennis Hastert (R-Ill.), Hoyer called for an ethics investigation into the allegations (California Healthline, 2/2). Hastert spokesperson John Feehery said the speaker would not demand such an inquiry, adding that the issue is "really the purview of the ethics committee and not the speaker's office." In an interview Monday, Hoyer said he would revisit the issue with Hastert, adding, "If there is not action, and the only alternative is an individual complaint ... frankly I would expect that to happen" (Washington Post, 2/30).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.