Medicare+Choice Success Unlikely in Rural Areas
The lack of competition among providers and hospitals in rural areas has largely dissuaded Medicare+Choice managed care companies from entering those regions, a new report released yesterday by the Medicare Payment Advisory Commission concludes. CongressDaily/AM reports that the study's findings "dea[l] a blow" to proponents of shifting more Medicare beneficiaries, 20% of whom live in rural areas, into private health plans. "It's going to be very difficult for private plans to offer the Medicare benefit package at a cost lower than Medicare does in rural areas," new MedPAC Chair Glenn Hackbarth said during a House Ways and Means subcommittee hearing yesterday, adding, "So I don't see private options as being a huge force in rural areas." Hackbarth said that managed care companies have faced difficulty in establishing provider networks and negotiating discounts in rural regions compared to urban and suburban areas because of the lack of competition. He also cautioned that raising Medicare reimbursement rates in rural areas would "not necessarily yield extra benefits for beneficiaries" but could be used for "additional profit, higher administrative costs or higher payments to providers." Given all these factors, Hackbarth said that HCFA head Thomas Scully's recently stated goal of getting 30% of beneficiaries into Medicare+Choice was "very optimistic" (Rovner, CongressDaily/AM, 6/13).
The MedPAC report also found that despite the "obstacles of distance and poverty" that rural Medicare patients face, they receive "about the same amount and quality of medical care as patients living in urban areas," Scripps Howard News Service/Memphis Commercial Appeal reports. The report concluded that urban hospitals' inpatient "Medicare margins" stand about 10% greater than rural hospitals', with reasons for this discrepancy including: small size; a greater average length of stay for patients; a "skewed formula for taking wages into account; and an unfair limit on the amount of money the hospitals can get for having to care for a disproportionate number of low-income and uninsured patients." While the report urged Congress to raise rural reimbursement rates by an average of 1.8% to improve rural hospitals' Medicare performance, Hackbarth said that rural hospitals' non-Medicare margins fare favorably compared to urban hospitals because of the same lack of competition that hinders managed care in rural areas. "Rural hospitals haven't done well under Medicare for about the past 10 years, but in general they've done better from private insurance, simply because there isn't much choice out there. If you're the only hospital for 35 miles, you don't have to deal with a lot of discounts," he said (Bowman, Scripps Howard News Service/Memphis Commercial Appeal, 6/12).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.