Private Health Plan Participation in Medicare Could Increase Costs, Reports Find
According to two reports, efforts in Congress and by President Bush to increase the participation of private health plans in Medicare could "substantially increase Medicare costs," as the fees paid to providers by private health plans generally are higher than those paid by fee-for-service Medicare, the New York Times reports (Pear, New York Times, 5/6). Bush has proposed a Medicare reform framework that would offer prescription drug assistance in the traditional Medicare system through discount cards and some coverage for low-income beneficiaries and would include two other options to be offered through private insurers. A private system called "Enhanced Medicare" would provide beneficiaries with expanded prescription drug coverage, full coverage for preventive care and lower out-of-pocket costs for hospital stays. "Medicare Advantage" would be similar to the current Medicare+Choice program, which provides beneficiaries with a selection of private health plans with and without prescription drug coverage but no guaranteed drug benefit. House Speaker Dennis Hastert (R-Ill.) proposed a similar plan last week (California Healthline, 5/2).
The Medicare Payment Advisory Commission recently compared the fees charged by 33 health plans covering 31 million people, finding that private health plan fees are about 15% higher than Medicare fee-for-service rates, the Times reports. Paul Ginsburg, president of the Center for Studying Health System Change, said his group found a similar pattern, adding that higher provider fees from private health plans are becoming more prevalent and that use of more private plans would not produce much savings for Medicare. Ginsburg said that private health plan rates for doctors can be 100% higher than Medicare physician payments in some areas of the country. Further, in rural areas, private health plans often pay much more than Medicare because there is little competition among health providers and private plans cannot obtain discounts, Ginsburg said. Zachary Dyckman, the economist who completed the MedPAC study, said that preferred provider organizations, which Bush favors using under his "Enhanced Medicare" option, often have to pay doctors more than Medicare to attract enough doctors to join their networks. The federal government sets the Medicare provider payment rates with statutes and regulations, but private plans set payment rates through negotiations with health providers.
Bush administration officials and congressional Republicans said they would like to give private plans a more substantial role in Medicare because such plans are thought to improve care quality by better coordinating health services for beneficiaries with chronic conditions. "A prescription drug bill will result in overmedication of seniors, at great cost physically and monetarily, if we don't coordinate care for people with multiple chronic conditions. That's why we've decided to include preferred provider organizations. They're much more capable of managing care than a fee-for-service plan," Rep. Nancy Johnson (R-Conn.) said. Some Senate Republicans said they are considering legislation that would keep costs down by requiring health plans to follow fee schedules used by the traditional Medicare program for at least several years, the Times reports (New York Times, 5/6).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.