Private Plans Costing More for Medicare

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September 17, 2004

Private Plans Costing More for Medicare

By ROBERT PEAR

 

WASHINGTON, Sept. 16 - Members of Congress expressed concern on

Thursday about new data indicating that Medicare pays private health

plans more than it would cost to care for the same patients in the

traditional Medicare program.

 

Lawmakers of both parties raised questions about the payments, which

were increased under the new Medicare law to entice more private plans

to participate in Medicare.

 

About 4.7 million of the 41 million Medicare beneficiaries, or 11.5

percent, are in health maintenance organizations and other private

plans, now known as Medicare Advantage plans.

 

" The majority of seniors in traditional fee-for-service Medicare

should not subsidize the minority of seniors in private plans, " said

Senator Olympia J. Snowe, Republican of Maine.

 

Senator Jeff Bingaman, Democrat of New Mexico, said that " large

overpayments to H.M.O.'s were built into the bill " that Congress

passed last year, and he asked why people in traditional Medicare

should bear the cost of such " subsidies. "

 

Congress once assumed that private health plans could get by on

payments equal to 95 percent of the cost of treating patients in

traditional Medicare, but experience showed that was not enough to

keep plans in the program.

 

The Medicare Payment Advisory Commission, an independent federal

panel, says in a report to Congress that Medicare is paying private

plans an average of 107 percent of what it would cost to cover their

patients under the traditional fee-for-service program. Payments were

as high as 116 percent of the traditional Medicare cost in some cities

and 123 percent in rural counties.

 

The office of the chief Medicare actuary told Congress that Medicare

would spend $50 billion less in the next 10 years if it paid private

plans only 100 percent of what traditional Medicare pays. Copies of

the estimates were obtained by The New York Times.

 

Peter L. Ashkenaz, a spokesman for the agency, said the estimates were

prepared in response to requests from Congress.

 

Dr. Mark B. McClellan, administrator of the federal Centers for

Medicare and Medicaid Services, said that in general, the private

plans offered " tremendous savings " to the elderly and more benefits

than traditional Medicare.

 

The estimates do not include the cost of $10 billion in special bonus

payments that the federal government can make to private plans as an

incentive for them to enter or stay in the Medicare market from 2007

to 2013.

 

Senator Bob Graham, Democrat of Florida, said, " The federal government

is dramatically overpaying H.M.O.'s, " and he asked why.

 

Several members of Congress have vowed to pursue legislation to reduce

what they describe as overpayments.

 

Former Senator Dave Durenberger, Republican of Minnesota, a member of

the Medicare commission and a longtime supporter of managed care, said

in an interview, " There appears to be no good reason why private plans

should be given more money per capita than is given through the

traditional fee-for-service system. "

 

Karen M. Ignagni, president of America's Health Insurance Plans, a

trade group for insurers, rejected the contention that private plans

were overpaid. They need the additional money, she said, to pay

doctors and hospitals in rural areas, where health care providers are

sometimes reluctant to join the networks established by private plans.

 

In a telephone interview, Dr. McClellan defended the payments to

private plans. People in those plans receive extra benefits and have

lower out-of-pocket costs than those in traditional Medicare, he said,

and the private plans often do a better job of holding down costs.

 

Beneficiaries in traditional Medicare, with no supplemental insurance,

had out-of-pocket costs averaging $2,631 in 2003, while the average

for those in private plans was $1,964, Dr. McClellan said.

 

Numerous federal studies have found that Medicare beneficiaries in

private plans are, on average, somewhat healthier than those in

traditional Medicare, so, in theory, it should cost less to care for them.

 

The Medicare commission said that the Medicare program should receive

the benefit of those potential savings, but in 2004, it said, the

money was redistributed among private plans, thus avoiding any

reduction in " aggregate payments to plans. "

 

Copyright 2004 The New York Times Company |