Friday, June 22, 2007

Will Medicare Advantage Payments Be Cut as Soon as 2008?

That's the question a poster asked today and it has been an issue on my mind. So I will address it here.

First, CMS has already started the rate setting process for 2008 and will have it finalized by early September. While the Congress makes the rules and can do anything it wants, it would be very difficult to change the 2008 deal with the private sector after early September.

The only way we would get a 2008 cut is if the Congress reauthorized S-CHIP and used private Medicare Advantage cuts to fund the cost of that program. Under the Democratic rules, the Congress will have to come up with either new taxes or budget cuts to offset any spending on S-CHIP.

Since S-CHIP has to be reauthorized by September 30th, you can see the possibility of a Medicare Advantage cut taking place before the 2008 Medicare Advantage rates are finalized.

Most in the Congress--Democrats and Republicans--would like to use an increase in the tobacco tax as the means to fund S-CHIP reauthorization. The reauthorization process is going to begin in the Senate and move to the House. The Senate Finance Committee wants to take the issue up in the next couple of weeks.

Republican Senate Majority Leader, Mitch McConnell, all but conceded the votes are there to do it with a tobacco tax increase in comments he made this week.

There is more interest in cutting Medicare Advantage to pay for S-CHIP in the House.

S-CHIP reauthorization
will eventually get done but it won't be any kind of slam-dunk. The hang-up will be in the details. The Bush administration, and most conservatives, are upset that states have gone beyond the original intent and gone on to cover children in families making up to 350% of poverty and also covering adults. There will be a lot of arm wrestling around just what the new rules will be. Ironically, the Bush administration is still approving state exemptions to cover these "extra" people just as they complain about state action (on May 30th for Wisconsin, for example).

Also, if Democrats were to pass an S-CHIP reauthorizaton bill it will be a standalone bill. That would be subject to a Bush veto. You will recall that I have pointed out that the place Medicare Advantage payments are most at risk is in the year-end "omnibus" budget bill. That is usually loaded up with dozens of big items and is the sort of thing that would be very difficult for the President to veto.

Democrats need lots of money at year-end to counter the automatic 10% Medicare physician fee cut and to offset come possible hospital and other provider cuts. The Medicare Advantage cuts are the logical source for this money.

So, after all that background here's where I see things:
  1. In the end, it will be better for the Dems to leave the Medicare Advantage payments alone and fund S-CHIP with only a tobacco tax.
  2. Their best shot at getting hold of the Medicare Advantage money is in the final omnibus budget bill (at the end of the 2007 session) that is almost entirely controlled by the key House and Senate committee chairs (most of which hate Medicare Advantage). That bill will be far more insulated from Republican meddling and a Bush veto because it will be larded-up with lots of things Congressional Republicans and Bush will want.
  3. If Medicare Advantage is cut in the final omnibus bill--and I think it will be--then the first impact on the program will be in 2009--the Congress will reach forward for those cuts and bring some of them back into their multi-year calculation.
  4. Now here's my caveat--anyone interested in this issue needs to watch the S-CHIP bill's progress very closely. What is troubling to me is how poorly worked out the S-CHIP reauthorization outline is. The people in the middle of all of this really don't know how they are going to get it done yet.
When the day is done, I believe Medicare Advantage cuts will come in the year-end omnibus bill. I also think the recent MedPAC recommendations offer a reasonable template for how that will happen.
Avoid having to check back. Subscribe to Health Care Policy and Marketplace Review and receive an email each time we post.

Blog Archive