Wall Street Relieved Democrats Unable to Cut Private Medicare Advantage Payments This Week--Why?
Congressional Democrats tried to take a big bite out of private Medicare this past week in an attempt to pay for an 18 month fix to the upcoming July 1st 10.6% reduction in Medicare physician payments.
The effort, led by Senate Finance Chair Max Baucus (D-MT) got only 54 of the 60 votes he needed to end debate and move the issue to a floor vote. While getting that floor vote would almost have certainly meant passage of the bill in the full Congress, President Bush would have vetoed any attempt to cut the payments to private Medicare plans and the Dems would not have had the votes in either chamber to override.
Now, Baucus and Senate Finance Ranking member Chuck Grassley (R-IA) will have to find a more modest way of fixing the doc problem––likely for just six months. The docs are not going to suffer a Medicare payment cut this summer.
All of this was expected and is what I have been saying for months would happen.
A temporary fix to the Medicare physician payment problem--the docs will be facing a 15% cut on January 1, 2009--will just shunt the problem off to next January. After January 20th, George Bush will be gone. Barack Obama will have no problem signing a bill with big Medicare Advantage cuts in it. John McCain was one of only a handful of Republican Senators who voted against the Medicare Modernization Act, that created this version of private Medicare, in the first place.
This time, Baucus only tried to nail the private-fee-for-service (PFFS) version by making the relatively reasonable proposal that PFFS plans develop provider networks by 2011 in all but the most rural markets. Since PFFS was only supposed to be a transitional product to real network plans when it was first created in 2003, that's hardly an unreasonable idea. But Bush would have vetoed even that.
Next time around, with a more willing President sitting down the street, the Democrats aren't going to be so generous. The health insurance industry would have been smart to take this deal. But even so incremental a deal as this would have badly hurt the PFFS guys who have been gaming the system with their inch deep and a thousand miles wide strategies for penetrating the private Medicare market.
Sooner or later the mainstream Medicare Advantage insurers are going to cut the PFFS guys loose, who have been gaming this system, in order to save what the program was supposed to be in the first place.
It's not clear to me what Wall Street is so relieved about.
9 comments:
You're in Washington and I'm in Florida so maybe you can answer what's been bugging me this week: The GOP rather obviously sided with the MA plans at the expense of physicians. Don't Republicans risk the loss of a fairly reliable Republican constituency by dissing the docs?
Everyone agrees, Dems and Reps, the doc cut will not go through so no one is going to make the docs upset.
Watch for a relatively inexpensive 6-month reprieve on the cuts.
The first priority for the GOP--and the Dems--is taking care of the docs.
The brinksmenship is just grandstanding.
My understanding that the Medicare physician payment problem is really about constraining Medicare spending within the Sustainable Growth Rate formula. Therefore, is it properly characterized as a "physician payment problem" or a deeper "Medicare funding problem"?
It's my understanding that there are 12-13 million people on MA plans right now. Many or most of these folks would not be able to replace their MA product with a supplement.
What DC calculus would any politician use to kiss of these votes? And seniors DO vote. The docs don't likke cuts in their reimbursements, but there are fewer of them that take Medicare than seniors on MA plans.
So....
Seniors can move back to Medicare Supplement without a problem from Medicare Advantage.
If Congress were to cut PFFS, there would be at least a couple of years of notice and the network version of Medicare Advantage is less threatened.
Without a problem? Supplements cost 1800/yr bare minimum....more if you are ill. A significant minority if not the majority of seniors currently on plans could not afford one
A legitimate concern.
But the policy issue here is extra payments for Medicare Advantage--117% more.
Is the answer to better benefits for lower income people to pay HMOs far more than is paid for seniors who are on traditional Medicare?
Is this the best place to direct Medicare money over the long-term?
Overpaying HMOs sounds like a bizarre way to deal with low income seniors who have trouble paying for MedSupp.
Bob,
While I want to agree with you here, I also hear a rather convincing political argument from the opposite side, those opposing the MA cuts. It says that back in the old days of Medicare+Choice when the BBA trimmed rates, only a small number of seniors in a small number of markets were enrolled -- mostly the urban near-poor.
Now that MA has expanded, and particularly with the advent of MA Private Fee For Service, every single Congressman has MA members in his district and every Senator has a large number of MA members in his state, 20 percent of all Medicare eligibles.
How do you respond? Won't it be real easy for opponents of the MA cuts to demagogue the situation with accusations that Congress is trying to take away their Medicare? Anything, once given, is tough to take away.
I think it is important to distinguish between standard MedicareAdvantage and the private fee-for-service version.
The extra payments were supposed to be a temporary pump-priming scheme--pay enough to get private plans and seniors interested while the networks were developed and got up to speed.
However, the PFFS product became an arbitrage play instead of the "training wheels" it was supposed to be in particularly rural markets.
The program has regressed into an entitlement for insurance companies for SOME because they haven't been serious about using this time to develop the proper networks and go head-to-head with Medicare for the same money.
I will suggest that if you look at it this way, it will be easier to see how the the program will be pared back to what it was supposed to be.
Where people who want no cuts will have the problem is in justifying PFFS for the longterm.
Watch for the health plan industry to leave the PFFS guys hanging out on a limb in order to protect the mainstream product.
Also, there will need to be choices made about who will get more Medicare money--hosps, docs, health plans. There isn't enough money for all of them. Someone will win and someone will lose. There are tons of money in PFFS that is the easiest to go after to keep the very powerful doc and hosp lobby happy.
Your point about a growing senior market is a good one. So good that many Dems know they have to nail PFFS sooner rather than later.
Watch for trade-offs to be made early next year when Bush isn't around to veto anything.
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