Monday, November 17, 2008

Medicare Advantage Payments to Insurers--Baucus Zeroing In!

Senate Finance Chair Max Baucus (D-MT) released his health plan white paper last week.

Buried in it was this regarding how private Medicare payments to HMOs should be changed:
“Congress must act to level the playing field between traditional Medicare and Medicare Advantage payments and the Baucus plan would do so. Enacted in July 2008, MIPPA [the July physician fee fix that will end PFFS] took modest steps to reduce overpayments to private plans beginning in 2010. There are a number of ways to complete this. One is to set MA payments on par with traditional Medicare in every county in the country. However, Medicare costs can be low in some areas of the country and extraordinarily high in others. Simply setting MA payments equal to traditional Medicare could maintain overpayments in some areas and create severe underpayments in other areas relative to insurers’ costs.

“The Baucus plan would seek to better understand how insurers’ costs differ by region of the country in designing new policies to eliminate the remaining excess spending in the Medicare Advantage program."
I have lost count of the number of different Democratic proposals there are out there to use these extra payments made to private Medicare Advantage plans above the levels paid for the same senior risk in traditional Medicare for new spending.

MedPAC estimates these extra Medicare Advantage payments are worth $62 billion over five years and $169 billion over ten years. That makes them about the only "free money" in an otherwise bleak deficit picture.

Most calls to eliminate these extra payments simply call for "equalization" between insurer payments and traditional Medicare costs for the same senior risk.

But Max Baucus is telling us here that he knows something that isn't commonly discussed in the private Medicare world--that even if you just equalize payments there is, and was before 2003, plenty of opportunity to game the county-by-county private Medicare payment system--"One is to set MA payments on par with traditional Medicare in every county in the country. However, Medicare costs can be low in some areas of the country and extraordinarily high in others."

Where the 98-page Baucus plan goes from here is debatable. That Senator Baucus is the most influential member of the Senate on the issue of Medicare Advantage payment reform is not.

I expect there are plenty of Medicare Advantage players, knowing that payment "equalization" is on the way, who are getting ready to just play the old county-by-county cherry pick game all over again and preserve a substantial block of profitable private Medicare business doing it.

Think again. Baucus literally has your number!
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