Thursday, May 17, 2007

The Debate Over Medicare Advantage Funding--The NAACP Goes "Whoops!" and Stark Tries to Start a "Food Fight" Over Who Has to Come Up With the Money

The History--Skip it if you do this everyday.
The Democratic Congress needs billions to offset the 10% Medicare physician fee cuts that will happen on January 1st if action isn't taken and to reauthorize the bipartisan State Children's Health Insurance Program (S-CHIP).

S-CHIP will take at least $15 billion over five years--many Democrats (but not enough) want to expand it for a total cost of $50 billion over five years.

Offsetting the 10% Medicare physician fee cut in full will cost almost $8 billion just in 2008 and as much as $65 billion over five years to fix the problem.

The Congressional Medicare adviser--MedPAC--and the Congressional Budget Office (CBO) are saying private Medicare Advantage plans are significantly overpaid compared to the traditional Medicare program. The CBO says by $54 over five years and MedPAC says by 12%--19% for the private fee-for-service plans.

In recent weeks the health insurance industry has countered these arguments pointing out that private Medicare Advantage plan payments are being gradually reduced anyway because of changes in the payment formula and ongoing payment increases that are less than the cost of medical inflation. They also enlisted the NAACP and a Latino organization to argue that the private plans are great for low income people because of all the extra benefits these additional payments make possible.

As I have said before, many of the longstanding Democratic chairmen, particularly in the House, hate Medicare Advantage because they see it as a conservative attempt to destabilize the original Medicare program through privatization and because they see the extra private payments as just a special interest payoff.

Most people on Capitol Hill look at the Medicare Advantage plans and either see a laudable private market experiment in an attempt to use the market to improve both the cost and quality of Medicare or they see it as a right wing attempt to end the longstanding success they see Medicare has had in creating an efficient universal health insurance pool for all seniors.

The Democratic Congress now controls the budget process and many--but not all--of its leaders see their chance to turn back the conservative onslaught on a centerpiece of Democratic social legislation.

While many Democrats want to cut Medicare Advantage plans and take the money to reauthorize S-CHIP and fix the Medicare doctor payment problems, Medicare (CMS) is well into setting the 2008 Medicare Advantage payments. Most likely, the first time the Democrats are going to be able to get hold of any of the Medicare Advantage money will be for calendar year 2009.

That Takes Us to Where We Are Now.
Ethanol, Medicare Advantage, and Corporate Welfare
The health insurance industry's attempt to invoke the likes of the NAACP, in a bid to argue that we need to pay Medicare Advantage plans more than the traditional Medicare plan because it is good for poor people, has resonated inside the Beltway about as outrageously as it always appeared on the surface.

Ethanol comes to mind. Ethanol, just like private Medicare plans, began as a noble experiment by government to solve a national problem--this time energy independence. But where has the federal ethanol program evolved to? Corporate welfare. There is all kinds of evidence to indicate we aren't going to work our way out of our energy problems by growing more corn. But which presidential candidate warming up for the Iowa caucuses is going to say so?

Fast forward to Medicare Advantage--a noble experiment to determine just how effective the private market can be in bettering the government program by giving seniors better cost and quality. Four years after the Medicare Modernization Act, that rejuvenated the private Medicare Advantage program, where are we? Are the health plans putting lots of data on the table showing us just how much smarter and more effective the market is?

No. The health insurance industry trade association has the NAACP telling us insurance companies are the minority communities' best friend--we need to keep overpaying the private plans because that's the best way to give poor people more comprehensive benefits.

The health insurance industry trade association--instead of defending this experiment by showing us how much better the private market can deliver health care--is falling back on one of the more convoluted defenses of corporate welfare (a rationalization to continue the high profit private plans) we have seen in some time.

As I said in an earlier post, I hope the NAACP has asked the insurance industry what it will do if there are some cuts and the for-profit health plans have to make a choice between continuing to provide these extra benefits or keeping Wall Street happy by protecting profits (and cutting benefits).

Whatever the NAACP has or hasn't asked, they are back-peddling on their alliance with their new corporate health care allies. In a May 14 "clarification" letter, the NAACP told Congress the organization understood "hard choices" will have to be made under the Democratic "pay-as-you-go" rules. In a related interview, an NAACP spokesman said that Medicare Advantage has been a "good program" but that the "vast majority of African-Americans benefit from the traditional Medicare program."

Sounds like a big "Whoops!" coming out of the NAACP as they repair some fences with the likes of the letter's recipients--the key Democratic chairmen.

The Food Fight
The fight over where the money is going to come from to fix the Medicare physician fee cut and reauthorize S-CHIP got even more interesting this week.

House Ways and Means Health Subcommittee Chair, Pete Stark, effectively told the hospital industry he was going to cut their Medicare payments to come up with some money if the hospitals didn't join in on the effort to get the money out of the private Medicare Advantage plans.

The president of the American Hospital Association, in a written statement, told Stark, that private fee-for-service plans that do not provide care management services should receive payment "adjustments." However, in "those instances where plans are providing actual management services...payments above fee-for-service may be appropriate."

Stark responded by telling the hospitals that they have to be clear on their priorities--I translate that as do you (hospitals) want to be cut or do you want to help me cut the insurance plans?

That's not an entirely clear choice for the hospital industry since they often get more from a private Medicare plan than they do from the government-run Medicare plan.

Add to this all of the bad publicity over Medicare Advantage marketing abuses and the attendant Congressional hearings and the Democratic counteroffensive is in high gear.

The Democrats are now clearly playing hardball:
  • Someone on the Democratic side has obviously explained some things to the NAACP.
  • There is no doubt the hospital industry is being told they have a choice--you or them.
  • The marketers of Medicare Advantage are now under a national press and Congressional oversight "microscope."
An industry friend heavy into this business warned me the other day I had better be careful with all my criticism of the way the industry is playing this because I was in the middle of a "very political minefield."

Damn right this is a big political minefield and my friend may now be undergoing a practical demonstration in how this all works. This was never going to be as easy as arguing that the big payments were always intended for the poor people.

It always helps to defend your policies on merit. Merit may not always carry the clout it should in Washington, but it never goes out of style--no matter who's in power.

Separately, there are unconfirmed reports that
Stark is going to seek to cut $23 billion in Medicare Advantage payments over five years. That would be about half the "excess" payments the plans are supposedly getting.

Enough for the plans to have to choose between cutting benefits or cutting profits.

NAACP take note. This may be a good time to ask that question.

May also be a good time for a merit offensive on the part of the health insurance industry.

But then, I don't understand this big league political stuff too good.


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