MedPAC Recommends a Reasonable Road Map For Reducing Private Medicare Advantage Payments--Plan Would Equalize Payments Over a Five-Year Period

The Medicare Payment Advisory Commission (MedPAC), the Congressional advisory group on Medicare payment issues, has sent a report to Congress recommending that the Congress structure future private Medicare plan payments in a way that eventually equalizes private plan and public plan costs.

MedPAC said in its report that current Medicare Advantage reimbursement does not promote increased efficiency in health care delivery and outcomes because the private plan payments are much higher than those in the traditional government-run Medicare plan. They also said that, "PFFS [Private Fee For Service] plans are providing extra benefits because of the higher payment rates, not because of greater efficiency."

MedPAC pointed out that private Medicare payments averaged 116% of the expected traditional Medicare plan's payments in 2006.

MedPAC is calling for the creation of "blended rates" to determine Medicare Advantage plan payments and a five-year transition toward equalized payments between private plans and the public Medicare plan. In the first year, the plans would get a payment composed of 80% of the higher rates and 20% based upon the traditional plan's expenditures. In the second year, 60%/40%, the third year 40%/60%, the fourth year 20%/80%, and by the fifth year the payments between private plans and the traditional Medicare plan would be equalized.

As for the controversial Private Fee For Service (PFFS) program, MedPAC recommends simply freezing these payments at current levels until the traditional Medicare plan's expenditures catch-up to the PFFS program. PFFS was never supposed to be more than a transition plan anyway.

They also called for using competitive bidding to set the future Medicare Advantage benchmark based on average bids--much like Part D is operated and like the Medicare Modernization Act of 2003 authors saw the private Medicare program eventually working.

Last week, I called for a transition program similar to this: You Can't Have the Medicare Advantage Private Fee-For-Service Training Wheels Forever

I think MedPACs proposals are better. MedPAC has created a reasonable way to transition the private Medicare industry's business off the training wheels and onto a sustainable business model.

MedPAC has also shown the Congress a five-year plan to begin taking back some of these extra payments in an orderly way so they can be used for other priorities--like S-CHIP and fixing the Medicare doctor fee cut problem.

In the end, the private Medicare Advantage programs, including Private Fee For Service, have to be able to demonstrate that they can provide care more effectively and efficiently then can the government-run system.

If the private plans cannot provide a better (cost and quality) health care insurance program, why continue them?

The people in our industry who have confidence in what they do for a living will take this deal!!!!!