Medicare+Choice option gains ground as alternative to HMOs
American Medical News
December 10, 2001
by Markian Hawryluk
"... a new type of Medicare+Choice option that more closely resembles traditional fee for service is winning converts."
"The product differs little from the traditional Medicare fee-for-service program but offers greater administrative simplicity for physicians. Doctors need only collect the co-payment for the beneficiary and bill the Medicare allowable rate to the plan. There's no primary and secondary payer to worry about as there often is with traditional Medicare."
"Beneficiaries are free to choose from any Medicare-eligible physician, allowing patients who sign up for the private fee-for-service option to continue seeing their doctors."
"So how can Sterling and Humana make money paying full Medicare rates while HMOs are unable to cover their costs? For one, they don't offer additional benefits such as prescription drugs or eyeglasses, or a zero premium. Premiums for both plans are somewhat higher than the Medicare Part B premium but offer medigap-type coverage at a lower price"
"The plans also are taking advantage of idiosyncrasies in payment policies for Medicare+Choice. Prior to 1997, plans were paid 95% of the average cost of treating a beneficiary in the fee-for-service program in the same county. But plans flocked to urban areas where the rates were higher than the national average, leaving rural beneficiaries with little choice in Medicare coverage."
"In an effort to attract plans to underserved areas, Congress in 1997 set a floor for payment to plans and limited the increase in high-payment counties. Lawmakers again raised the floor in 2000."
"As a result, in some counties, payments to Medicare+Choice plans now exceed the average fee-for-service payment. The private fee-for-service option was a prime candidate to serve these mainly rural, floor-payment counties."
"Three-quarters of the counties in which Sterling operates are floor-payment counties, and it is withdrawing from areas that accounted for 20% of its enrollment in non-floor counties in 2001."
Murray Ross, PhD, executive director of the Medicare Payment Advisory Commission:
"On the one hand, such plans represent an alternative to traditional Medicare that the Medicare+Choice program was intended to provide. On the other hand, the lack of care management means that additional benefits provided by such plans come not from efficiency in the provision of medical care, but from higher-than-needed payments."
<http://www.ama-assn.org/sci-pubs/amnews/pick_01/gvsb1210.htm>http://www.ama-assn.org/sci-pubs/amnews/pick_01/gvsb1210.htm
Comment: It is astounding to observe the extent to which Congress is attempting to resuscitate the Medicare + Choice program. This particular option is simply the traditional fee-for-service Medicare program turned over to private health plans to administer. This is probably the ultimate demonstration of the relative effectiveness of private versus public administrative bureaucracies.
There are two primary differences between the public and private fee-for-service models. The private sector charges the Medicare beneficiary higher premiums. And the private plans direct their marketing to counties with a "floor payment" rate that exceeds that of the traditional fee-for-service program. The "success" of the private models is based on the fact that Medicare beneficiary pays a higher premium, and the taxpayer pays a higher rate. Since the Medigap-type benefits of these programs are negligible and subject to change, both the Medicare beneficiary and the taxpayer are not receiving value for their additional investment.
Traditional Medicare, as a publicly administered program of social insurance, has served us well. Instead of misguided efforts to privatize Medicare, wouldn't it be better to direct our efforts to providing publicly administered social insurance for everyone? The need lies with patients, not health plans.