Congress wastes tax funds on private Medicare plans
Medicare Payment Advisory Commission (MedPAC)
April 8, 2004
M+C payment rates compared with county Medicare per capita fee-for-service spending (revised)
The purpose of this report is to present data on the level of Medicare+Choice (M+C) payment rates relative to the spending on similar beneficiaries in Medicare’s traditional fee-for-service program.
Before the Balanced Budget Act of 1997 (BBA), payment rates for private plans were set at 95 percent of a county’s per beneficiary spending under the traditional FFS program.
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), altered the payments in several ways.
Across all counties, Medicare is paying M+C plans an average of 107 percent of what it would cost to cover the current mix of M+C enrollees under the traditional fee-for-service Medicare program. This estimate (along with all the other estimates in this report) assumes that the average health risk of the M+C and traditional enrollees are the same, other than those differences accounted for by demographic characteristics. If, as CMS has found, M+C plans enroll a less costly population than would be accounted for by demographics, Medicare would be paying M+C plans more than 107 percent of Medicare’s spending under FFS. (MMA), altered the payments in several ways.
The “100 percent of FFS” prong of the payment formula ensures that no county will have M+C payment rates below its average FFS spending. In fact, because of the additional payments made on behalf of M+C patients by the Medicare program directly to hospitals for IME (indirect medical education), payments to plans in “100 percent of FFS” counties average 102 percent of the cost of covering demographically similar beneficiaries.
Payment rates for enrollees in “blend” counties (most of whom are in areas of northern California with a relatively high hospital price index) average 111 percent of FFS payment. By design, the payment formula’s floors are set higher than FFS spending in many counties. Medicare pays 116 percent of FFS spending for enrollees in floor counties in large urban areas and 123 percent of FFS spending in floor counties in other areas. By contrast, in non-floor counties Medicare pays 104 percent of average FFS spending.
The minimum update component of the rate formula prevents county rates from declining, even if other portions of the formula would otherwise lower rates.
http://www.medpac.gov/
For the two page report, under “Recent products,” click on “MedPAC Brief: M+C payment rates compared with county Medicare per capita fee-for-service spending (revised April 8, 2004)”
Comment: The private Medicare plans promised us lower costs, which they said were made possible by the alleged efficiencies of the competitive marketplace. But they failed to deliver, and many plans pulled out of the Medicare markets. Now Congress has responded by granting the private plans between 3% and 23% more than the costs of the traditional Medicare program, plus whatever else the plans can gain on their own through selective marketing to healthy Medicare beneficiaries.
This is an explicit concession by members of Congress that there is no magic in the competitive marketplace of private health plans. When many members of Congress are protesting that Medicare is headed for bankruptcy, it is outrageous that they would spend even more taxpayer dollars merely to “stabilize” these private plans that have already proven their inability to prevent administrative waste.
This is no longer an expensive experiment in health funding policies. The experiment is over, and the results are in. It is an egregious abusive use of a Congressional edict to give billions of our tax funds to an unworthy private industry. We need to evict these highly unethical scoundrels from our venerable chambers of Congress and replace them with our own scoundrels, but scoundrels with at least some semblance of ethics.
For an excellent article by Theodore Marmor and Jonathan Oberlander on the specious claim of Medicare ‘bankruptcy’:
http://www.post-gazette.com/pg/04095/295433.stm
Note: If and when the above link expires, the article is available under “Recent Articles of Interest”.