Closed-Door Deal Makes $22 Billion Difference
By Jonathan Weisman
The Washington Post
January 24, 2006
House and Senate GOP negotiators, meeting behind closed doors last month to complete a major budget-cutting bill, agreed on a change to Senate-passed Medicare legislation that would save the health insurance industry $22 billion over the next decade, according to the nonpartisan Congressional Budget Office.
Since managed-care companies first began working through Medicare in the 1990s, the government has recognized an issue in the way the companies are paid for their participation. Private insurers attract healthier seniors than the traditional government-run Medicare system, so their payment rates — based on the elderly population as a whole — exceed the actual cost of treatment.
In 2003, the government began lowering payments to Medicare HMOs to account for their healthier population of beneficiaries. But to keep those HMOs from fleeing the system, the Bush administration added a “hold harmless” payment that negated that cut.
http://www.washingtonpost.com/wp-dyn/content/article/2006/01/23/AR2006012301700_2.html
Comment: By Don McCanne, M.D.
Although the details of the CBO analysis are somewhat technical, the fundamental perversity is not. The Medicare Advantage private insurance programs are paid at a rate which assumes that patients enrolled in their programs have the same health care needs as the average patient remaining in the traditional Medicare program. That is not the case. The Medicare Advantage programs are successful in selectively marketing to a healthy subset of Medicare patients. Thus the private plans are overpaid when compared to payments for comparable patients within the traditional program.
This overpayment is vital to the Medicare Advantage plans. Without it, they could not meet their higher administrative costs. New private plans would not enter the market, and once rates are adjusted to match risk, existing plans would exit the market.
Even though Democrats were excluded from the behind-closed-doors sessions, the intent of these overpayments is no secret. In 2010, a process will begin which is designed to reduce payments in the traditional Medicare program. It will be important to have in place a market of private Medicare Advantage plans as patients begin to flee from an underfunded public program. That market of private plans cannot develop unless Congress and the administration pays this $22 billion bribe of taxpayer funds.
The Washington Post article also states, “Republican aides involved in the change dismiss its significance, saying the CBO is reading too much into it.” A $22 billion bribe may be insignificant to Republican aides, but the rest of us certainly should be concerned. That’s our tax money and our Medicare program that they’re messing with!