Private Medicare plans get lawmaker scrutiny
WASHINGTON (Reuters) - U.S. taxpayers are subsidizing the explosive growth in a lucrative type of private health plan under Medicare, an independent advisor to the U.S. Congress told lawmakers on Wednesday.
The plans, known as private fee-for-service plans (PFFS), are the fastest growing segment of private companies contracting with Medicare, the U.S. health insurance plan for the about 44 million elderly and disabled individuals.
Offered by many major publicly traded health plans, PFFS plans enjoy a competitive advantage because they operate under looser federal rules, making them cheaper to run, experts told the Senate Finance Committee.
In addition, the government program is paying them about 17 percent more than traditional Medicare, said Mark Miller, executive director of the Medicare Payment Advisory Commission, which advises Congress on Medicare financing.
"These payment rates are subsidized by taxpayer dollars and that is why they are attractive" to private companies, he said.
Under conventional Medicare, the government pays for care through a system letting patients choose doctors and hospitals. A 2003 law encouraged entry of more private plans in Medicare, in a program called Medicare Advantage, which includes managed care plans and the private-fee-for-service plans.
Enrollment in all Medicare Advantage plans has grown to 9.2 million as of January 2008, from 7.6 million in December 2006. Among those, 1.7 million are now in the PFFS plans.
Major health plans make billions in revenue from Medicare, about 31 percent of average company revenue, according to Carl McDonald, an analyst with Oppenheimer & Co.
INTENT OF CONGRESS
MedPac and other critics say the intent of these private plans in Medicare was to provide better care more efficiently, not to provide more care at a higher cost.
The trade group for most private health plans, America's Health Insurance Plans, said the intent of Congress has changed over time and that lawmakers added extra payments for certain goals, including a floor payment to ensure they could operate in rural areas.
"Members of Congress wanted to have choices all across the country," an AHIP spokeswoman said.
The plans have also been accused of luring seniors in with low or even no premiums, only to overwhelm patients with higher costs for substantial items such as hospital co-payments.
PFFS plans do not need to maintain networks of doctors like "managed care" plans do.
"I'm disturbed that my constituents may have a hard time getting access to doctors," Senator Chuck Grassley, the ranking Republican on the Senate finance panel from Iowa.
The issue could reemerge in several months when Congress takes up legislation to fix pay to doctors under Medicare. Lawmakers will need to find money to pay for such payments.
President George W. Bush has vowed to veto any major legislation that cuts payments to any private Medicare plans, but analysts have said if any cuts are approved, the PFFS plans would be the most likely target.
(Editing by Andre Grenon)
