back

 

Want to support Global Action on Aging?

Click below:

Thanks!

Private Health Insurers Begin Lobbying for Changes in Medicare Drug Legislation

 

By ROBERT PEAR


New York Times, July 1, 2003

 

WASHINGTON - Private health insurance plans began lobbying Congress yesterday for major changes in the Medicare drug legislation passed just three days ago.

 

Without increased subsidies and more stability, they said, few private plans will enter the Medicare market, and the legislation will not work as intended.

 

Lobbyists for the health insurance industry praised Congress for its efforts to inject market forces and competition into Medicare. But they said Congress needed to change the rules for such competition and to increase payments for private plans to make Medicare an attractive business proposition.

 

Under the legislation that the Senate and House passed on Friday, Medicare would sign contracts with up to three preferred provider plans in each region of the country. Those plans would provide drug benefits along with a full range of medical services. The Bush administration has indicated it might designate 10 regions.

 

Mary Nell Lehnhard, senior vice president of the Blue Cross and Blue Shield Association; Karen M. Ignagni, president of the American Association of Health Plans; and Dr. Donald A. Young, president of the Health Insurance Association of America, all denounced the proposed limit on the number of private plans.

 

"Rather than picking winners and losers," Ms. Lehnhard said, "the government should let the market decide."

 

Ms. Ignagni said, "Congress should let Medicare beneficiaries vote with their feet."

The House and Senate bills would create an option for Medicare beneficiaries, encouraging them to enroll in preferred provider organizations like those that serve millions of working-age Americans. Contracts between Medicare and the plans would normally run for two years, too short a term to guarantee stable markets, the insurers said.

 

"To establish a network of doctors and hospitals, to compile all the data needed for a bid, to hire a sales force and to advertise a new product to Medicare beneficiaries requires a huge investment," Ms. Lehnhard said. "Health plans would be hesitant to make that investment if they could be excluded from the Medicare program in two years. You don't want to put a new product on the market, entice people into it, tell them it's a great deal and then leave the market in two years."

 

Health maintenance organizations have participated in Medicare for more than 15 years, but in the last five years, many have pulled out, saying payments lagged far behind costs.

Ms. Ignagni said she was lobbying Congress to increase payments to H.M.O.'s under the existing Medicare+Choice program. Those payments would be a benchmark for paying the new private plans, starting in 2006.

 

"But if Congress does not improve payments to H.M.O.'s in 2004 and 2005," she said, "more of them will withdraw from Medicare, and that instability will undermine confidence in the private sector as an alternative to traditional Medicare. It's very difficult to build a new program around a private sector that doesn't exist."

 

Those arguments frame a choice that will face House and Senate negotiators, whether to increase subsidies for private plans or improve drug benefits for the elderly.

 

The chairman of Aetna, Dr. John W. Rowe, said he was urging Congress to provide special assistance or protection to insurers who were trying to line up doctors and hospitals to care for Medicare patients in rural areas. In such areas, Dr. Rowe said, health care providers often demand exorbitant payments because they have little or no competition.

 

Accordingly, he added, Medicare should limit payments to doctors and hospitals, by authorizing use of a federal fee schedule, or Medicare should pay a bonus to health plans to reflect the higher costs of care in rural areas.

 

Dr. Young, from the health insurance association, said: "Doctors and hospitals have real market power in rural areas. We need them to participate in our networks. But we can't pay them 30 percent more than Medicare pays them at the same time we're competing with the traditional fee-for-service Medicare program."

 

John W. Flink, vice president of the Montana Hospital Association, rejected the idea of limiting payments to rural hospitals.

 

"That's logically inconsistent with the argument that Republicans have been making, that the marketplace should determine prices," Mr. Flink said. "If you favor competition, why would you want the government to step in and set rates?"

 

Insurers say they are also nervous about Washington's plan to award contracts for large multistate regions. A health plan that does business in Massachusetts and New Hampshire may not have a network of doctors and hospitals to care for Medicare patients in Maine or Vermont, the companies said. Moreover, they added, in a big state like New York or California, it will be difficult to establish a statewide network of providers.

 

The Senate bill says, "There shall be at least 10 regions," and, "Each region must include at least one state," with all parts of a state assigned to the same region.

 

Deborah L. Bohren, senior vice president of Empire Blue Cross Blue Shield in New York, said: "That provision appears to preclude us from participating in the new Medicare program. Our license does not allow us to sell health insurance to individuals residing outside our service area, which covers 28 counties of eastern New York."

Other Blue Cross and Blue Shield plans, based in Rochester and Buffalo, serve the rest of New York.

 

Dr. Young said many insurers would like to enter or stay in the Medicare market, but could not do so if they were required to serve an entire region. Such a requirement, he added, would reduce competition because "only a small number of insurance companies can cover a large geographic area."


Copyright © 2002 Global Action on Aging
Terms of Use  |  Privacy Policy  |  Contact Us