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(Montana Senator Max) Baucus Tackles Cuts in Subsidies for Medicare Advantage
By Jennifer Mckee, Helena Independent Record
March 23, 2008
Sen. Max Baucus said this week he wants to shear billions in tax-dollar subsidies now going to private insurance companies that sell private Medicare plans to millions of seniors.
Such fees, averaging about 13 percent more per person than traditional, government-run Medicare, are expected to cost the U.S. treasury an additional $54 billion between 2009 and 2012, according to two recently released congressional studies.
Baucus, chairman of the Senate Finance Committee which wields enormous power over Medicare, said in an interview this week those fees are too high and need to be cut back.
“We’re looking at that,” he said. “That is too much.”
Some of the private insurance companies cost as much as 50 percent more than traditional Medicare in some parts of the country, said Sara Kuban, a Baucus spokeswoman.
The Medicare Payment Advisory Commission recommended this month to do away with those subsidies entirely. The overpayments for private insurance companies are driving up the cost of Medicare for all seniors, Kuban said, and making it more difficult to pay doctors what they’re worth.
Judy Stein, executive director of the Center for Medicare Advocacy, a national, non-partisan pro-Medicare group, said she welcomed Baucus’ comments, adding such over-payments threaten the future of Medicare itself.
At issue is something called Medicare Advantage. These private Medicare plans were expanded under a sweeping Medicare bill in 2003, the same legislation that brought prescription drug coverage — all of it provided by private insurance companies to seniors on Medicare.
Traditional Medicare is government-run insurance for all Americans over 65 and some disabled people. The program has many parts. Medicare Part A, for example, is free to all enrollees and covers visits to hospitals. Other parts of Medicare cover doctor’s visits, but those services aren’t free. Seniors must pay just under $100 a month in premiums, plus 20 percent of doctor’s fees.
The amount of money Medicare will pay doctors for visits doesn’t usually cover the full cost of a doctor’s visit and some doctors are now refusing to take new Medicare patients. But, generally speaking, Stein said, seniors enrolled in traditional Medicare can visit whichever doctor they choose.
Under Medicare Advantage, the government pays private insurance companies to administer Medicare. On average, according to a congressional study released last month, the government paid these insurance companies the same amount it spent on traditional Medicare enrollees, plus 13 percent.
The two largest sellers of Medicare Advantage in Montana have about 2,000 seniors enrolled.
Blue Cross Blue Shield sells Medicare Advantage plans in the state and has a few hundred people enrolled, said Linda McGillen, a spokewoman for the company.
New West has about 1,600 Montanans enrolled in its two Medicare Advantage plans, said Tanya Ask, a New West spokeswoman. So far, New West has yet to turn a profit on its Medicare plans, she said. That’s because New West plans charge no deductible to enrollees, includes some services not covered by traditional Medicare and pays doctors in its network more than traditional Medicare.
New West offers two plans: One costs seniors nothing more than they currently pay for traditional Medicare; the other costs an extra $40 a month.
The New West plans include a network. Seniors who seek treatment from doctors not in the New West network will pay more money, but doctors and hospitals within the network are guaranteed to treat the patient.
So far, said Ask and Bonnie Franklin, director of government services at New West, doctors and patients seem to like New West’s Medicare plans because they are simpler and more efficient than Medicare and its more complicated billings.
Both Ask and Franklin said rolling back the money paid to insurance companies like New West could threaten their company’s ability to offer the plans if the payments erode the extra money paid to insurance companies to induce them to operate in rural states like Montana.
Stein said she has no doubt that you can find anecdotes about seniors satisfied with their Medicare Advantage plans. She also said it’s good that some private insurance companies are paying doctors more than traditional Medicare.
But not all of the extra money the government pays to private insurance companies is going to doctors, according to a recent government report. About 12 percent of the extra tax money going to private Medicare plans is spent on administration, marketing, sales and profit.
Finally, Stein said, it makes more sense to take the $54 billion in extra public money currently go private insurance and use it to increase the money Medicare pays all doctors, not just doctors fortunate enough to be enrolled in a Medicare Advantage network that pays doctors more.
“To pay, literally, hundreds of billions of dollars to pump one or two plans, or even a dozen plans in a dozen areas, makes no sense when what we ought to be doing is paying doctors more,” she said.
Kuban said the insurance overpayments “are not a rural-urban issue.”
“Senator Baucus wants to look at all Medicare Advantage payments in all areas,” she said.
Not all companies offering Medicare Advantage have networks like New West’s, in which enrollees are guaranteed to find a doctor. Some insurance companies sell insurance that more closely resembles traditional Medicare. Kuban said Baucus is looking especially hard at payments to these companies.
“If they are mirroring Medicare payments and don’t have the expense of contracting, why should they be paid the higher (Medicare Advantage) rates?” Kuban said.
According to Baucus, the vast majority of Montanans enrolled in a Medicare Advantage plan are in one of these so-called “fee-for-service plans,” in which doctors and hospitals can refuse to treat them. Additionally, some of these plans pay less than traditional Medicare, even though they cost the federal government more.
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