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."
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2002 Global Action on Aging
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