Medicare HMOs v. the Docs, Round Two

Congress still hasn't figured out how to rescind the scheduled 10 percent cut in Medicare physician fees without violating its pay-as-you-go or PAYGO rules. But, according to this morning's New York Times, the major medical insurance companies are placing big bets that it won't come at the expense of Medicare Advantage plans.

This year, Democrats in the House and Senate have been trying to live by so-called PAYGO rules. Every dollar in new expenditures must be met with either budget cuts or tax increases. And, by and large, they've managed to do it.

But the next major test will be the annual budget reconciliation for the Department of Health and Human Services, which includes Medicare. Every year since 1997, doctors have been slated to get a 10 percent pay cut. And every year, Congress steps in and rescinds it. Only this year, if they're going to stick by PAYGO, they're going to have to pay for it by cutting other programs or raising taxes. The air hangs heavy with threats by organized medicine that doctors will stop seeing elderly patients if the cuts go through.

A logical way to pay for it would be to scale back the Medicare Advantage payments. That's what the House did in its version of the children's health insurance bill that passed earlier this year.

Why go after Medicare Advantage? For those not familiar with this wrinkle in the nation's senior citizen health insurance program, Medicare Advantage plans were created for seniors who want to enroll in health maintenance organizations. Now, you're probably asking yourself, why would any senior in their right mind want to do that? The answer is simple: the HMOs lure them in by offering additional services over the traditional fee-for-service plan.

How can they afford to do that, you're probably wondering. First, they structure the plans so only the healthiest seniors will enroll (I read stories somewhere that said some companies had set up their enrollment counters in offices where you had to walk up a flight of stairs to get to them). More significantly, Medicare pays the HMOs about 12 percent more per enrollee than the average cost for beneficiaries in the standard fee-for-service plan.

That can get pretty expensive. Indeed, the extra payments for Medicare Advantage amount to a $16 billion a year subsidy for the health insurance industry.

It turns out that Congress needs about $6 billion a year or $60 billion over ten years to rescind the 10 percent pay cut for physicians without violating the PAYGO rules. Simply by cutting MA overage payments by a third (to 8 percent instead of 12 percent over the average fee-for-service plan), the Democrats will be have enough money.

Of course, President Bush will have a say in all this. He stepped into the fray yesterday by sending a letter to Capitol Hill promising to veto any measure that cuts the Medicare Advantage plans. According to Congressional Quarterly, he recommended Congress cut hospital payments instead. The insurance industry, which is moving aggressively to sign up more seniors for their HMO plans, is betting that the president will come through for them.

Posted by gooznews at December 5, 2007 08:57 AM