Complaints about Medicare Advantage Mount…While Congress Contemplates Slashing Fees Traditional Medicare Pays Docs

http://www.healthbeatblog.org/
by: Maggie Mahar

Recently I argued that eliminating the private insurance industry would not suddenly make health care affordable. But this is no reason to gratuitously overpay private insurers to provide health care to Medicare patients—while simultaneously planning to slash the fees that Medicare pays physicians.

Begin with the insurers. When Congress created Medicare Advantage, the program that allows private insurers to offer Medicare to seniors, it agreed to pay for-profit insurers about 12 percent more per patient than traditional Medicare would spend if it were covering those patients directly. Add up those extra payments and they amount to a $16-billion-a-year subsidy for the health insurance industry.

Why the sweetener? Lobbyists argued that the government would have to pay more to persuade for-profit insurers to join the Advantage program. Moreover, they promised that the insurers would use the $16 billion to offer patients extra benefits like acupuncture and eye exams that they would not receive under traditional Medicare. And Congress agreed. Now, think about this for a minute: legislators agreed to use our tax dollars to help for-profit insurers draw customers away from a government program that most people liked—and that cost taxpayers less. This is not about saving money by transferring Medicare to the supposedly more efficient private sector. This is about the conservative agenda: some politicians are determined to try to outsource government to for-profit corporations.

Predictably, private insurers structured their plans to siphon off the healthiest seniors. In New York City, for example, Oxford included free memberships to some pretty posh gyms as part of the package. They called it the “Silver Sneakers� program. Unfortunately, a year after seniors signed up they discovered that the number of gyms involved in the program had suddenly shrunk. The options that remained weren’t nearly as tony, and most were no longer located in upper-middle-class residential neighborhoods. Is this “bait-and-switch�? You decide.

What is certain is that the program has proved a boon for UnitedHealth, the nation’s biggest medical insurer, and Humana, the No. 4 player in the private health insurance market. As the New York Times explained last week, Humana, which has 1.1 million seniors enrolled, and UnitedHealth, which has 1.3 million signed up, are relying on Medicare Advantage “to cope with a sales slump in the private-sector parts of their business.�

Some private insurers are suffering, the Times pointed out, because “corporate customers are cutting back on the medical coverage they give employees.� So insurers need taxpayer dollars to keep their bottom line strong. “Humana is transforming itself into a big-time government contractor. It will get almost three-fourths of its projected $1.28 billion in pretax profit this year from Medicare, mainly from the Advantage program,� the Times reported, “while UnitedHealth, the industry giant, draws about 15 percent of this year’s projected pretax profit of $7.48 billion from Medicare.� One in five of the nation’s 43 million Medicare enrollees is now in the Medicare Advantage program and by 2009 “government spending on Medicare Advantage is projected to exceed $100 billion annually.�

As of yesterday, Humana’s shares were up roughly 35 percent for the year while UnitedHealth had climbed about 15 percent. Meanwhile, the Times reported, “the Bush administration says Medicare Advantage has brought more choices and better benefits to the federal health system.�

Is the Bush Administration Right?

A few weeks ago, the Medicare Payment Advisory Commission (MedPAC), the independent agency that advises Congress on Medicare spending, took a close look at the quality of care that seniors are receiving under Medicare Advantage. If you had been in the room, you would have found the mood gloomy.

MedPAC Commissioner Jack C. Ebeler called the data on quality “disappointing.” Ebeler, the former head of the Alliance of Community Health Plans, an association representing older, more tightly managed HMOs, said: “this is not what we are hoping for.” Then MedPAC chairman Glenn Hackbarth weighed in: “I’m struggling to get to ‘disappointed,'” he said dryly, referring to Ebeler’s comment. “I’m more depressed.”

Consider just one example of how Medicare Advantage is failing seniors: When the commission looked at 2006 data showing whether diabetics had received routine eye exams to assess whether their vision is declining, they found that only one-quarter of the plans had provided the exams for more than 60 percent of their diabetic enrollees. Older plans were far more likely to make sure that patients had their vision checked. Fee-for service Medicare Advantage plans are becoming more popular than HMOs—and they are not coordinating and managing care.“I feel like we’re going backward,� said Hackbarth, referring to the new plans.

MedPac isn’t the only organization that is complaining. An American Medical Association survey released in May revealed that more than 50 percent of 2,022 physicians responding to the poll said they have seen plans deny services typically covered in the traditional Medicare plan. More than half of physicians report receiving payments below the traditional Medicare rate.

Of course, the AMA has its own axe to grind. In January, Medicare is scheduled to slice the fees that it pays physicians by a whopping 10 percent. With an eye on the extra $16 billion that Medicare pays insurers, the AMA has been quick to point out that if Medicare cut back on the insurance industry subsidy, it wouldn’t have to slash physician’s salaries. As Merrill Goozner explained last week on Gooz News: “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…Simply by cutting the Medicare Advantage [bonus] by a third (cutting it to 8 percent instead of 12 percent more than Medicare itself would spend to care for the same patients), Medicare would save enough money to avoid the cuts.�

But, as Goozner notes, “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.�

If Medicare pares physician’s fees by an average of 10 percent next year—and another 5 percent, as scheduled, in 2009, the AMA warns that many doctors will simply stop taking Medicare patients. There are some signs that this is already happening.

In his Wall Street Journal column, Dr. Benjamin Brewer recently reported on doctors who have closed their doors to new Medicare patients, including “a family doctor in rural California named Deborah Sutcliffe, who stopped taking new Medicare patients two years ago. Now she’s thinking about requiring her remaining Medicare patients to pay her directly rather than taking her fee via Medicare. If she goes this route,â€? he explained, “she’s allowed to charge a slightly higher price. Medicare sends partial reimbursement for the office visit to the patient, and the patient pays the difference. This approach usually results in more overhead for a practice, but the total collections for the same sorts of visits can be 15 percent higher.â€?

Looking beyond anecdotal evidence, an August-September MedPAC survey of beneficiaries found that while 70 percent reported no problem finding a new doctor, that figure was down from 2006, when 76 percent said that they could easily find a physician.

Even if doctors are not yet abandoning their Medicare patients, it is clear that they are trying to make up for lower fees by increasing the volume of services they provide. According to the Commonwealth Fund, “the volume of doctor services per beneficiary in 2006 grew by 3.6 percent. The highest rates of growth in 2006 were for ‘tests’—6.9 percent—and for medical imaging, 6.2 percent.�

Indeed, since 2000, Medicare payments to physicians have risen by an average of 9 percent a year (see graph below from Hackbarth’s May testimony before the House Subcommittee on Health) not because Medicare is paying more per service, but largely because doctors are “doing more� to their patients. Some observers have suggested that this is because of the rise of new technology or changing protocols, but when MedPAC analyzed the rise in volume, it could find no medical explanation.

As I have argued on this blog, when doctors provide more services, patients don’t necessarily benefit. More tests can lead to the epidemic of diagnosis that I’ve talked about here and here. And more procedures and more drugs can lead to over treatment.

In response to these concerns, the Commonwealth Fund reports that MedPAC is now considering a proposal that would require Medicare “to establish a process for measuring and reporting, on a confidential basis, the health care resources consumed by doctors in delivering care. The aim would be to prod doctors who order too many tests and services to begin to conform to the way medicine is practiced by some of their more efficient peers…some commissioners said that after a couple of years, tougher steps should be taken to discourage inefficient care, such as penalizing it by paying less or by publicizing which doctors are less efficient.�

MedPAC is not encouraging doctors to stint on needed care. But the Commission recognizes that unnecessary care can be hazardous to a patient’s health. Every test and every procedure carries some risk—and if there is no benefit to balance the dangers, the patient is exposed only to the risk.

Make no mistake: when researchers talk about “more efficient� healthcare providers they are not referring to discount medicine. They point to prestigious medical centers like the Mayo Clinic, the University of California at San Francisco and Duke University as benchmarks for care that is less wasteful—and leads to better outcomes. At these hospitals, patients typically see fewer specialists, receive more primary care and undergo fewer procedures. Ironically, higher quality care usually goes hand in hand with less expensive care.

A Better Solution

Rather than slashing physicians fees by 10 percent , it would make much more sense to cut fees to physicians and hospitals that are cranking up the volume of the services they provide—without getting better results.

Across- the-board cuts would unfairly penalize family doctors and other generalists who, MedPAC recognizes, already earn much less than specialists. In his May testimony, Hackbarth pointed out how little Medicare reimburses doctors who practice “cognitive medicine�—talking to and listening to the patient. For example, he noted that in Chicago, primary care doctor receive $90 for a 30-minute office visit, while a specialist performing a colonoscopy (which also takes 30 minutes) is paid $227.

Hackbarth explained that specialists’ fees have climbed in part because, as a MedPac report pointed out last year, Medicare has relied “too heavily on physician specialty societies . . . to make recommendations about how much specialists should be paid for particular services.â€? Noting that these groups “have a financial stake in the process and thus little incentive to identify over-valued services,â€? MedPAC recommended that Medicare itself should “play a lead role in identifying over-priced services.â€? In addition, the report suggested that the group reviewing fees should include physicians who “would not directly benefitâ€? –for example, physicians who work on salary.

In the same testimony, Hackbarth argued that Medicare should do everything that it can to promote primary care, by re-examining fee schedules, and charging lower co-pays when patients see a family doctor. As evidence , he pointed to work done by researchers at Dartmouth, that I have written about here, which shows that in regions of the country where Medicare patients see fewer specialists and more primary care doctors, costs are lower and outcomes are at least as good–and often better.

The bottom line is that Medicare needs to trim doctors’ fees with a scalpel, not an ax. Otherwise, primary care physicians will begin turning away Medicare patients; seniors would receive less preventive care, and down the road they would need more expensive, more aggressive care

But where will Congress find the money? Will legislators prune payments to private insurers to avoid whacking doctors? Robert Laszewski keeps a close eye on the beltway’s healthcare politics on Health Care Policy and Marketplace Review, and he predicts an 11th hour compromise: “There will be a deal in the Congress on the doc cuts and Medicare Advantage and it will occur later in December [rather] than earlier. It might even slide into the early part of the New Year with a retroactive effective date to January 1.�

Is he right? I’m not sure. But I do know this: at some point in the near future, Congress is going to have to begin paying attention to MedPAC’s recommendations.
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