• Medicare Advantage withdrawals: Some not due to health reform

    A reader tipped me off to this from today’s Boston Globe:

    Harvard Pilgrim Health Care has notified customers that it will drop its Medicare Advantage health insurance program at the end of the year, forcing 22,000 senior citizens in Massachusetts, New Hampshire, and Maine to seek alternative supplemental coverage.

    The decision by Wellesley-based Harvard Pilgrim, the state’s second-largest health insurer, was prompted by a freeze in federal reimbursements and a new requirement that insurers offering the kind of product sold by Harvard Pilgrim — a Medicare Advantage private fee for service plan — form a contracted network of doctors who agree to participate for a negotiated amount of money. Under current rules, patients can seek care from any doctor.

    This is a private fee for service (PFFS) plan.  Such plans are paid like other Medicare Advantage (MA) plans but are not required to establish networks, manage care, report on quality, offer drugs, among many other exemptions. They are essentially enhanced fee-for-service (original Medicare) products or subsidized Medigap. For all this, they are paid well above FFS cost. They have been the fastest growing type of plan, responsible for most of the recent increase in cost of the MA program.

    Here’s what I wrote about PFFS origins and growth last December:

    Who decided to craft a subsidized Medigap-like product in the form of PFFS, and when? The push began in 1997 by the National Right to Life Committee, which was concerned that Medicare HMOs would ration care. Then, in the final hours of the 109th Congress, outgoing Speaker Dennis Hastert slipped a provision into a 2006 tax and trade bill that favored PFFS plans over others. The provision permitted beneficiaries to preferentially switch coverage into PFFS plans long after the open enrollment period expired. Hastert’s efforts were applauded by Aon, whose subsidiary Sterling Life was the first carrier to market PFFS plans. Subsequently, PFFS plan enrollment took off.

    Though a few special interest groups strongly supported the growth of PFFS plans, there was no deliberative debate about whether they make sense and deserve the degree of taxpayer largess and relative freedom from MA requirements they enjoy.

    Like the Harvard Pilgram plan, many PFFS plans are about to die or mutate into something unlike a PFFS plan. But it’s not because of changes in MA payment rates included in the ACA. It’s due to an earlier law. On July 15, 2008, Congress overrode a veto of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). In 2011 MIPPA will rescind the PFFS provider network exemption in areas with at least two local network plans (HMOs or PPOs). That means that just about anywhere HMOs and PPOs exist, PFFS plans as we now know them cannot.

    In a 2009 paper with Steve Pizer and Roger Feldman, I estimated that the MIPPA  provisions would cause half the PFFS plans to exit the market. The Harvard Pilgram plan exists in a market where HMOs and PPOs also operate. Thus, its demise is due to the network requirement. Had it stayed, it might have been called a PFFS plan but it would not have really been one. It would have been an HMO or a PPO by another name–just another type of network plan.

    That doesn’t mean its departure isn’t disruptive to beneficiaries. It is. But one should’t blame the ACA and the current Congress for it. Blame MIPPA and the prior one. Or thank them. They’re saving taxpayers a lot of money, $47.5 billion over 2009-2018 according to Peter Orszag. I wish we could save a lot of money and cut a lot of waste out of the health system without inconveniencing people, but we can’t. Sorry.

    • What do you know about private-fee-for-service (PFFS)plans being offered to retirees through their employer retirement coverage? I have run into several people, including my in-laws, whose retirement coverage has recently been converted to a Medicare Advantage PFFS plan. While PFFS plans offered to individuals are required to have networks, and thus most are being canceled, these “group plans” can operate as they always have – with no network.

      I haved a feeling this is a booming market for the Medicare Advantage plans. My in-laws are in New Jersey and haven’t said anything about access problems with doctors, but I am an insurance agent and we always had to say to PFFS clients that “a doctor can agree to see you and bill your PFFS Advantage plan one month, but he can decide the next month that he will not accept your PFFS plan”. My in-laws had no clue as to this caveat.

    • Just another thought. When I took the AHIP (America’s Health Insurance Plans) course and exams in September, quite a bit of time was spent on PFFS plans, even though they are mostly going to be canceled for 2011. The hybrid PFFS version actually sounds very interesting. PFFS plans must have a network if they are in an area with two or more network plans (HMO or PPO), but people enrolled in these plan can still go out of network just like with the old PFFS.

      In Arizona, United is canceling its PFFS, but Humana is not – though they no longer talk about their PFFS plans because they expect people to drop out of PFFS and switch to their PPO. Universal Health Care (out of Florida) is still offering a $0 premium PFFS plan in Arizona, one with a network and one (in rural areas) without a network.

      HMO Advantage plans in Arizona still have $0 premium and free gym memberships. Not much has changed – except for one plan that used to allow people getting LIS (low income subsidy) to enroll and get very low co-pays for medical services. This was a godsend to many folks living on less than $1240 per month but more than $920. People below $920/ month get Medicaid help for their Medicare co-pays. This plan, called Health Net Amber, is only going to be open to “full duals” and the poor-but-not-poor-enough people will have to find a new Advantage plan. And these people on limited incomes will have to pay $40 or more to see a specialist and could pay $1400 – $1800 if they end up in the hospital. I think there needs to be a subsidy for people in this not-poor-enough category because they need help.

      I have talked to many seniors who’ve told me they don’t get care because they can’t afford a $40 co-pay for a speciaist. And I’ve even heard from middle-income seniors that they don’t get the physical therapy they’ve been prescribed because they would pay $40 x 4 visits or $40 x 8 visits. They just don’t have the money, so they don’t get the care they need. Their co-pay might be even higher if they only had Medicare. What a system!

    • Casualty of Obamacare Plan

      Obama promised,  “If you like your current insurance, you keep that insurance. Period. End of Story.”  He should have added ‘if it is available’.  I was notified that the Universal Healthcare Medicare Advantage plan I have had for 4 years “will no longer be offered in 2011”.  I am advised that I must take action to find new coverage by December 31.   The company is not offering an alternative and the agent who sold me this policy cannot be contacted.  I now must start over in trying to find coverage. 
      I will remember this “benefit” when I vote in November.

      • @Jerome – I’m sympathetic to your plight, but also to the challenges of responsible governance in a very political environment. How does one get major reform in health care, which means change and disruption, when everybody hates change and disruption? I’m not saying Obama was right to say what he said. What I’m sure of is that if he had said anything that suggested folks would have to change then the plan would very likely not have passed. One should only like that outcome to the extent one likes the status quo–15%+ uninsured and all else.

        My advice: judge the law on its merits, not on what was said about it. And compare it to the likely alternative, not to some ideal but unattainable paradise. Are you willing to sacrifice a little so many can find affordable insurance?

    • Jerome:

      ObamaCare had nothing to do with the cancellation of your Universal PFFS Medicare Advantage plan. Back in 2008 Congress decided that PFFS plans were too expensive for Medicare so they told Advantage companies that these plans must have a network if they are based in locations which already have HMO’ and PPO’s. If you lived in a rural/small town area like Yuma, AZ, you would still have your Universal plan.

      If you signed up for a PFFS plan because you travel and thus do not want a local network plan, you can get a Medicare Supplement with no questions asked. In the letter you received from Universal, it says you have “guaranteed issue” for any Medicare Supplement plan. This means you don’t have to answer medical questions and your premium will be based on your age but not your medical history.

      I just got a phone call from a woman whose mother is in a PFFS plan that is being canceled. Her mother is very ill and the daughter is trying to figure out all the bills she is getting with all the co-pays required by the Medicare Advantage plan. The daughter was thrilled to hear that her mother could get a Medicare Supplement under guaranteed issue for around $136/month. This is a plan F Med Supp which will leave her mother with NO BILLS to pay. Medicare will pay first and the Med Supp will pay second. This is the best coverage and the cancellation of YOUR Medicare Advantage plan will give you the opportunity to go back to the best coverage, which is Medicare plus a Med Supp.

      And just a reminder: the changes affecting you are not part of ObamaCare. Universal could have set up a network – and they told agents in Arizona that they were going to do this. But they discovered that contracting doctors and hospitals is a big project, so they made a business decision not to do it. You are dealing with a for-profit insurance company that made a business decision, so don’t blame Obama or Medicare. Blame the insurance companies that get in and out of the Medicare business, change plan benefits each year, and don’t provide enough service to their clients.

      Managed care (network plans) are the past and the future of Medicare Advantage because they are “manged care” and can save Medicare money.

    • What people don’t understand – or don’t want to admit – is that nobody gets to choose or keep their doctor unless their insurance company contracts with that doctor. People enrolled in Medicare Advantage are enrolled in private insurance plans and they control your choices. I have two clients enrolled in Medicare Advantage plans that tried to get prior authorization – one for a CT scan and another for surgery on his eye lids. Both requests were denied by the insurance companies as medically unnecessary. Would that have happened if they had Medicare instead of Medicare Advantage?