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.