• The battle to control the Medicare Advantage message

    First, go read Igor Volsky’s post on CMS Chief actuary Rick Foster’s letter to Sen. Chuck Grassley and HHS Secretary Kathleen Sebelius’s response letter. He says Medicare Advantage (MA) plans will reduce benefits and increase cost sharing due to lower government payments scheduled as part of health reform. She says we’ll see no such thing in 2011.

    Is Foster right that MA plans will reduce in generosity?

    That’s an easy one. Of course he is. There is no way for the government to pay plans less and the plans continue their level of benefits. That HHS has strong-armed plans to maintain their premium level in 2011, even if at the expense of increased cost sharing, is a short term outcome. Long term, you get what you pay for. Pay less and get less. Quite simple.

    But this is just the latest skirmish in a wider war, one brought about by dysfunctional and inconsistent Medicare policy. As administrations and legislative agendas change, so does the financial support for MA. Under Bush, the 2003 Medicare Modernization Act dramatically increased payments to MA plans. Now, under Obama, they’re going to be scaled back.

    One can argue about which is the right way to go, but the up-again-down-again movement of payments is incredibly disruptive to plans and beneficiaries. It may make for good politics, but it is not good policy. Moreover, the actual payment level is not tied down by anything like plan costs. The government has no good system for determining what benefits actually cost MA plans and instead sets rates based on administrative formulas, themselves driven by the political winds.

    Partisans and political junkies may enjoy this renewed political dog fight in the war over Medicare payments. But it’s just that, all politics. Sebelius is trying mightily to put a positive spin on things and Foster is trying to make the obvious plain. Neither is saying what should really happen to Medicare Advantage payments, that they should be set by competitive bidding, the only true way to know plan costs and, by the way, a system that would save tens of billions of dollars per year.

    Sigh.

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    • I sometimes think the well-documented gridlock problems in Congress, particularly the Senate, encourages tinkering at the edges of programs by politicians who would best setting broad strategies and leaving details to more experienced hands. You describe a classic example.

    • We sometimes forget that Medicare Part C was originally Medicare + Choices, and paid 95% of the local fee for service rate. The idea was that with managed care, the companies could live on 95% and still turn a profit. It was designed to save Medicare money, not provide more expensive benefits to a subset of beneficiaries. Until Bush.