Medicare Compliance & Reimbursement

CBO, MedPAC eyes your reimbursement as revenue source.

Heads up, Medicare Advantage (MA) plan administrators: You need to start playing defense now to fight against potentially monumental cuts in your reimbursement during the next federal budget cycle.

Congress is already looking ahead to draft a budget for FY 2008, which begins Oct. 1. And it's taking note of a recent Congressional Budget Office (CBO) report that says the federal government can save upwards of $65 billion between 2008 and 2012 by taking one simple but substantial step: reducing pay to MA plans to 100 percent of fee-for-service (FFS) payments.

Industry insiders and government budget-masters have discussed taking this measure for a while, but many speculate that the need to raise federal revenue this year will cause some naysayers to review their position. The CBO report's promise of big savings "will be almost insurmountable to get around," laments John Gorman, CEO of Gorman Health Group LLC in Washington, DC. "There's still a lot of negotiating to do, but that number will be pretty hard for lawmakers to resist."

Some aren't so sure that the cuts will be so steep, including Thomas Scully, senior counsel in the Washington, DC office of Alston & Bird. Look for a more modest phase-down of MA payments over the next several years, he predicts.

But almost everyone seems to agree that the long-debated stabilization fund for regional MA preferred provider organizations (PPOs) is on the chopping block, Scully contends. "The stabilization fund I'm sure is toast," Scully warns. "That was a made-up thing to begin with."

More bad news: Adding fuel to the pay-cutting fire is a recent Medicare Payment Advisory Commission (MedPAC) study that suggests Congress look into alleged overpayments to Medicare managed-care plans. The implication of overpayments could lead Congress to respond with across-the-board cuts.

This move could happen even though several industry experts caution that the MedPAC data may be outdated. "The report is not taking into consideration the MA cuts legislated last year," says Jane Galvin, director of regulatory affairs for the Blue Cross and Blue Shield Association in Washington, DC. The MedPAC numbers, which come from 2006 data, don't reflect the $6.5 billion in MA cuts that Congress mandated under the 2005 Deficit Reduction Act, which phases in this year.

"It doesn't mean the MA payments have gone down to FFS levels," Galvin conceded. "But they're not as high as MedPAC may quote them to be." Know Your ABCs: What MA Funds' Reallocation Could Look Like Lawmakers and advocates are championing MA pay cuts because many of their pet projects could use a funding boost. For example, Congressional mover-and-shaker Rep. Pete Stark (D-CA) suggests that reallocating payments would bolster the struggling State Children's Health Insurance Program (SCHIP) and permit [...]