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This move could happen even though several industry experts caution that the MedPAC data may be outdated.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 lawmakers to increase Medicare payments to physicians--an issue that generates annual dogfights between the federal government and providers.

Alternatively, "that $65 billion could be used to expand eligibility for the Qualified Beneficiary Program (QMB), one of the Medicare Savings Programs (MSPs)," argues the Washington, DC-based Medicare Rights Center (MRC). 

QMB pays the Part B premium and Medicare deductibles and coinsurance for people with Medicare living below the poverty line, the MRC points out. "QMB is a far better deal than the 'extra' benefits available from Medicare Advantage plans--and it doesn't require people to give up the original Medicare program they trust for a private plan that every year can choose to change its benefits, raise its costs or pull out entirely," the group says in a statement.

Protect Yourself By Getting The Word Out

Private plans' biggest fear is that sizable cuts, coming in concert with a projected 2-percent rate hike in 2008, could force them to introduce cost-sharing measures that would cause benes to lose out.

"Millions of seniors and disabled Americans in Medicare could risk losing their current coverage or see their benefits decline should Congress enact changes based on the conclusions of the MedPAC report, or reduce payments based on the CBO report," says Peter Ashkenaz, spokesman for United Health Group.

Larger insurers with a stake in the decision can try to sway legislators directly, as United is doing. "We're working closely with members of Congress to insure that millions of beneficiaries will continue to have the comprehensive coverage in the future," Ashkenaz says.

Another option: If you're with a smaller insurer that doesn't have strong lobbying resources, you can get behind the efforts of America's Health Insurance Plans (AHIP), which is taking an active role in combating MA pay cuts.

"Low-income and minority Medicare beneficiaries who rely on the program could face higher expenses, which may force them to forgo preventive screenings and other needed medical treatments," says AHIP president and CEO Karen Ignagni in a statement. This possibility raises special concern because studies have shown that 49 percent of MA enrollees in 2004 had annual incomes of less than $20,000 and that 68 percent of minority MA enrollees had incomes below $20,000, she adds.