Medicare Compliance & Reimbursement

Health plans hoping to see a larger population of Medicare beneficiaries move into private plans will need to bolster their arguments for why they can help the embattled program.

Two new reports are sharply critical of Medicare managed care plans, and they highlight the large degree of public and political skepticism of private plans' ability to offer quality and affordable care to seniors. An April 10 report by the Commonwealth Fund shows that managed Medicare premiums are rising even while their benefits decrease for the fourth year in the row. On the bright side, MCOs' average monthly premium increase of 3.6 percent was far lower than employer-sponsored plans' increases. But the bottom line for MCOs is that benes are losing faith in managed Medicare.

It is wrong to blindly assume that the free market will enable private plans to offer more affordable care than traditional Medicare, Urban Institute health economist Marilyn Moon told the House Energy and Commerce Subcommittee on Health April 9. "It is commonly claimed that the private sector is more efficient than Medicare," and "that competition among plans will generate more price sensitivity on the part of beneficiaries and plans alike," Moon noted. "Although seemingly credible, these claims do not hold up under close examination.

Moon referred to a report she penned in the March issue of Health Affairs, showing that Medicare has controlled costs better than private plans over recent years.

One week before Moon's testimony, Consumers Union released a report showing that benes in California - considered the most sophisticated Medicare+Choice market - are also paying more for fewer benefits. Consumers Union and the California HealthCare Foundation publish an annual Guide to California Medicare HMOs to help the state's benes choose the best plans. But such market economics can't change the fact that most of the plans received worse ratings than last year.

The number of top-rated plans has declined 86 percent in two years, according to the report, and most plans are offering a lesser drug benefit than in years past. Though some decline in benefit was to be expected due to the federal government's reimbursement cuts, the report's author was still surprised by how much the ratings dropped.

The decline of most plans' drug benefit was particularly surprising, says Trudy Lieberman, director of Consumers Union's Centers for Consumer Health Choices. "It seemed to me that a lot of the HMOs wanted to stay in the game with some kind of [drug] benefit, but not a very robust one," she surmises.

The results "certainly argue against ... [Medicare reform] proposals that would entice people to go into managed care," Lieberman says. She is particularly concerned that MCOs may "leave consumers hanging down the road" if the federal government decides to reduce its share, as has happened in recent years. "That can happen again, and it may happen," she notes. "If it does, beneficiaries are going to be at the short end of the stick."

Private plans - and proponents of the Bush reform plan - have argued that market economics will work to the benefit of the program and beneficiaries. If an MCO offers insufficient care or if its fees are too high, the beneficiaries will leave the plan and join one of its superior competitors, according to this argument. But Moon disputes this argument, noting that Medicare benes won't switch health plans as easily as they'll switch shampoos or other consumer goods.

"For a premium support model to work, at least some beneficiaries must be willing to shift plans each year (and to change providers and learn new rules) in order to reward the more efficient plans," Moon says. "Without that shifting, savings will not occur."

If seniors decide it is too confusing or burdensome to go through with the process of switching plans, then inferior plans will not be punished and superior plans will not be rewarded, Moon explained.

"They want to stick with the same plan, they don't want to go through a lot of changes," Moon tells MCLR. "That's fairly rational on their part, because many of them have multiple physicians and are involved in medical treatments and are reluctant to add more complexity on top of what is already a fairly complex health care system."

Indeed, Moon testified that "shifting across plans is not necessarily good for patients; it is not only disruptive, it can raise costs of care." Further, "some studies have shown that having one physician over a long period of time reduces costs of care," she said.

Even if the relatively young and healthy population switches plans, the older and less healthy population may be less willing to switch and will therefore be penalized. "If you believe in caveat emptor - let the buyer beware - then that's perfectly fine, but I think that for this population that's really not the goal," she opines.