By Dave Ranney, KHI News Service, November 09, 2009
TOPEKA — A key provision in the health reform bill passed late Saturday by the U.S. House calls for cutting billions of dollars currently spent on federal subsidies to Medicare Advantage plans.
Those savings would then be shifted to help underwrite the expansion of health insurance to millions of Americans.
But the Medicare Advantage plans, if the bill becomes law, will have to find ways to cover beneficiaries for less than what standard Medicare services cost or, most likely, go out of business.
That’s all right with Kansas Insurance Commissioner Sandy Praeger, a Republican.
The Republican members of the Kansas federal delegation have opposed reforms that would bring cuts to Medicare Advantage.
"When Congress is looking for savings, this is a very appropriate place to look," Praeger said. "I mean, keep in mind, Advantage plans are supposed to be costing less, not more."
The House bill calls for ratcheting down the subsidies by $170 billion over the next 10 years.
In Kansas, most Advantage plans are administered by Coventry Health Care, Humana, or United Healthcare.
Initially, the federal government paid the plans 95 percent of the average cost of caring for a Medicare beneficiary. To break even, the companies had to be at least 5 percent more efficient than the government.
But today, the companies’ costs exceed the government-run program’s costs by as much as 14 percent.
"For me, that’s a big concern," Praeger said. "Is what we as taxpayers are getting from these Advantage plans worth the additional 14 percent we’re paying these companies to administer them? I can’t say that it is."
Praeger said she initially supported the Medicare Advantage concept, which was to let private companies roll Medicare’s Part A, Part B, and prescription drug coverage components into an easier to administer package, and, in turn, use a portion of the savings to help beneficiaries lead healthier lifestyles.
Medicare, in theory, would get more for its money.
"I don’t know that we’ve seen that benefit," said Praeger, an immediate past president of the National Association of Insurance Commissioners.
Medicare Advantage evolved into its current configuration during the administration of President George W. Bush with solid backing from the Republican majorities in Congress, but in the face of general opposition from Democrats who are now back in charge of Congress and the White House.
The number of Medicare Advantage plans available to Kansans has been declining.
Since last year, the number available here has dropped from about 150 to 87.
"They can be very attractive to consumers," Praeger said. "They really like that everything is wrapped up in to one payment instead of two or three."
Still, Praeger said her office receives a “fair number” of complaints from Advantage plan beneficiaries who didn’t realize their doctor or hospitals weren’t in the plan’s provider group and they would be subject to co-pays and deductibles.
"We also hear from people who thought they were signing up for a supplemental plan and didn’t realize it was an all-in-one Advantage plan that was going to cost them more," she said.
Praeger said her office forwards the complaints to the regional Centers for Medicare and Medicaid Services (CMS) office in Kansas City, Mo.
She’d like to do more about the complaints, she said, but she can’t.
"We’ve been pre-empted from regulating Medicare Advantage plans," Praeger said. "They’re regulated by CMS."
Repeated attempts to put state insurance departments in charge of overseeing the plans, she said, have been unsuccessful.
"There’s been a lot of push back on the industry’s part, big time," Praeger said.
Medicare supplemental insurance — also known as Medigap — is subject to state regulation.
Praeger said she took exception to recent insurance company claims that a reduction in subsidies would trigger cuts in Medicare benefits.
"I think some scare tactics were being used," she said. "These plans currently cost 13 to 14 percent more than traditional Medicare, so there will inevitably be some changes made to bring these costs under control. And there will be a hard look at benefits versus outcomes. Are health club memberships a necessary benefit, for example?"
Praeger said she doesn’t expect the plans to disappear if the reform bill becomes laws and the subsidies are cut.
"I think traditional Medicare works fine, but there are advantages to having everything rolled into one plan," she said. "There’s a demand for that and there will be companies ready to meet that demand. There may not be as many, but there will still be a choice."
-Dave Ranney is a staff writer for KHI News Service, which specializes in coverage of health issues facing Kansans. He can be reached at dranney@khi.org or at 785-233-5443, ext. 128.
To read more on Medicare Advantage plans in Kansas read: Good for some, nightmare for others.