Paying
Medicare Private Plans by bidding will not
match cost savings of treating patients
under traditional Medicare
Newswise — In 2009, Medicare Advantage (MA)
plans - private health insurance plans that
enroll Medicare beneficiaries – will be paid
$11 billion, or $1,140 more per enrollee,
than it would cost to care for the same
number of beneficiaries under traditional
fee-for-service (FFS) Medicare.
As a Presidential candidate, Barack Obama
supported paying Medicare private plans the
same amount per enrollee as is paid for
fee-for-service Medicare.
In early 2009, the Office of Management and
Budget (OMB) proposed a competitive bidding
system – in which payments to MA plans would
be based on the average of all MA plan bids
submitted to Medicare in an area, as a way
to reduce overpayments to MA plans.
The Congressional Budget Office projects
that the proposed bid-based payment system
would pay MA plans an average of 101 percent
of FFS costs nationally which would result
in federal savings of more than $150 billion
over the next 10 years.
A new study by The George Washington School
of Public Health and Health Services,
Department of Health Policy, titled “Paying
Medicare Private Plans By Competitive
Bidding: Not the Same as Costs in Regular
Medicare,” found that the new system
proposed by the OMB would not achieve
President Obama’s goal of paying MA plans
“the same amount as it would cost to treat
the same patients under regular Medicare.”
Brian Biles, MD, MPH, lead author of the new
study, funded by The Commonwealth Fund,
found that, while the average of MA payments
would be 101 percent of FFS costs
nationally, the level of payments relative
to local FFS costs would vary greatly in
local areas across the nation.
• In 11 states – such as Oregon, Rhode
Island, Washington, and Wisconsin – Medicare
payments to MA plans would average more than
10 percent and $1,000 more per enrollee per
year than average costs in FFS Medicare.
• In Florida, payments to MA plans would be
20 percent, or $2,100, less than average FFS
costs in the state. Overall, payments to
Florida MA plans would be nearly $2 billion
a year less that local FFS costs.
“MA Plans in over 2,000 counties would
continue to be paid more than regular FFS
Medicare, in many cases as much as the
$1,140 national average of annual extra
payments.
"These
counties are mostly in rural and smaller
urban areas. On the other hand, plans in
many large urban areas such as Los Angeles,
New York City, Miami and Houston would be
paid significantly less than local FFS
costs,” noted Dr. Biles.
“The irony of this approach is that it
continues overpayments only where private
plans are less efficient than FFS Medicare
and institutes a new policy of underpayments
for precisely those plans that are the most
efficient relative to FFS Medicare.”
The Paper is available
here.
About The George Washington University
Medical Center
The George Washington University Medical
Center is an internationally recognized
interdisciplinary academic health center
that has consistently provided high-quality
medical care in the Washington, DC
metropolitan area, since 1824. The Medical
Center comprises the School of Medicine and
Health Sciences, the 11th oldest medical
school in the country; the School of Public
Health and Health Services, the only such
school in the nation’s capital; GW Hospital,
jointly owned and operated by a partnership
between The George Washington University and
a subsidiary of Universal Health Services,
Inc.; and the GW Medical Faculty Associates,
an independent faculty practice plan. For
more information on GWUMC, visit
www.gwumc.edu.
