Managed Medicare costs more

Sunday, November 30, 2003

WASHINGTON - Although private Medicare plans purport to curb the soaring cost of publicly funded healthcare, a recent report citing government overpayment of Medicare HMOs flies in the face of that argument.

The Bush administration expects in 2004 to pay private Medicare health plans 19.3% more than traditional Medicare spends on coverage, according to a report issued in October by the Medicare Rights Center.

“This is part of a fairly zealous effort to bring private plans into the Medicare business,” said Robert Hayes, president of the Medicare Rights Center, a national consumer organization.

According to the MRC report, since BBA ‘97, the federal government has been giving financial incentives to private plans to lure them into the Medicare marketplace. Reports from the OIG, CMS, MedPAC and other non-governmental organizations have concluded that it costs far more for the federal government to provide health services through private Medicare than traditional Medicare.

Despite the evident costs of these plans, proposed legislation would continue to increase payments to private Medicare by $8 to$12 billion over the next 10 years. The overpayment would total $67 billion over that period.

The MRC says these multi-billion dollar subsidies will only work to further diminish the resources of traditional Medicare.

“The more blank checks the Bush administration writes to private plans, the less money for a decent drug benefit or other health care services,” said Hayes.

According to the MRC, a reason private plans are overpaid is because the payment rate is based on the cost of treating the typical Medicare beneficiary even though HMO enrollees are generally healthier. While 14% of those enrolled in traditional Medicare in 1997 had both cognitive and physical difficulties, only 7% of Medicare HMO enrollees reported having such problems.