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-------- Original Message --------
Subject: qotd: Government insiders misappropriate funds to Medicare
Date: Tue, 2 Apr 2013 09:58:11 -0700
From: Don McCanne <firstname.lastname@example.org>
To: Quote-of-the-Day <email@example.com>
The Washington Post
April 1, 2013
U.S. to boost rather than cut payments to health insurers
By Sandhya Somashekhar
The Obama administration reversed itself Monday, scrapping plans to cut
by 2.2 percent the rates paid to health insurers that take part in the
Medicare Advantage program.
The insurance industry and more than 100 members of Congress had
objected to the cut in the per capita growth rate, which was proposed in
February. The insurers mounted a vigorous campaign, using television ads
and phone banks, to persuade lawmakers to oppose the reduction.
On Monday, the Centers for Medicare and Medicaid Services (CMS)
announced that it was changing its method of calculating reimbursement
rates. Instead of cutting payments for Medicare Advantage plans, it will
increase them by 3.3 percent.
"The policies announced today further the agency's goal of improving
payment accuracy in all our programs, while at the same time ensuring
program stability and preserving beneficiary choice," Jonathan Blum, the
CMS's acting principal deputy administrator, said in a statement.
Centers for Medicare and Medicaid Services (CMS)
April 1, 2013
CMS Ensures Greater Value for People in Medicare Drug and Health Plans
After careful consideration of public comments, key changes and updates
finalized in the Rate Announcement and final Call Letter include:
The final estimate of the combined effect of the Medicare Advantage
growth percentage and the fee-for-service growth percentage is 3.3
percent. These growth rates assume a zero percent change for the 2014
physician fee schedule (PFS) by taking into account the likely
Congressional override of the schedule physician payment reduction.
February 15, 2013
Subject: Advance Notice of Methodological Changes for Calendar Year (CY)
2014 for Medicare Advantage (MA) Capitation Rates, Part C and Part D
Payment Policies and 2014 Call Letter
Section A. MA Growth Percentage
The current estimate of the change in the national per capita MA growth
percentage for aged and disabled enrollees combined in CY 2014 is -2.3
We appreciate that plans are facing several legislatively mandated
changes affecting payment for 2014, and this may present challenges for
plans. We solicit comment on suggestions to address these challenges
within the parameters of current law.
April 1, 2013
Subject: Announcement of Calendar Year (CY) 2014 Medicare Advantage
Capitation Rates and Medicare Advantage and Part D Payment Policies and
Final Call Letter
Attachment I shows the final estimates of the increases in the National
Per Capita MA Growth Percentage for 2014 and the National Medicare
Fee-for-Service (FFS) Growth Percentage for 2014. These growth rates
will be used to calculate the 2014 capitation rates. As discussed in
Attachment I, the final estimate of the increase in the National Per
Capita MA Growth Percentage for combined aged and disabled beneficiaries
is 2.96 percent, and the final estimate of the increase in the FFS
Growth Percentage is 3.53 percent. Attachment II provides a set of
tables that summarizes many of the key Medicare assumptions used in the
calculation of the National Per Capita MA Growth Percentage.
The basis for the Growth Percentage for 2014 has been changed to
incorporate an assumption that Congress will act to prevent the
scheduled 25-percent reduction in Medicare physician payment rates from
occurring. The Office of the Actuary has been directed by the Secretary
to use this assumption, on the grounds that it is a more reasonable
expectation than the reduction required under the statutory "sustainable
growth rate" (SGR) formula. Although the Office of the Actuary agrees
that Congress is very likely to override the physician fee reduction,
the assumption conflicts with the Office's professional judgment that,
as in all past years, the determination should be based on current law,
not an assumed alternative.
America's Health Insurance Plans (AHIP)
April 1, 2013
AHIP Statement on Final 2014 Medicare Advantage Payment Rates
America's Health Insurance Plans (AHIP) President and CEO Karen Ignagni
released the following statement in response to the final Medicare
Advantage payment rates released by the Centers for Medicare & Medicaid
Services (CMS) today:
"By being responsive to the more than 160 members of Congress from both
parties who raised concerns about the impact of the proposed payment
rate on seniors, CMS has taken an important step to help stabilize
Medicare Advantage at a time when the program is facing significant
challenges. We are currently reviewing the final rate announcement and
will continue to work with policymakers in both parties to strengthen
this critically important part of Medicare that provides high-quality,
affordable coverage to more than 14 million seniors and people with
Kaiser Family Foundation
Medicare Advantage Plan Star Ratings and Bonus Payments in 2012
In 2012, Medicare Advantage plans will begin to receive bonus payments
based on quality ratings. These payments were initially established in
the 2010 health reform law that provides for bonus payments to plans
that receive 4 or more stars and to unrated plans beginning in 2012. In
addition to the bonus payments established by the health reform law, CMS
will also be launching a 3-year demonstration to begin in 2012 that
increases the size of bonuses for these plans, and also provides bonuses
to plans rated as average (receiving 3 or 3.5 stars), using the same 1
to 5 star scale.
Payment Accuracy (Official U.S. government website)
The Department of Health and Human Services (HHS) reports an annual
Medicare Advantage (Part C) program payment error rate, which presents
the combined impact on payments from two kinds of error: errors in the
payment system and errors in risk scores used to adjust benefit payment
amounts to Medicare Advantage plans.
$96.4 billion Total Medicare Advantage payments
$13.6 billion Improper payments
14.1% Improper payment rate
Comment: The private Medicare Advantage plans, offered as options to
the traditional government-run Medicare program, were to have their
egregious overpayments reduced by provisions of the Affordable Care Act.
This year they were to have a 2.2 percent reduction in their rates, but
instead received a 3.3 percent increase. That is a rate 5.5 percent
higher than scheduled, which increases the payments to the Medicare
Advantage plans by over $5 billion! What happened?
It is easier to understand why when you realize that the program was
established as an effort to privatize Medicare. The previous effort -
private Medicare + Choice plans - didn't work since the insurers were
unable to provide profitable plans at a cost comparable to the
traditional Medicare program.
Recognizing that, Congress established the Medicare Advantage program,
authorizing payments averaging 14 percent over the costs of traditional
Medicare. This would allow the private plans to offer a more attractive
option with greater benefits and lower our-of-pocket costs. Once enough
people were enrolled in the private plans then they could start to make
the traditional Medicare program even less attractive through greater
cost sharing, through means testing that chases away the more affluent
beneficiaries, and through reducing payment rates causing a further
decline in the number of willing providers.
Originally, the private Medicare + Choice plans were successful in
enrolling healthier, lower cost patients. With time, many of those
patients required more care, and the insurers started dropping out of
markets in which they experienced losses. So the next phase - Medicare
With Medicare Advantage, risk adjustment was used to transfer funds from
insurers that cornered healthier patients to insurers that enrolled more
patients with greater needs. Soon it was evident that the insurers
became masters at enrolling patients who were not very ill but who could
be coded as having expensive problems. Although efforts have been made
to further refine the risk adjustments, our government's payment
accuracy website reveals that the insurers are still able to game the
system, such that 14 percent of payments remain improper - over $13 billion.
Another one of the methods used to improve payments - but not reduce
payments since the proposal was to be revenue neutral - was to retain
some of the funds for the Medicare Advantage plans and then use them to
reward plans with higher quality ratings, 4 or 5 star. Well, when they
were ready to start reducing the overpayments, as required by the
Affordable Care Act, the insurers protested that they couldn't afford
the reductions. So the administration revised the quality awards to
include 3 star plans, thus assuring that 80 percent of Medicare
Advantage plans would have their required reductions largely offset with
the quality awards. But this was not revenue neutral. No problem. The
administration declared these expanded awards to be a "demonstration,"
and thus drew funds from their demonstration project kitty (our tax
funds). That diversion of funds will continue through 2014.
So now we're down to this year, and, of course, the insurance industry
said that they would not be able to tolerate the scheduled reductions of
2.2 percent. They called out the forces. They even had more than 160
Representatives and Senators of both parties lobbying the administration
to reverse these cuts. Yesterday, it became evident that they were
successful - increasing payments 5.5 percent over the scheduled 2.2
percent cut - a $5 billion bonanza. How did they do it?
The sustainable growth rate (SGR) was a formula designed to slow the
growth of spending on physician care down to sustainable levels. In
response, physicians adjusted the frequency and intensity of their
services to make up for what they perceived to be a reduction in their
reimbursement rates. The formula would require a reduction in rates that
would especially impact primary care physicians. Congress has deferred
the reductions for fear of losing too many physicians from the program,
but that has resulted in a 25 percent deficit for which Congress needs
to enact a "doc fix." Here's where the shell game comes in.
In violation of the standards of the Office of the Actuary, CMS decided
that Congress inevitably would enact a doc fix, which then they could
say represents an increase in the cost of providing care to all Medicare
beneficiaries. Thus the phantom increase has been applied to the new
Medicare Advantage rates. Little does it matter that there was no
increase since Congress has continued to authorize the suspension of the
SGR reductions. It is specious for CMS to claim that payments went up
this year because of the not-yet-enacted doc fix when they have been up
the whole time. Also it seems not to matter that the doc fix which they
used in their calculations has not been fixed, and the money will have
to come from somewhere... but certainly not from the $5 billion bonus
they just gave the Medicare Advantage plans - money that never existed
but will have to be drawn from Medicare payroll taxes, from general
funds for Part B, and from increases in Part B Medicare premiums that
will be paid by Medicare beneficiaries in the traditional plan who are
not receiving any of the extra benefits that enrollees in the Medicare
Advantage plans are receiving. Unfair.
But it's worse than this. Not only is the administration bending over
backwards to take good care of the private Medicare Advantage insurers,
they are now engaged behind the scenes to further impair the traditional
Medicare program - a strategy to further push privatization.
The Ryan/Wyden and Frist/Breaux/Thomas premium support voucherization of
Medicare has proven to be too hot for the privatizers, considering the
backlash that they have experienced. So premium support is off the table
during the Obama administration's negotiations with Congress over the
next manufactured fiscal crisis. So what has replaced the vouchers?
It has been leaked, presumably deliberately, that Obama is proposing to
combine the Part A (hospital) and Part B (physician) deductibles into
one deductible for Parts A & B combined. The intent is twofold - to
reduce the amount that the federal government is paying for Medicare,
and to increase the sensitivity of Medicare beneficiaries to prices paid
for Medicare benefits - making them empowered health care shoppers. This
increase in out-of-pocket spending will especially impact the majority
who do not require hospitalization and thus have lower total costs. This
strategy will make those who have fewer health care needs wonder why
they are paying so much more than they thought they would once they were
Bu that's not all. About 90 percent of Medicare beneficiaries are
protected from excessive cost sharing through Medigap plans or through
employer-sponsored retirement health benefit programs. The
consumer-directed camp has long wanted to bash the Medigap plans so
patients would be exposed more directly to the costs. Obama's team is
proposing just that. They want to prohibit the Medigap plans from
providing protection for the deductible - removing it, or at least
reducing it, as a Medigap benefit. Another option that they are
considering is to assess a 15 percent tax on Medigap premiums which
would have a similar net financial impact as prohibiting coverage of the
So what is a person to do? You can accept the traditional Medicare
program, but you will face higher deductibles, perhaps a Medigap tax, an
even higher Part B Medicare premium, and perhaps means-tested premiums
and benefits which will gradually shift down to middle-income
individuals. This will not be pleasing to the majority who have only
modest health care needs. The other option? You can enroll in a Medicare
Advantage plan with greatly reduced cost sharing plus expanded benefits,
and perhaps not even a plan premium, all thanks to Congress and the
administration who are using our tax funds to provide very generous
subsidies to the private Medicare Advantage plans.
A crummy traditional Medicare program with high out-of-pocket costs, or
a slick private plan with most costs prepaid, by the government no less?
It is presumed that the majority will rush over to the private plans,
especially when they see what extra bennies they get.
What then? Congress can then continue to ratchet down government
spending on the traditional program, causing an exodus of willing
providers - stripping the program down to worse-than-Medicaid. After the
private plans have become the standard and Medicare is in the tank, then
what? Premium support vouchers! The government gradually pares down the
support for the premium you select, so you are now really an empowered
shopper - empowered to buy whatever meager benefits you can afford with
your measly premium subsidy.
Excuse the length of today's message, but I hope you understand why.
It's not that I'm a soothsayer... but maybe I am.