Medicare Advantage Plans Create Headaches for Providers, Witnesses Say

The rapid growth in Medicare private fee-for-service plans during the past few years has placed financial and administrative burdens on many medical practices, forcing some to withdraw from the plans and leaving thousands of Medicare beneficiaries scrambling to find other sources of Medicare coverage. That's according to testimony before the Senate Finance Committee here on Jan. 30.

Private fee-for-service plans are a type of plan offered under the Medicare Advantage managed care program. The plans have certain competitive advantages other plans lack -- for example, they are not required to provide enhanced coverage or negotiate with providers. The plans also do not have to provide coordinated care networks or submit quality care data. At the same time, the federal government pays private fee-for-service plans more than other plans to encourage enrollment in the plans and Medicare managed care in general.

The Bush administration and many House and Senate Republicans oppose reductions in funding for these private fee-for-service and other Medicare Advantage plans, including cuts in funding that could pay for increases in Medicare physician payment rates. This makes federal payments to Medicare managed care plans a contentious issue for physicians, and the Jan. 30 hearing did not provide any insights on whether Senate Republicans would accept cuts to the plans to pay for physician payment updates under Medicare.

In many cases, private fee-for-service plans pay providers less than traditional Medicare plans, creating an incentive for insurers to enroll beneficiaries in the plans, witnesses testified. As a result, enrollment in the plans has skyrocketed, climbing from 20,000 beneficiaries in 2005 to nearly 1.7 million today, a growth rate of about 1,000 percent that has prompted concerns from both the public and private sectors.

"The private fee-for-service plan was the most rapidly growing part of our Medicare business," said internist Albert Fisk, M.D., medical director of the Everett Clinic, a large multispecialty physician group 30 miles north of Seattle that serves nearly 250,000 patients. "But it became clear to us that we could not continue to offer care under this program."

In late 2007, the Everett Clinic informed 1,400 patients who were enrolled in private fee-for-service plans that it would no longer accept the plans starting in January 2009, said Fisk, one of five witnesses to testify before the committee.

Witnesses and members of the Senate Finance Committee described similar situations. Sen. Charles Grassley, R-Iowa, ranking member of the finance committee, said during his opening statement that a "large physician group in Des Moines was refusing to treat beneficiaries in private fee-for-service plan coverage."

"They took this extreme step because they did not think the payment situation was fair," Grassley said. "They felt that if the plan paid the benchmark, it should at the very least have a contract with them."

Sen. Max Baucus, D-Mont., chair of the Senate Finance Committee, said he's heard his share of comparable tales. "In my home state of Montana, providers like the Billings Clinic tell me that they are more than frustrated with private fee-for-service plans," he said. "They feel these plans are burdensome, less transparent and pay less than traditional Medicare."

The push to enroll beneficiaries in private fee-for-service plans also has led to "deceptive and abusive marketing practices," Baucus said, a point substantiated by other witnesses.

Elyse Politi, state health insurance program coordinator for the New River Valley Agency on Aging in Pulaski, Va., which provides services to seniors in southwestern Virginia, said private fee-for-service plans were convincing beneficiaries to enroll in their plans by telling them they were less expensive than the seniors' current plans. But the insurance representatives failed to tell beneficiaries about other out-of-pocket deductibles and copays that resulted in dramatic cost increases for the seniors, Politi said.

"People who gave up their (previous) policies suddenly had to pay these large, unexpected costs out of their own pocket," said Politi. "When one woman I spoke with found out she had to pay a $525 hospital bill, and then received a bill for her 100-day stay in a skilled nursing facility in the amount of $8,000, she thought the end of the world had come and realized what a bad decision she (had) made."

Mark Miller, Ph.D., executive director of the Medicare Payment Advisory Commission or MedPAC, which advises Congress on Medicare payment issues, said the private fee-for-service plans are indicative of the problems with Medicare managed care in general. The federal government pays Medicare managed care plans an average of 113 percent of traditional Medicare plan rates, and it pays about 117 percent of Medicare rates to private fee-for-service plans, he said. This has created a "current payment mechanism that is flawed" and one that "invites inefficient plans to join Medicare."

"The commission has long supported the principle that Medicare payments should be neutral -- the same whether a beneficiary chooses fee-for-service or managed care," Miller told the committee. "Like our other payment recommendations, we try to recommend to Congress payments that will produce efficiencies among all providers."