Congress considers insurance plan cuts

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Originally published 10:37 p.m., March 21, 2007, updated 12:00 a.m., March 22, 2007

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Congress is considering cutting money it pays to insurance companies in the government-run Medicare program next year.

The House Ways and Means health subcommittee met yesterday to examine how much the government pays insurance companies to provide health services beyond traditional Medicare.

Medicare Advantage plans add services such as prescription-drug coverage and eye exams to the basic Medicare health plan. To provide additional medical coverage, the private plans receive more Medicare money than other plans that offer the basic benefit.

House Democrats say that the additional payments Medicare Advantage plans receive increases premiums and costs to every person in the Medicare program, not just those enrolled in the Medicare Advantage plans. A Medicare payment advisory committee estimates Medicare Advantage plans get 2 cents more on the dollar than basic Medicare plans.

"When private plans formally asked to join Medicare in 1982, they said they could provide Medicare's benefits better and cheaper than the government," said Rep. Pete Stark, California Democrat and chairman of the health subcommittee. "Fast forward 25 years, and we are now losing money for every person who enrolls in a private plan."

Medicare Advantage plans are run by some of the biggest insurance companies in the country such as Humana Inc. and Blue Cross Blue Shield. Enrollment has increased over the past several years to reach 8.3 million of the 43 million Americans covered under Medicare. Payments to the plans, which totaled $64 billion in 2006, are estimated to hit nearly $200 billion by 2017.

The insurance industry estimates that the insurance companies are making about a 3 percent to 4 percent profit margin.

Under new "pay as you go" rules in Congress, lawmakers must find spending offsets to pay for expanding current programs such as the State Children's Health Insurance Program, which is certain to receive a funding increase to pay for insuring more children and some adults.

"I can tell you right now that something will happen with Medicare Advantage this year," said Jon Sheiner, an aide to Rep. Charles B. Rangel, New York Democrat, speaking to a group of business leaders in Washington this week. "There will be a Medicare bill this year that includes money for the State Children's Health Insurance Program, end-stage renal disease providers and physician payments. Medicare Advantage will pay for some of these things."

The Congressional Budget Office estimates that cutting payments to Medicare Advantage health plans would save $65 billion over five years.

The insurance industry is making the rounds on Capitol Hill lobbying against any proposed cuts. This week, America's Health Insurance Plans releasedpollsshowing 62 percent of low-income seniors would skip some of the medical treatments they receive in their Medicare Advantage plan rather than enroll in Medicare. The poll was done by Ayres, McHenry & Associates Inc. and the Glover Park Group, both in the District.

The poll also found high satisfaction among Medicare health-plan enrollees in coverage areas such as quality of care, choice of benefits, preventative care, out-of-pocket costs and prescription-drug coverage.

"As members of Congress engage in budget discussions, they will be hearing from their low-income and minority constituents who count on the essential benefits and lower out-of-pocket costs Medicare health plans provide," said Karen Ignagni, president of America's Health Insurance Plans, the nation's largest insurance lobby.

Ms. Ignagni emphasized that for beneficiaries with incomes of $10,000 to $20,000, Medicare Advantage plans provide the largest source of comprehensive coverage and that a high percentage of Medicare Advantage enrollees -- about 25 percent -- have low incomes, making them vulnerable to funding cuts.

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