Medicare managed care, high costs, and the blame game

Robert Pear's piece in Sunday's NY Times is about the bajillionth article or MedPAC report recounting the fact that Medicare Advantage and Medicare fee-for-service plans cost the federales more than traditional Medicare — 12% more and 17% more, respectively — and it points to some Health Affairs papers on Medicare managed care that will be released on Monday. 

The campaign trail was littered with candidates' plans to bring fiscal discipline to the Medicare Advantage and Medicare fee-for-service plans, due to the spotlight shone in recent times on these excess payments, and also on the "slamming" or "cramming" hard-sell tactics of some brokers who pushed elders into Medicare fee-for-service plans that may not have been right for them.  Descriptions of these tactics have led to stricter marketing regulations.

It seems that what's lacking in the discussion is an emphasis on how we came to this pass: It is important to remember that Medicare Advantage started life as "good" capitation, with Medicare laying off risk to HMOs at 95% of average Medicare fee-for-service costs.  The Medicare Advantage plans and, to an even greater extent, the Medicare fee-for-service plans, exploded in volume after Congress managed to turn the program inside out by authorizing payment at higher rates.

Congress and the new administration have a ton on their plates, but rolling back Medicare payments to private plans to the 95% of cost levels would be an easy win, would maintain appropriate levels of care and care coordination — one of the good things about "good" capitation — and Obama and Daschle have indicated their interest in moving in the right direction. 

Update 11/24/08:  The invisible hand sees the writing on the wall too.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting