On S-Chip ... and Medicare Advantage ... and Physician Reimbursements ...

Finally back from vacation, and almost caught up at work.

Dominating my work life these days is S-Chip, both the House and the Senate versions. I gotta say, the House version bugs me. It just seems so utterly unrealistic. The bill does so much ... from a major expansion of S-Chip, to a 45-cent tobacco tax, to major revisions in Medicare (i.e. physician reimbursement levels, nursing home and inpatient rehabilitation reimbursements ... and let's not forget everyone's favorite -- Medicare Advantage).

Reimbursed on average 12% higher than traditional Medicare, and sometimes as high as 19% more, Medicare Advantage is House Dems' favorite source of S-Chip funding to meet their own pay/go guidelines. And no wonder why, the latest CBO scoring finds equalizing the payments will save $50.4 billion over five years and $157.1 billion over the next decade. Dems argue that there's no reason these plans should get more, just because they're private. It's a big Republican scheme to make insurance companies richer, they say.

Republicans, along with AHIP, HATE the idea of equalizing the reimbursement rates. Some reasons they give why the rates shouldn't be equalized:

1. The lower reimbursement rates will make the plans unprofitable and cause the insurance companies to drop them, which could hurt seniors in rural areas, who have limited options to begin with.
2. If companies drop the MA plans, minorities will be adversely affected because they enroll in higher numbers in the private plans. (This is a contentious assertion. Rep. Pete Stark, and other supporters of an equalization, say this is simply not true -- that minorities are equally enrolled in both the traditional plans and private plans.)
3. Reducing the reimbursement will cause physicians to stop accepting patients enrolled in the plans, which would obviously be bad for everyone.

So who to believe?

MedPAC, which advises Medicare, issued recommendations (PDF) in June saying that MA rates should be equalized. It writes that

MedPAC has a long history of supporting private plans in the Medicare program. The Commission believes that Medicare beneficiaries should be able to choose between the [traditional] Medicare program and the alternative delivery systems that private plans can provide. Private plans may have greater flexibility in developing innovative approaches to care, and these plans can more readily use tools such as negotiated prices, provider networks, care coordination and other health care management techniques to improve the efficiency and quality of health care services.

However, the recommendations continue:

The Commission believes that payment policy in the MA program should be built on a foundation of financial neutrality between payments in the traditional ... program and payments to private plans. Financial neutrality means that the Medicare program should pay the same amount, adjusting for the risk status of each beneficiary, regardless of which Medicare option a beneficiary chooses.

I'm going with MedPAC. I think overall reimbursement rates are too low and the access to care for Medicare beneficiaries is a problem, but I don't think continuing to give private plans more money is the solution. I'm all about an overhaul of the reimbursement system.

So go ahead and equalize 'em, Stark, you've been waiting for this moment all session. (Now if only you could get enough support in the Senate to actually make it happen...).

More on S-Chip in the days to come.