Government
Private insurance in Medicare costs the government more
By Ben Wasserman
Jun 30, 2008 - 10:48:42 AM

MONDAY June 30, 2008 (foodconsumer.org) -- Health officials announced Friday that the Department of Health and Human Services will lock the current pricing system to prevent the planned 10.6 percent cut in Medicare payments to physicians who treat certain Medicare patients under a private program.

The cut was scheduled on Tuesday. The decision came after the Senate could not reach a deal on Friday and Congress is ready for a midsummer break this week and will not pick up the issue again until after this week.

The cut would reduce the government's payment to these insurers by $14 billion over a five-year period while a conservative Republican caucus estimated that the reduction would be as much as 47.5 billion over 11 years.

The cut would affect the Special Needs Plan Alliance; a program involves some 30 private insurers and is used by 1.1 million people. Medicare covers about 45 million seniors.

The payment cuts to doctors are part of a 1997 budget-balancing deal. Democrats said the private insurers are too costly.   And studies show that private issuers receive more money from the government while offering less medical service.  

Bush administration threatened to veto any legislation that would result in the cut in payments to private issuers arguing that the payment cut will affect those who are covered by the program, media reported.

Doctors argued through their trade organizations like the American Medical Association, and the AARP that the payment cut would promote doctors to leave the patients under the Medicare Advantage untreated.

On Friday, the debate between Republicans and Democrats in the Senate were fairly tense and ended up with democrats having one vote short of 60 that is needed to pass their version of the Medicare fix.

The Senate Finance Committee was reportedly close to working out a compromise without cutting payments to private insurers in that program in hopes that the bill could avoid the president’s veto.

But the possible deal worked out by the Senate Finance Committee did not go anywhere as Senate Majority Leader Harry M. Reid (D-Nev.) decided to push ahead with the House bill which has a good chance to circumvent Bush’s veto, Washington Post reported.

The House on Tuesday passed a veto-proof bill 355 to 59 to delay the planned 10.6% cut in the Medicare fees to physicians who treat patients under the Medicare Advantage for 18 months, but slash the payments to about 30 private issuers participating in the Special Need Alliance Program such as Humana Inc., United Health Group and Aetna Inc.

According to insdebayarea.com, payments to Medicare private insurers for Medicare Advantage plans cost the government 13 percent more than traditional Medicare.  A new study by the General Accounting Office showed the private insurers in 2005 spent less on medical services for beneficiaries and earned larger profits than projected, the Los Angeles Times reported.