Editorial:
BUSH’S “GIFTS” TO MEDICARE PRIVATE HEALTH PLANS

The early April announcement of 2009 payment rates for Medicare private health plans included a parting gift from the Bush administration to the insurance companies that sponsor these plans. The administration decided it would not reduce payment benchmarks to compensate for “upcoding”—the systematic downgrading of plan enrollees’ health status—in order to boost the subsidies the companies receive from taxpayers.

On Wall Street, the decision prompted a rise in the share prices of insurance companies. In Washington, it is merely the latest in the long line of favors the Bush administration has handed its pals in the insurance industry, the most recent of which are:

• threatening to veto legislation that makes modest reductions to the $150 billion in excess subsidies Medicare private health plans will reap over the next 10 years;

• threatening to veto legislation that would allow states to hold Medicare private health plans accountable for the abusive and fraudulent marketing tactics employed by their agents.

For a long time, Medicare private health plans have used a combination of benefit designs (higher home health copayments but free gym membership) and subtler marketing strategies to attract healthier, less costly enrollees. To counteract this practice, payments to plans began to be adjusted according to the health status of the enrollee, with plans receiving more money for enrollees in poor health who require more costly care.

The phase-in of these “risk-adjusted” payments threatened a reduction in subsidies to the insurance companies, so the Bush administration unilaterally adjusted payments to prevent any overall reduction in subsidies (and any savings to taxpayers). It took Congressional action to phase out this boost in subsidy levels. Congress also instructed the administration to adjust payments for upcoding, but the administration has effectively ignored those instructions.

As payment rates to health plans began to reflect the health status of their enrollees, plans began to report (“code”) that their enrollees were in poorer health. For other providers receiving payments that are adjusted according to health status, such as home health agencies, the administration has reduced payments to compensate for such upcoding. Insurance companies, however, get a free pass. Once again, the Bush administration has proven its generosity—with your money.

-Adapted from: A Kiss Goodbye, “Asclepios, Your Weekly Medicare Consumer Advocacy Update”, the Medicare Rights Center, April 10, 2008 • Volume 8, Issue 15.

4/08