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BALTIMORE/WASHINGTON — The Centers for Medicare & Medicaid Services released its Medicare Advantage (MA) managed care payment rates last week, and while one might need a degree in actuarial science to understand the calculation that led to the final figure, the proposed increase is sure to throw more gasoline on an already healthy fire.

The CMS press statement says that "the aged and disabled capitation rates will increase about 3.5%" for MA, which is less than "the estimated Medicare growth trend for 2008 of about 4.3%." The calculation was based on a back-out of 3.9% from the 2007 budget neutrality factor and an application of the national per capita MA growth percentage, a.k.a., the minimum percentage increase, for 2008 of 5.7%, and an application of the budget neutrality factor of 1.7% for 2008.

The minimum percentage increase for 2008 was, in turn, calculated by adding a 1.3% correction from prior years to the 4.3% growth trend rate.

In its March 2007 report to Congress, the Medicare Payment Advisory Commission (MedPAC) said that the federal government "should pay the same amount . . . regardless of which Medicare option a beneficiary chooses." But despite the greater per-beneficiary payment to MA plans, MedPAC said that "changing MA plan payment rates too quickly to achieve financial neutrality may cause disruptions for beneficiaries and may have unintended consequences."

However, some argue that minorities are disproportionately represented in MA enrollment.

According to a document published by America's Health Insurance Plans (AHIP; Washington), figures drawn from CMS's Medicare Current Beneficiary Survey (MCBS) indicate that almost half (49%) of MA enrollees in 2004 had incomes of $10,000 of $20,000, while 68% of minority enrollees had incomes in that range. Of African Americans and Latinos who were enrolled in 2004, 70% had incomes within the stated range.

The AHIP report also said that more than half of seniors with incomes exceeding $50,000 were enrolled in private, employer-based plans for 2004 and that 42% of seniors "say they would pay higher out-of-pocket costs if the option of choosing a Medicare Advantage plan was taken away." Sixty percent "cited either better benefits or lower costs as their reason" for enrolling in an MA plan, according to the AHIP document.

AHIP President Karen Ignagni said in a March 21 hearing of the House Ways and Means health subcommittee that trimming the federal outlay for MA plans would reduce the benefits available to minority enrollees, but Rep. Pete Stark (D-California), who chairs the subcommittee, went on record as saying that "Karen Ignagni's lying, using false information" to make her case.

During that hearing, Peter Orszag, PhD, director of the Congressional Budget Office, said that CBO numbers indicated that while MA plans "accounted for 13% of enrollment in Medicare, the lowest level since 1996," enrollment has increased to about 19%, or 8.3 million beneficiaries, thanks in part to the boost in payment rates provided by the Medicare Modernization Act that. CBO numbers suggest that MA enrollment "will continue to increase rapidly in coming years, to 22 percent of total Medicare enrollment in 2008 and 26 percent by 2017."

Stark's is not the only voice disputing the claim that minorities would lose out with a trimming of MA funding.

In an April 3 report, the Center on Budget and Policy Priorities (Washington) made the case that those with incomes below $10,000 are in a group "that constitutes fully one-fifth of all Medicare beneficiaries and a much larger share of African American (42%) and Hispanic (50%) beneficiaries."

The report, authored by Edwin Park and Robert Greenstein, said that "these very low income Medicare beneficiaries are overwhelmingly enrolled in fee-for-service and rely on Medicaid, not Medicare Advantage, for supplemental coverage." Park's and Greenstein's numbers suggested that "while 22% of fee-for-service beneficiaries are in the under $10,000 income category, only 14% of Medicare Advantage beneficiaries are."

One of the reasons that MA plans are popular with enrollees is that they often incorporate Part D benefits, and eye care. Some plans offer free preventive services as well, such as cancer screenings.

On the Senate side, Finance Committee chairman Max Baucus (D-Montana) has not said he will seek to trim MA funding to boost funds for the Children's Health Insurance Plans, but that such a possibility is "on the table." The committee will hold a hearing Wednesday on MA plans, with a panel of witnesses that includes CBO's Orszag and MedPAC chairman Glenn Hackbarth.

Stark said in a statement that where MA is concerned, "[t]he free market's so-called 'invisible hand' is picking taxpayers' pockets. Medicare's overpayments to private plans cost taxpayers tens of billions of dollars." Stark characterized "these overpayments" as "part of an effort to privatize Medicare" and promised that he will use his chairmanship of the Ways and Means Health Subcommittee to "pursue a more fiscally responsible course."

At press time, neither AHIP nor the American Hospital Association (Chicago) had responded to calls for comment.

White House nod to new stem cell bill?

The White House last week signaled support for legislation that provides federal funding for stem-cell research using embryonic cells that have no chance of surviving.
A bill being offered by Senator Johnny Isakson (R-Georgia) would allow scientists to conduct research on embryos that they determine incapable of surviving in the womb but whose stem cells are still viable for research. The bill would also allow funding for research on stem cells from embryos that have died during fertility treatments.

Isakson believes the bill finds a middle ground in the debate over stem cell research by skirting moral concerns about the use of embryonic stem cells, while ensuring federal funding for the science.

"This legislation threads the ethical needle," Isakson said. "I'm very optimistic it will be looked on favorably, especially with the White House's endorsement."
White House officials have met with Isakson to discuss his bill several times since January. Tony, Fratto, a White House spokesman, said, "We are very supportive" of the legislation. "By intensifying support for non-destructive alternatives, we can advance medical research in valuable ways while respecting ethical boundaries."

The president used his veto for the only time in his presidency last year to reject federal funding for embryonic stem-cell research, saying that taxpayers should not support research on embryos at fertility clinics, even if the embryos would otherwise be destroyed. Senate Majority Leader Harry Reid (D-Nevada) contends, however, that last year's stem cell bill is the only version providing "real hope to patients," according to a Reid spokesman.

The Senate will begin debate on the bill tomorrow.

Isakson said he has been in the "educating" senators for the past six weeks concerning the bill and is confident it can get the 60 votes it needs to pass.

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