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AARP Baffled by Administration's Medicare Inconsistencies

Fiscally unrealistic proposals will not strengthen Medicare

Earlier this week, the administration submitted “principles” it set-out to prevent a possible veto of Medicare legislation.  In response to the requests, AARP CEO Bill Novelli sent a letter to Health and Human Services Secretary Michael Leavitt to outline AARP’s priorities for a Medicare bill and question Sec. Leavitt’s plan.

 

Novelli wrote, “We are baffled…by apparent inconsistencies in your letter. While you encourage ‘responsibly adjusting payments’ to providers, you insist that Congress not use billions of dollars in excess Medicare Advantage payments (MA) to offset Medicare program improvements. In addition, while you state that you want to ‘promote fiscal solvency’ in the Medicare program, the tens of billions of dollars in current excess MA payments reduces the life of the Medicare trust fund by two years.”

 

For several months, AARP has urged Congress to address Medicare before the end of the year.  Priorities for the legislation include:

* Improving assistance and closing the Medicare Part D “doughnut hole” coverage gap for more people with limited incomes by raising asset limits and aligning income thresholds in the Part D Low-income Subsidy and Medicare Savings Programs;
* Maintaining access to physicians by preventing an unprecedented 10 percent pay cut that would threaten beneficiary’s access to care; and
* Avoiding additional unaffordable increases in the Part B premium by offsetting any physician payment changes with other Medicare reductions. The premium has more than doubled since 2000, and has grown five times faster than the Social Security cost-of-living-adjustment (COLA).

AARP has recommended offsetting these improvements by reducing excess payments to private plans in Medicare instead of raising premiums even higher.  Novelli wrote, "The current unnecessary level of excess MA payments is costing Medicare – and taxpayers -- too much.” Novelli added, “Excess MA payments are thus an obvious and fiscally responsible way to pay for preventing further spikes in beneficiary premiums, protecting taxpayers, and guaranteeing access for Medicare patients to their doctors…Plans should compete on performance and quality, not on the basis of excess payments from the federal government.”

The full text of Novelli’s letter follows:

December 6, 2007
The Honorable Michael Leavitt, Secretary
Department of Health & Human Services
Washington, D.C.

Dear Secretary Leavitt:

On behalf of AARP’s nearly 39 million members, we are pleased that your December 4 letter to Senators Baucus and Grassley stresses the need to bear in mind the impact on Medicare premiums as Congress considers ways to prevent a 10 percent payment cut to Medicare’s physicians. We also appreciate your remarks on protecting choice and promoting health information technology. However, we have great concerns about the conditions under which you said the President would consider this critical legislation unacceptable.

As you know, the traditional Medicare program is vital to millions of older and disabled Americans, and AARP has been working with Congress to strengthen Medicare by:
* Improving assistance and closing the part D “doughnut hole” coverage gap for more people with limited incomes by raising asset limits and aligning income thresholds in the Part D Low-income Subsidy and Medicare Savings Programs;
* Maintaining access to physicians by preventing an unprecedented 10 percent pay cut that would threaten beneficiary’s access to care; and
* Avoiding additional unaffordable increases in the Part B premium by offsetting any physician payment changes with other Medicare reductions. The premium has more than doubled since 2000, and has grown five times faster than the Social Security cost-of-living-adjustment (COLA).

AARP also believes that we need to achieve these priorities in a fiscally responsible manner.

We are baffled, however, by apparent inconsistencies in your letter. While you encourage “responsibly adjusting payments” to providers, you insist that Congress not use billions of dollars in excess Medicare Advantage payments (MA) to offset Medicare program improvements. In addition, while you state that you want to “promote fiscal solvency” in the Medicare program, the tens of billions of dollars in current excess MA payments reduces the life of the Medicare trust fund by 2 years.

The Congressional Budget Office and the Medicare Payment Advisory Commission (MedPAC) have both documented that the Medicare program could save billions of dollars by reducing the excess MA payments. MedPAC has specifically recommended reducing them. Excess MA payments are thus an obvious and fiscally responsible way to pay for preventing further spikes in beneficiary premiums, protecting taxpayers, and guaranteeing access for Medicare patients to their doctors.

AARP believes in choice, and MA can be an important option for many Medicare enrollees. In fact, next year AARP will endorse a managed care plan offered by United Health Care. But the current unnecessary level of excess MA payments is costing Medicare – and taxpayers -- too much. Plans should compete on performance and quality, not on the basis of excess payments from the federal government. Furthermore, it is unfair that the 80 percent of beneficiaries who choose to remain in traditional Medicare continue to pay higher premiums each month to subsidize these excess payments.

The need to reduce excess payments is particularly true for private fee-for-service (PFFS) plans that are not required to provide the care coordination and quality improvement services that MA plans should offer. PFFS has been the source of widespread marketing abuses and patient complaints, and should be dramatically reformed in any responsible Medicare package. Beneficiaries need to be assured that when they enroll in a Medicare private insurance plan they are guaranteed the same protections as beneficiaries in other coverage options.

Your letter also suggests that Congress reduce payments to other fee-for-service providers – some reductions have been recommended by MedPAC – but possible reductions to other providers pale in comparison to the amount available under the MA program and that are needed to address the looming physician pay cut. Extensive provider cuts would also risk creating other debilitating access problems for our members.

As this session of Congress quickly draws to a close, we urge the Administration to help break the current gridlock on health care issues by supporting responsible reductions in excess MA payments so we can make needed improvements in Medicare that will benefit millions of older Americans. 

Sincerely,
William D. Novelli
Chief Executive Officer

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