Baucus Faults Bush Administration for Exceeding Authority in Implementing PPO Demonstration; Questions Whether New PPO Reforms Will Work
Today, the Government Accountability Office (GAO) issued a report showing that the administration exceeded its authority in testing managed care plans in Medicare.During negotiations over last year’s Medicare bill, the administration pressed foradditional funding and new rules to facilitate participation by preferred providerorganizations (PPOs) in Medicare. The administration asserts that PPOs will be moreefficient and save federal dollars over time, while delivering private plan options at lowercost to Medicare beneficiaries living in rural areas – assertions purportedly based on datafrom the PPO demonstration project.
In its evaluation, the GAO considered the administration’s authority to conduct thedemonstration, the cost of the demonstration to the Medicare program, and the benefits andcosts to beneficiaries enrolled in PPO plans.
After reviewing the GAO’s conclusions and recommendations, Senator MaxBaucus, Ranking Member of the Senate Finance Committee, which has jurisdiction overMedicare, made the following statement:
“I was pleased to play a role in the passage of last year’s Medicare bill. It is not aperfect bill, but it is a good first step. As well as adding a new drug benefit, the bill aimsto expand private plan options for Medicare beneficiaries living in rural areas.
“While I believe in choice, I also believe that private plan options, including PPOs,should be added to Medicare only if they bring value to beneficiaries and taxpayers.Although the administration claimed last year that regional PPOs would provide greaterplan options and more comprehensive benefits at a savings to the federal government, theGAO shows that such claims are not based on reality.
“Contrary to assertions made by CMS officials last year, the GAO found that PPOsare more expensive, both to taxpayers and enrollees. Medicare spent between $650 and$750 more per year for each beneficiary who enrolled in a PPO than it would have spent ifthe same beneficiaries had stayed in traditional Medicare. And contrary to administrationclaims that private plans will lower beneficiaries’ out-of-pocket costs, the GAO found, inmany cases, that beneficiaries incurred higher out-of-pocket costs.
“The GAO also found that the majority of PPOs in the demonstration chose toparticipate in counties that were already served by Medicare HMOs, rather than reachingout into new areas. A majority of beneficiaries who could enroll in a demonstration PPOalready had access to existing private plans. In fact, 74 percent of those who enrolled in aPPO had previously been enrolled in a Medicare+Choice plan. This does not give meconfidence that rural areas, which currently are not typically served by private plans, willhave access to a new regional PPO option in 2006.
“One of the troubling findings of this report is that CMS exceeded itsdemonstration authority in carrying out the PPO demonstration. Contrary to federal law,CMS allowed demonstration PPO plans to restrict Medicare covered services to in-networkproviders. Beneficiaries seeking home health and skilled nursing care were required to usenetwork providers or else pay the full costs for those benefits. The law does not allowCMS to waive the requirement that these services be covered, regardless of whether theprovider is part of the PPO network.
“I am pleased that CMS has already instructed PPO plans to comply with coveragerequirements under the law. But the violation demonstrates a pattern by thisadministration of disregarding the law and proper administrative procedures.
“This report renews my resolve to remain vigilant and maintain vigorous oversightas CMS implements the Medicare changes Congress passed last year. As they implementthe most comprehensive set of Medicare reforms since the program’s enactment, it isimperative that the administration follow both the letter and spirit of the law.
“The report also confirms my belief that traditional Medicare will continue to bethe dominant plan for Medicare enrollees. As such, Congress must ensure that thetraditional program remains robust and that it continues to reflect up-to-date medical careto meet the needs of beneficiaries.”
Full text of the GAO Report, GAO-04-960, “Medicare Demonstration PPOs:Financial and Other Advantages for Plans, Few Advantages for Beneficiaries” is posted onthe Senate Finance Committee’s website on Senator Baucus’ press release page.
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