The Administration Delivers A Major Gift to Managed Care

Here at Managed Care, we offer in-depth discussions on the complex issues of the day by respected experts inside and outside the industry. Sometimes, however, we address issues informally. When an interesting story breaks, for example, it sometimes makes sense to discuss it in this space, rather than wait a month for a full-blown article that, by the time you read it, might be turning stale.

Which brings me to the announcement that Medicare payments to health plans participating in what was called Medicare+Choice but is now known as MedicareAdvantage will increase by a record 10.6 percent.

This wasn’t exactly out of the blue. We’d been reporting for months that one effect of Medicare reform would be an influx of funds for managed Medicare. With this new money, the Bush administration hopes to have 35 percent of beneficiaries enrolled in MedicareAdvantage by 2007. At its peak in 1999, M+C had 16 percent.

We’ll be hearing more about this in the coming months. But right now, it seems to us that the question of whether MedicareAdvantage can work is still very much open.

For one thing, the fee-schedule Medicare market is far different from the commercial indemnity market that managed care blew away a decade ago. Medicare is lean and mean already: Ask the physicians how they feel about their fees, and note that it is beyond dispute that Medicare’s per-beneficiary overhead is minuscule compared with any HMO.

There will also be the resistance of beneficiaries to being told they may not have certain tests and treatments because they are not indicated. Any extra benefits, however, will not be rejected.

I hope the new program does work out. I believe that true management of care (as well as cost) is in patients’ interest, and I hope that the industry will take this gift and do the right thing.

With the proper oversight, managed Medicare will turn out to be one of the most successful efforts in privatization ever.

MANAGED CARE February 2004. ©MediMedia USA

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