Senate Finance Committee Discusses Medicare+Choice Improvements for Rural Areas

Congress should take steps to shore up the Medicare+Choice program in rural areas, where a lack of cost-reducing competition among providers is causing insurers to "abandon" the program, according to witnesses who spoke before the Senate Finance Committee yesterday. CongressDaily/A.M. reports that the committee and witnesses discussed several possible long term solutions to improving Medicare+Choice, under which Medicare beneficiaries can enroll in managed care plans that often offer benefits, such as prescription drug coverage, not covered by traditional fee-for-service Medicare. Most witnesses agreed that the program works well in urban areas, where reimbursement rates are higher, and they noted that payments for rural providers have become more comparable to those in urban areas in recent years. However, decreasing the variation in rates paid to urban and rural providers has not led to increased benefits or a "stampede of new providers to rural areas." Instead, Murray Ross, executive director of the Medicare Payment Advisory Commission, said the change has "increased the cost of the program and distorted local health care markets that could steer beneficiaries to either fee-for-service or Medicare+Choice." He recommended that Congress make reimbursement rates for the fee-for-service program and Medicare+Choice insurers in a particular market "substantially equal." Len Nichols, a researcher at the Urban Institute and a member of Medicare's Competitive Pricing Committee, suggested that giving Medicare+Choice insurers higher payments in the first years they entered a market would allow them to "secure solid financial footing" before their rates were reduced in later years. While this plan would increase Medicare's short term costs, he said, it would create greater long term savings "as more private [insurers] would be able to stabilize themselves in a market in the early years" (CongressDaily/A.M., 4/4). To view a Healthcast of yesterday's hearings, go to http://www.kaisernetwork.org/health_cast.