FOR IMMEDIATE RELEASE, Tuesday, June 6, 2006
CONTACT: Yoni Cohen, Stark  (202) 225-3202

WASHINGTON – U.S. Representative Pete Stark (D-CA, 13th), Ranking Democrat on the Ways and Means Subcommittee on Health, today responded to new data released by the Medicare Payment Advisory Commission (MedPAC) confirming that Medicare continues to grossly overpay HMOs to provide Medicare Advantage (MA) plans.

“While working to enact the Medicare Modernization Act, Republicans crowed that adding Medicare Advantage plans to Medicare would save money through ‘competition’ and ‘market efficiencies.’ Yet as the latest MEDPAC briefing paper makes clear, Medicare spends 11% more for beneficiaries in MA plans than for people in fee-for-service Medicare. Much like Iraqi weapons of mass destruction, the purported Medicare Advantage cost reductions don’t exist. It is past time for Congress to enact legislation eliminating government overpayments to HMOs. MA plans should be paid the same as traditional Medicare,” said Representative Stark.

In 2004, MedPAC data suggested that MA plans were paid 107 percent of the cost of care for Medicare fee-for-service. That same year, CMS announced that MA enrollees were healthier than traditional beneficiaries, and cost eight percent less on average to care for. The total overpayment was therefore calculated to be 115 percent.

In response to requests from Representative Stark and his colleagues in Congress, MedPAC recently released new data on Medicare Advantage payments. MedPAC found that MA plans are now paid, on average, 111 percent of what it would cost to care for the same beneficiaries in fee-for-service Medicare.

“Republicans in Congress wrote this payment policy for the insurance industry. It should therefore come as no surprise that insurers continue to make huge profits at taxpayers’ expense. The only rational explanation for Republicans’ desire to overpay HMOs is that they intend to undermine fee-for-service Medicare by encouraging MA enrollment. The greater the number of beneficiaries in MA plans, the easier it will be for Republicans to convert Medicare into a voucher rather than a guaranteed benefit,” Stark concluded.

The MedPAC release can be accessed at: http://www.house.gov/stark/news/109th/pressreleases/20060606_MedPAC.pdf