FOR IMMEDIATE RELEASE, Thursday, May 17, 2007
CONTACT: Yoni Cohen, (202) 225-3202

WASHINGTON, D.C. -- Representative Pete Stark (CA-13), Chairman of the
Ways and Means Health Subcommittee, delivered the following opening
remarks at today's hearing on Medicare Advantage Private Fee-For-Service
Plans (PFFS).

Representative Stark also submitted the following letter from the
California Medical Association (CMA) into the Hearing Record. The CMA
has called on Congress to eliminate PFFS from the Medicare Advantage
program. The CMA letter is available at here.

“Today’s hearing continues oversight on the Medicare Advantage program.
Shadowboxing with the Administration’s message machine is getting
tiresome, but at least Ms. Block will repeat today what she apparently
told press yesterday. Ever the optimist, I hope today’s hearing will
contribute to a rational conversation about these issues. To that end,
I am going to suggest an unconventional approach. Many of the witnesses
on our second panel have said they are having trouble getting the
Administration to pay attention to them. Thus, I would like to flip our
panels so that Ms. Block and others from CMS are able to listen to the
suggestions from outside experts.

“Private Fee-For-Service plans are unique among Medicare Advantage (MA)
offerings, and are the focus of today’s hearing. According to MedPAC,
these plans are paid on average 119% of fee-for-service rates – rising
to 150% or more in some areas. Since business follows the money, it’s
no surprise that enrollment is skyrocketing. The rate of growth from
2002-2007 was an astounding 5600 percent. Even so only 1.3 million
people – about three percent of all beneficiaries – are in these plans
now. Given that half of the projected MA growth is in this option, we
need to immediately evaluate its value before it gets unmanageable.

“Unlike most of the MA options, these plans do not typically have a
network of providers. They are marketed as operating the same as
traditional Medicare, but with lower cost-sharing and perhaps other
additional benefits. Yet, reality often fails to match the sales pitch.

“These plans may offer flat co-payments for physician visits, but
physician co-payments of even $15-20 are often higher than the
corresponding 20 percent co-insurance in traditional Medicare. In
addition, these plans tend to charge higher cost-sharing for certain
Medicare-covered services like skilled nursing facilities, home health,
and durable medical equipment. My guess is that this is NOT
coincidental. If you don’t want sick people, you charge more for the
services that they are looking for.

“While these plans promote the ability to see any provider, they neglect
to mention that providers are not required to accept the plan’s payment
terms, and that providers can decide on a per-visit basis whether to
participate. Beneficiaries who have signed up for these plans are just
beginning to confront this confusing situation. I’d like to ask
unanimous consent to submit for the Record a letter from the California
Medical Association. They’ve become so disgruntled with the PFFS plans
that they’re asking us to eliminate this particular option.

“We’ll also hear today about the difficulty faced by insurance
commissioners attempting to regulate the sales practices of these
products. High profit margins for this plan type have provided
incentives for plan sponsors to offer huge commissions to sell these
plans. If you think used car salesmen are bad, they have nothing on some
of the hucksters selling PFFS plans. We’ll hear today about outright
fraud, and both intentional and unintentional misrepresentations about
what these plans mean for individual beneficiaries. Yet the 2003
Medicare Modernization Act prohibited state oversight of these products,
and this Administration has consistently dragged its feet both on
requiring better behavior and enforcing the rules that are in effect.
Even worse, they’ve interfered at times with the limited ability
retained by the states with respect to oversight on agents and brokers.
I hope this hearing will lay the groundwork for positive change.

“PFFS plans are exempt from MA quality and plan adequacy requirements so
we cannot determine what, if any, value these plans provide. I look
forward to discussing this huge loophole today.

“We’ll also hear from one actual plan today, but their situation is
unique. Even so, Mr. Camp’s local plan deserves some credit for their
willingness to appear today. I gather you were left with no other
choices – other prominent plans “declined” the offer, while still others
were not invited because of their bad behavior. This speaks volumes to
me about this product and its future.

“This Subcommittee has a responsibility to provide effective oversight,
and assure that beneficiaries and taxpayers are getting both value and
quality for their investment. PFFS plans appear to provide far better
value to their shareholders and their companies’ bottom lines than they
do to Medicare.

“As I’ve said all year, as we look to improve and protect Medicare, all
provider payments must be reviewed and are subject to change. Given
what we know about PFFS at this time, they’re at the top of my list. I
look forward to today’s testimony and I yield to Mr. Camp for any
opening statement he’d like to make.”

May 20, 2007

The Honorable Pete Stark
Chairman, Health Subcommittee
Ways and Means Committee
U.S. House of Representatives
1135 Longworth HOB
Washington, D.C. 20515

RE: CMA Supports Elimination of the Private Fee-For-Service Plans
(PFFS)

Dear Chairman Stark:

On behalf of the California Medical Association, I am writing to urge
you to eliminate the Medicare Advantage Private Fee-For-Service Plans
(PFFS) from the Medicare Advantage program. The CMA has studied these
plans carefully and we have concluded that the higher payment rates from
Medicare (119% of Medicare fee-for-service rates on average), the lack
of value to the program in terms of efficiency and quality, the
inadequate physician networks, the disincentive to negotiate competitive
contract terms with physicians due to the “deeming” authority and the
well documented marketing abuses, have made the PFFS plans unwarranted
profit-centers for the insurance industry at the expense of patients,
physicians and the taxpayers.

Last fall, the CMA received hundreds of phone calls from physicians
complaining that their long-time Medicare patients had enrolled in PFFS
plans with which they were not contracted. Every physician we spoke to
said that their patients were erroneously told by the insurance broker
that they could continue to be treated by their current physician even
though their physician was not contracting with the plan. This caused
the unnecessary disruption of many existing physician-patient
relationships.

Many physicians who did not know that their patients had enrolled in a
PFFS plan continued to treat their patients and were therefore, “deemed
contracted” with the plan. Under the law, PFFS plans may unfairly
“deem” physicians to be contracted with the plan when a physician treats
a patient who has enrolled in a PFFS plan. Physicians who do not
contract but remain “deemed” are paid according to the Medicare
fee-for-service fee schedule. However, these physicians must adhere to
the PFFS plans’ terms and conditions which are subject to change at any
time. These terms and conditions are not readily available to
physicians and not consistent Medicare payment rules. CMA has
repeatedly asked CMS to require PFFS plans to post their payment rules
on a single website where physicians can readily obtain the information.

Unfortunately, patients who see “deemed” physicians must pay higher
copayments. However, if a physician agrees to sign a contract with a
PFFS plan, once the plan establishes an “adequate” network, they may
reduce the physician’s payment rates below the Medicare fee-for-service
fee schedule. But the patient’s copayments may be reduced.
Physicians have found themselves in an untenable situation.

The problems are rapidly compounding because PFFS plan enrollment is
growing astronomically in California consistent with the national
average of 284%. Moreover, the PFFS plans are paid on average 119% and
up to150% of the Medicare physician fee-for-service fee schedule. Thus,
their rates are 20-50% higher than physician rates. However, these
plans are not required to have adequate physician networks or meet any
quality standards. CMA does not believe that many of the PFFS plans
operating in California have adequate physician networks to serve their
enrollees. Further, we question whether PFFS plans have appropriate
incentives to establish appropriate networks. Further, there is no
evidence that they are providing a valued service in terms of
coordinating care or in providing efficiency. MedPAC has shown that the
PFFS plans are the most inefficient plans operating within the Medicare
Advantage program. MedPAC has reported that these plans are “…expanding
their enrollment and providing extra benefits with taxpayer dollars in
an inefficient manner.”

While CMA supports Medicare Advantage health plan options for the
Medicare program, we do not support the continuation of PFFS plans for
all of the reasons mentioned above. They are unwarranted
profit-centers that are siphoning-off valuable resources from the
Medicare program. They are not providing value to patients and are
allowed to hold physicians to untenable terms. We believe they will
ultimately cause access problems in the Medicare program. We urge
Congress to act to eliminate the PFFS plans before thousands of
additional California seniors enroll in these plans.

Mr. Chairman, thank you for the opportunity to comment on the PFFS
plans. I send you my best wishes and hope to see you in the District
again soon.

Sincerely,

Anmol S. Mahal, MD
President