FOR IMMEDIATE RELEASE, Thursday, March 13, 2008
CONTACT: Yoni Cohen, (202) 225-3202

WASHINGTON – In a hearing before the Ways and Means Health Subcommittee, Medicare Payment Advisory Commission (MedPAC) Chairman Glenn M. Hackbarth delivered opening remarks on MedPAC’s annual March report on Medicare payment policies and answered Subcommittee Members’ questions.

In its report, MedPAC projected Medcare Advantage plans would be paid, on average, 13 percent more than the cost of care in traditional fee-for-service (FFS) Medicare in 2008.

During the question and answer session, Chairman Hackbarth said (direct statements in quotes):

• MA overpayments are inefficient: “During [the] Reagan Administration, private plans were given the opportunity [to] compete in Medicare under risk contracts where they were paid 95%.... The problem is the payment system we're [currently] using rewards inefficiencies.”

• MA overpayments reward and encourage private sector inefficiency: “Overpayments send the wrong signal to the private sector. The Medicare Advantage payment system rewards and encourages inefficiency.”

• Benefits could be more efficiently delivered through fee-for-service Medicare: “If you want to provide geographic equity and better benefits, Congress needs to fix traditional Medicare… It is more efficient to target help to low-income beneficiaries through the programs that already exist… Private fee-for-service plan bids tell us they are less efficient than Medicare by 8% [on average]. It would be more efficient and effective to help low-income beneficiaries in other ways than through Medicare Advantage.”

• The sooner MA overpayments are reduced or eliminated, the better: “We expect enrollment will continue to grow and each new Medicare Advantage beneficiary costs more so program costs will continue to grow. That's why it is important to act as soon as possible. We run the risk, in the extreme, of moving beneficiaries from areas in the country with efficient high quality fee for service systems and moving beneficiaries into higher cost Medicare Advantage plans that add no value above fee for service Medicare.”