Inquiry on Medicare Finds Improper Limits

The New York Times
September 28, 2004

Inquiry on Medicare Finds Improper Limits
By ROBERT PEAR

WASHINGTON, Sept. 27 - Federal investigators said Monday that the Bush administration had improperly allowed some private health plans to limit Medicare patients' choice of health care providers, including doctors, nursing homes and home care agencies.

The investigators, from the Government Accountability Office, also said that the private plans had increased out-of-pocket costs for the elderly and had not saved money for the government, contrary to predictions by Medicare officials.

The study, the most comprehensive assessment of a demonstration project that the administration has described as the best hope for Medicare's future, focused on the program's experience with a form of managed care known as preferred provider organizations, the type of health insurance most popular among people under 65.

Medicare is spending $650 to $750 a year more for each beneficiary in such private plans than it would have spent if the same people stayed in traditional Medicare, the investigators said.

In negotiations over the Medicare bill last year, the administration pressed for more money and authority to foster the growth of preferred provider plans, saying they would be more efficient and would save money over time. Administration officials reiterated that view on Monday.

After reviewing the report, Dr. Mark B. McClellan, administrator of the federal Centers for Medicare and Medicaid Services, insisted that private plans were "an attractive option'' that would save money and improve coverage for beneficiaries.

The accountability office, a nonpartisan investigative arm of Congress, said the administration "exceeded its authority'' by allowing P.P.O.'s to limit patients' choices of providers offering skilled nursing and home health care, dental care and routine physical examinations.

In many cases, it said, the private plans covered such services only when beneficiaries used health care providers designated by the plans themselves. Beneficiaries who went outside the network of preferred providers were often "liable for the full cost of their care,'' the report said.

"By law,'' it said, "these plans should have been required to cover all services in their benefit packages even if those services were obtained from providers outside the plans' provider networks.'' But, it said, the administration waived this requirement for 29 of the 33 preferred provider plans, allowing them to deny coverage for some services obtained outside their networks.

The administration "did not have the authority to allow plans to restrict enrollees' choice of providers'' as it did, the report said.

Normally, preferred provider plans encourage patients to use certain doctors and hospitals, but allow them to use other health care providers for an additional cost.

The accountability office, formerly the General Accounting Office, found that the administration had "improperly waived the requirement'' for P.P.O.'s to let Medicare patients choose their health care providers.

The findings are a significant setback for the administration, which wants to triple enrollment in private plans in five years. About 4.7 million of the 41 million Medicare beneficiaries, or 11.5 percent, are now in private plans, most of them H.M.O.'s.

In January 2003, the Bush administration began the demonstration project encouraging beneficiaries to join P.P.O.'s, which in theory offer more choice than H.M.O.'s.

Ten million beneficiaries were eligible for the preferred provider plans, but only 105,000 had enrolled as of last month, the report said.

To comply with the law, the accountability office said, Medicare officials should immediately instruct these private plans to provide coverage for "all plan services furnished by any provider'' willing to accept their payments.

Dr. McClellan said, "We will comply with the recommendations made in the report.'' Moreover, he said, the government will work with private plans to ensure they follow the law.

Senator Max Baucus of Montana, the senior Democrat on the Senate Finance Committee, who requested the report, said the administration's claims about private plans were "not based on reality.''

Mr. Baucus, who voted for the new Medicare law, said, "While I believe in choice, I also believe that private plan options, including P.P.O.'s, should be added to Medicare only if they bring value to beneficiaries and taxpayers.'' Contrary to assertions by Medicare officials, Mr. Baucus said, auditors found that P.P.O.'s "are more expensive, to both taxpayers and enrollees.''

To draw P.P.O.'s into Medicare, the report said, the Bush administration offered to pay them more, waived stringent standards for the quality of care and removed limits on the costs that beneficiaries might be required to pay. As a result, it said, these plans were "subject to no statutory or regulatory limits on cost-sharing'' for beneficiaries.

The report was the fourth in two years to find that the administration had skirted federal law in pursuing health policy objectives. In July 2002 and last January, the accountability office said the administration had improperly allowed states to divert money from the Children's Health Insurance Program to provide coverage for childless adults.

Earlier this month the auditing agency said that the Bush administration had illegally withheld data from Congress on the projected cost of the new Medicare law.

The demonstration project, offering P.P.O. plans in 214 counties, runs through 2005. Medicare officials hope to offer such plans in all parts of the country in 2006.

In the future, Dr. McClellan said, "P.P.O.'s will be a familiar and popular choice.''