Panel Warns Against Medicare Competition

Times Staff Writer

Competition between Medicare and private managed-care plans will do little to control spending or ensure more consistent, coordinated care for the nation’s elderly and disabled, a widely respected independent panel reported Monday.

The conclusions of the expert panel of the National Academy of Social Insurance -- a nonpartisan, nonprofit think tank -- strike at the heart of Republican arguments for having Medicare compete against private health plans for clients. But the report also undercuts the position of some liberal Democrats that Congress should add a prescription drug benefit to Medicare but otherwise leave the program much as it is.

A hybrid of fee-for-service Medicare and private health plans would be “far superior” to many of the alternatives under consideration, said Mark Schlesinger, the Yale and Rutgers professor who chaired the panel.

“There is no evidence -- repeat, no evidence -- that private plans would reduce long-term [spending] growth rates. For Medicare to remain a vital program, it needs to rely in equal measure” on traditional fee-for-service and managed-care plans.


And given the tendency of some private plans to “cherry pick” the healthiest patients, “there is no way to say” that head-to-head competition between Medicare and private plans “will not produce a death spiral” for traditional Medicare in some parts of the country, he added.

The academy’s report struck a nerve with some advocates of competition. “It’s been our intent to keep fee-for-service” throughout the country, Medicare administrator Tom Scully said. “Nobody’s talking about getting rid of Medicare.”

Calling the panel’s report “precooked,” Scully said the private competition provisions of the House-passed bill represented “modest, modest, modest change” from the current system, in which only 12% of Medicare’s 40 million beneficiaries belong to private health plans. In the negotiations between House members and senators over the Medicare bill, the Bush administration “took no position” on the critical competition issue and “still hasn’t,” Scully said.

Karen Ignagni, president and chief executive of the trade group that represents the managed-care and insurance industries, said many of the panel’s criticisms of Medicare HMOs -- including the frequency with which HMOs drop out of the program, leaving seniors scrambling for care -- resulted from insufficient funding.


“Only in Washington do you undermine somebody and then call them unreliable,” she said.

The panel’s report highlights the ways in which the 38-year-old program has not kept pace with the modern health-care system.

Unlike most current health insurance policies, fee-for-service Medicare does not cover prescription drugs or most preventive health services. If Congress passes a prescription drug bill, beneficiaries would have the option of adding a stand-alone drug policy to their benefits.

“We will be having this debate 10, 20, 30 years from now unless


The panel’s conclusions reflect the fact that a significant proportion of Medicare beneficiaries have little understanding of health-care complexities or have memory or vision problems, Schlesinger said.

“For this group, markets are not a treat. They are a threat,” he said. “We believe providing security and stability for people who need security and stability is paramount over competition.”