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Health Plans: Unintended Consequences

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Special needs plans face same cuts as Medicare Advantage.

President Barack Obama, Democratic leaders, and program foes have painted Medicare Advantage as a Bush-era valentine to health insurance companies—and, on the surface, it's easy to see why.

Medicare Advantage costs the country 13% more than if those beneficiaries were in traditional fee-for-service Medicare. Opponents of the private Medicare program say the extra payments to private insurers could be spent more wisely, such as funding healthcare expansion and helping pay higher rates to primary care physicians.

With Democrats in control, Medicare Advantage is facing more scrutiny and payment cuts, and some experts wonder how much longer private payers will stay in the program. But there is a subset of Medicare Advantage that helps the most vulnerable Medicare patients that has been largely ignored during the policy debates.

Special needs plans cover Medicare/Medicaid dual eligible beneficiaries who are institutionalized and have severe chronic illness. SNPs care for the sickest beneficiaries, who, supporters say, could be unintended victims of cutting Medicare Advantage payments.

The federal government created SNPs as a way to move this costly population out of FFS and into plans run by private insurers that could provide care coordination.

Compared to Medicare as a whole, SNPs comprise a small percentage of the population. While about 25% of Medicare beneficiaries are in Medicare Advantage, fewer than 15% of those in Medicare Advantage are enrolled in SNPs. But the program also features higher per person medical costs than traditional FFS or other Medicare Advantage plans.

Because of the sicker beneficiaries, SNPs receive higher rates than other Medicare Advantage plans as a "risk adjustment" to account for the complexity of the patient population, but that doesn't mean SNPs will be exempt from Medicare Advantage payment cuts. In fact, SNPs will face the same level cuts as the larger Medicare Advantage program, says Claire Miley, member of the healthcare practice area of Bass, Berry & Sims law firm in Nashville.

Unlike Medicare FFS and private insurers, SNPs are not able to raise premiums as a way to make up the payment difference. SNP members don't pay premiums because of their dual status, which means the plans must make up the difference by managing costs. Jean D. LeMasurier, director of employer group practice at Gorman Health Group, Washington, DC, says a payment cut will force SNPs to review medical management programs. "A lot of the SNPs have been good when they have had a good model with keeping people out of the hospitals, providing care coordination, and managing the population expenses and their care better," says LeMasurier.

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