President Eyes Changes To Medicare-Run Plans President Barack Obama says the U.S. can save $177 billion over the next 10 years by revamping the Medicare Advantage plan.

President Eyes Changes To Medicare-Run Plans

President Eyes Changes To Medicare-Run Plans

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President Obama is forging ahead with plans to revamp the nation's health care system and hosting a forum Thursday where stakeholders will discuss and evaluate various options for insuring more people and holding down costs.

The president himself has issued general guidelines, and the one place he has been specific is the Medicare Advantage plan. It's different from traditional Medicare, in which beneficiaries go to doctors and hospitals that participate in the program, and the government pays the doctors and hospitals directly.

In Medicare Advantage, beneficiaries sign up for a managed care plan, an HMO or PPO or more open plan. They go to doctors and hospitals in the plan and often get things traditional Medicare doesn't pay for, such as dental care or prescription drugs.

The government pays the managed care plan 114 percent of what it would pay for someone in traditional Medicare. And here's where Obama would like to step in.

He wouldn't pay the 114 percent. Instead, he wants to ask the managed care plans to submit competitive bids. They would say how much they want to charge the government for taking care of Medicare beneficiaries. Government payments then would be based on the average of the bids, and only insurers that promise a certain level of quality would be allowed to participate.

With such an overhaul, the president expects to see a $177 billion reduction in planned Medicare spending over the next 10 years.

Some Medicare beneficiaries do not want to see the government reduce its payments to insurers. They're people in Medicare Advantage plans worried about losing the added benefits. But others who are in plans because of lower out-of-pocket costs would like to see changes, such as having more doctors to choose from and access to health care when they're away from the managed care plan's home area.

The health insurance industry is concerned about the $177 billion figure. Karen Ignagni heads the trade group, America's Health Insurance Plans. "Seniors are going to be expected to shoulder 30 percent of the costs of health reform," she says. "We think there are other strategies, and we're going to be involved in suggesting them."

But economist Marilyn Moon, who was once a trustee of Medicare, says planners need to consider the overall financial health of Medicare and what Medicare Advantage does to the budget.

"Medicare Advantage is a very good thing for individuals who get a good arrangement," she says. "It's a very good thing for a lot of private plans. It's not a good thing for the program as a whole, or for American taxpayers."

Moon sees the 14 percent "bonus" that insurers get as extra money. Rather than continuing the bonus, Moon would like to see regular Medicare, without a profit motive, do a better job of providing the extra services that some managed care plans provide.

But would Obama's plan for competitive bidding work — and save $177 billion?

It depends, says Moon and many others, on what sort of standards are set up for the bidding process and whether insurers will be willing to bid when their profits might be lower.