UnitedHealth Seeks ‘Doc Fix’ in Push to Kill Rate Cuts

UnitedHealth Group Inc. is among insurers that have told the Obama administration a proposed reduction in U.S. payments for Medicare Advantage plans relies on the faulty assumption that doctors’ fees will fall.

Insurers are asking the administration to backtrack on next year’s 2.2 percent reimbursement reduction for Medicare Advantage plans, in which private companies cover benefits for the elderly instead of the government. The companies, in written responses to a Feb. 15 proposal by the Centers for Medicare and Medicaid Services, said the cuts don’t add up.

Medicare’s calculation assumes Congress will let stand a 25 percent decrease in doctors’ pay, which is a component of the overall reimbursement to the insurance companies. That trimming of rates to physicians is required by a provision in a 15-year-old balanced budget deal that has been overridden by Congress every year since 2002 in a maneuver nicknamed “The Doc Fix.”

“CMS is assuming a 30 percent cut to physician payments that everyone in Washington knows will never take effect,” Robert Zirkelbach, a spokesman for the Washington-based lobbying group America’s Health Insurance Plans, said by telephone using his own calculations for the reduction.

Justine Handelman, executive director for legislative and regulatory policy at the Chicago-based Blue Cross and Blue Shield Association, asked for “a zero percent adjustment.” She said in a letter that the Medicare agency needs to account for the scenario that Congress overturning the doctor pay cuts is “an event that can be considered reasonably likely to occur.”

Budget Act

Isabella Leung, a spokeswoman for CMS, said in an e-mail that the agency assumes current law in all proposed rates. She declined to speak further because the agency is still reviewing public comments. The decreases in payments would be finalized April 1 unless Congress acts to make the Doc Fix calculation.

There may not be enough time for such action as lawmakers are preoccupied with a broader fight over deficit reductions.

America’s Health Insurance Plans said the cuts will lead to reductions in benefits and higher out-of-pocket costs for the 13.1 million people enrolled in Medicare Advantage plans.

“To prevent the MA program from going into a tailspin, the agency needs to implement a solution that will be big enough to solve the problem,” Karen Ignagni, president and chief executive officer of the lobbying group, said in a March 1 letter protesting the rule.

The cut in doctors’ pay is ordered by a formula called the Sustainable Growth Rate, created as part the 1997 Balanced Budget Act. Minnetonka, Minnesota-based UnitedHealth, the largest Medicare Advantage insurer with about 2.6 million members, said in a letter to Medicare that every 5 percent cut in payments to doctors leads to a 1 percent reduction in Medicare Advantage payments.

Zirkelbach put the doctors’ payment cut at about 30 percent and said reversing the reduction would improve the rates to insurers by four to five percentage points.

Before it's here, it's on the Bloomberg Terminal.