HHS Secretary Leavitt recently sent a letter to Senate Finance ranking member Charles Grassley saying the president might veto any reductions to private Medicare Advantage indirect medical education payments to offset legislation that would halt an upcoming Medicare physician payment cut. That letter runs against comments made by GOP staff last week. Leavitt wrote Grassley after bipartisan talks on the Medicare bill broke down last week and said cuts to Medicare Advantage or private fee-for-service plans are off the table. "To protect the interest of these beneficiaries, the administration strongly opposes any policies that would reduce payments for MA plans, or target a subset of those plans for funding reductions, program restructuring, marketing restrictions, or enhanced state regulation," Leavitt wrote in the May 22 letter. More than 20 percent of Medicare beneficiaries chose Medicare Advantage plans, he added. The plans are paid more by the federal government than traditional Medicare plans so that providers are encouraged to offer packages in rural areas and offer additional benefits. Shaving off those additional payments provide an attractive fundraiser to pay for the physician pay fix, particularly with Democrats, who are not as supportive of private-sector participation in Medicare.
The letter did not specifically mention the duplicative Medicare Advantage indirect medical education payments that go to teaching hospitals to cover extra costs associated with training. But because the opposition to cuts to the private plans is sweeping, the letter conjures up doubt that any reductions in the indirect medical education payments would pass muster. Senate Finance Chairman Max Baucus has said the White House would oppose the indirect medical education cuts. HHS did not respond today to requests for clarification. Grassley and Senate Minority Leader McConnell offered a counterproposal to Democrats' physician payment fix package last week that included $8.7 billion in Medicare Advantage indirect medical education cuts. Leavitt's letter, in contrast, offers up traditional Medicare fee-for-service plans for the chopping block. The president's FY09 budget proposes freezing payment updates for providers for several years and then reducing updates by 0.65 percent in later years.
This article appears in the May 31, 2008, edition of National Journal Daily PM Update.