Opening Statement of the Hon. Nancy L. Johnson, a Representative in Congress from the State of Connecticut, and
Chairman, Subcommittee on Health

Hearing on Status of the Medicare+Choice Program

December 4, 2001

Today, the Ways and Means Committee continues its examination of the Medicare+Choice program.   This is the ninth hearing by the Ways and Means Committee or Health Subcommittee on Medicare this year, and the second on Medicare+Choice. 

I am pleased to welcome Tom Scully, the Administrator of the Centers for Medicare and Medicaid Services, back to the Subcommittee. 

The Medicare+Choice program is at a crossroads.  Since enactment of the Balanced Budget Act, the viability of this important option has faltered, with sagging enrollment, reduced benefits and increased beneficiary costs.  Despite two Congressional attempts to breathe life back into the program, enrollment will once again decline next year.  While last year's Beneficiary Improvement and Protection Act reduced premiums and allowed plans to continue serving 2.9 million beneficiaries, next year costs will increase, and additional restrictions on benefits will be imposed.

Enrollment in Medicare managed care had been increasing steadily until the changes mandated by BBA 97.  Since that time, enrollment has declined by about 800,000 beneficiaries or about 12 percent.  Prescription drug coverage has been eliminated or cut back dramatically in recent years, while program participants' cost sharing and premiums have increased, in some areas significantly.  In 2002, only half of the Medicare population will have access to at least one Medicare+Choice plan with drug coverage, down from 65 percent in 1999.  In addition, only one-third of the Medicare population will have access to a zero premium plan in 2002, down from 61 percent in 1999.  Cost sharing for Medicare-covered services will jump 78 percent in 2002, from $14.88 per enrollee, per month, to $26.60 per enrollee, per month.

Next year more than 500,000 Medicare beneficiaries in 28 states will be forced to change their health coverage or move back to Medicare fee-for-service largely because reimbursement has not kept pace with health care inflation.  Ninety-two thousand beneficiaries will no longer have a coordinated care option, 38,000 of whom will have to return to the Medicare fee-for-service program.  These enrollees may supplement their lost benefits by purchasing a Medigap policy.   The Medicare statute requires guaranteed issue for plans A, B, C, or F with any company within 63 days if the plan terminates coverage in a beneficiary's service area, but not if benefits are reduced or cost sharing is increased.

Despite these disappointing facts, Medicare+Choice has provided an attractive and welcome alternative to traditional fee-for-service for millions of Medicare beneficiaries.  Importantly, Medicare managed care plans provide health services that are unavailable to their counterparts.

Consider these statistics:

• Virtually all plans have at least one disease management program.
• The average plan has four disease management programs in place.
• 95% of plans have a diabetes disease management program.
• In 2001, 67.2 percent of Plus Choice beneficiaries have access to prescription drug coverage.
• 94.1 percent of Plus Choice beneficiaries have vision care.
• 78.8 percent of Plus Choice beneficiaries have hearing care.
• 99.7 percent of Plus Choice beneficiaries are provided an annual physical.

These are benefits that are unavailable in traditional Medicare.

We have heard testimony in this Committee on a number of occasions that Medicare+Choice plans are overpaid.  Pairing that testimony to the changes occurring in the Medicare managed care market defies logic.  Plans don't leave profitable areas because they make too much money.  Nor do they reduce benefits and increase premiums on a whim.  In fact, the Medicare statute requires plans to provide the actuarial value of all Medicare covered benefits, and to offer additional benefits or rebates on Part B premiums if federal payments exceed anticipated plan costs.

Because of the continued plan exodus and the erosion of value of benefits received, it is clear to me we need to immediately stabilize the program through a short term infusion of additional dollars that will more accurately reflect the costs of providing health services.  In the mid-term, Congress needs a whole-scale restructuring of the payment formulas to ensure the long-term viability of the Medicare+Choice program.

Recent ideas to peg funding to input prices or pay plans based on certain quality indicators, making government a value purchaser, are intriguing and merit further investigation.

In addition, Congress must take measured steps to improve the regulatory environment for plans.  Today, the House will pass legislation to delay implementation of the so-called "lock-in" by one year, move the filing date for adjusted community rate filing from July to mid-September and lengthen the open enrollment period from one month to a month and a half.

While the challenge we face is daunting, it is not insurmountable.  I look forward to working with you, Mr. Scully, with the President, and with my colleagues on the Committee, to get the job done.