Private Plans Continue to Use Misleading Arguments to Oppose Reforms of Medicare Overpayments

Publication Date: July 2007

Publisher: Center on Budget and Policy Priorities (Washington, D.C.)

Author(s): Edwin Park

Research Area: Health

Keywords: Economic projections; Health insurance; Health care costs; Senior citizen

Type: Report

Abstract:

The CHAMP Act would address a gap in the oversight of private plans that results from the absence of any standards on how much of plan payments can go to administrative costs, marketing and profits, rather than to the provision of health care services to Medicare beneficiaries. The CHAMP Act would require plans to report their medical loss ratios (i.e., the proportion of their payments that go to the provision of health care). By 2010, plans would have to meet a minimum medical loss ratio of 85 percent or face penalties. Requiring a minimum medical loss ratio would be broadly similar to what is already required of Medigap plans (federal law establishes a minimum medical loss ratio for those plans), as well as of private insurers operating in the commercial market under state health insurance regulations in a number of states. This would allow the Centers for Medicare and Medicaid Services to better enforce the current Medicare Advantage requirement that plan bids be reasonably related to plan costs, rather than include excessive administrative costs, marketing costs, and profits, at taxpayers’ expense.