<nobr>Oct 25, 2005</nobr>

ERIC Letter to Senators Grassley and Baucus - Medicare Advantage Cuts

October 24, 2005

The Honorable Charles E. Grassley
Chairman
The Honorable Max Baucus
Ranking Member
Senate Committee on Finance
219 Dirksen Senate Office Building
Washington, DC 20510

Dear Chairman Grassley and Senator Baucus,

The ERISA Industry Committee (ERIC) must weigh in with concern on the Chairman’s Budget Reconciliation Mark concerning Medicare Advantage (MA) plans. While ERIC applauds the Finance Committee’s leadership for their integral roles in enacting the Medicare Modernization Act (MMA), which created MA plans, certain provisions of this Mark are cause for great concern on the part of major employers.

The two provisions that are unacceptable to ERIC’s members, America’s largest employers, involve the elimination of the Medicare Advantage Regional Plan Stabilization Fund (Section 6112) and the phase-out of the Risk Adjustment Budget Neutrality (Section 6111). These provisions diminish the effectiveness of MA plans – the most revolutionary reform element in the MMA. They should be removed in order to continue the reform of the government’s most rapidly-rising cost vehicle, Medicare.

The Risk Adjustment Stabilization Fund was designed to draw regional MA plans to states with fewer plan options, directly increasing choice and improving the Medicare program in these states. Currently 13 states do not have access to regional Preferred Provider Organizations (PPOs), and although the participation of plans nationally has been a success, these 13 states still need the Fund to attract plans.

ERIC also finds fault in the provision to change the Risk Adjustment formula for MA plan payments – now is not the time to send mixed messages of inconsistency to MA plans, as it may directly affect their abilities and willingness to continue operating. Similar provisions brought about the end of the Medicare+Choice program, and ERIC does not wish to see MA plans go down the same path – why risk missing the opportunity to enact real and lasting reform in the Medicare program?

Please do not hesitate to contact ERIC with any questions or comments.

Sincerely,


Edwina Rogers
Vice President, Health Policy

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