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Why Doctors May Push Medicare Patients to Managed Care Plans (Hint: $$$)

Just when it looked like a cut in government subsidies might begin starving private Medicare Advantage (MA) plans, a new factor might propel more patients than ever into these plans. A looming cut in what doctors get paid by traditional Medicare could prompt physicians to push their elderly patients into the private managed-care plans -- which, of course, will pay the doctors more.

One physician group in the Seattle area is already encouraging patients to shift from traditional Medicare to MA plans. Of course, Congress, which just postponed the reduction until the end of the year, could still come through with a long-term "doc fix." But there's a great deal of uncertainty about that, because nobody has figured out where the money -- about $300 billion over 10 years -- will come from.

Seattle's Highline Medical Group, which includes 35 doctors in eight offices, told about 6,000 senior patients that they'd have to switch to a Medicare Advantage plan by the end of this year if they wanted the practice to continue serving them. The physicians apologized to their patients in the letter to them; but, according to the Seattle Times, some patients felt they were being forced to leave traditional Medicare. In some cases, that's probably because they'd rather stay with their current doctors. In addition, an increasing number of physicians in the Seattle area and elsewhere are not taking on new Medicare patients.

One problem for some of Highline's patients is that they'd have to give up their Medigap coverage -- which pays for services that Medicare doesn't cover -- if they joined a Medicare Advantage plan. They're concerned they might not be able to get a Medigap plan if they rejoin traditional Medicare later. Also, some MA plans have higher copays than many seniors are used to.

As it turns out, a shift toward Medicare Advantage might be a good thing in the long run, because it would help acclimate doctors to the idea of controlling costs -- a necessity under any healthcare reform scenario. But it would also increase Medicare spending, at least temporarily. Last year, the government spent 14 percent more, on average, for beneficiaries in MA plans than for those in traditional Medicare. While the Affordable Care Act calls for reduced payments to MA plans, those cuts will be phased in gradually.

Meanwhile, surf may be up for health insurers that have Medicare Advantage expertise. Both Humana (HUM) and UnitedHealth Group (UNH) saw profits rise steeply in the third quarter, partly because of their Medicare Advantage business. They can be expected to benefit if doctors and their senior patients gravitate toward MA plans.

While it has been widely reported that some MA plans are going out of business, the Centers for Medicare and Medicaid Services (CMS) says that only 5 percent of MA plans are not renewing for 2011. Most of those are "private fee-for-service plans" that never really had a business model beyond excessive Medicare payments. Overall, 2011 enrollment in MA plans is up and premiums are down, CMS says.

Of course, it's still doubtful that Congress will let Medicare cut doctors' fees as much as it's legally required to. But in the absence of certainty about where their payments are going, physicians may start doing something they never expected to: support managed care to keep their incomes up.

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