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Private Medicare Plans Found To Cost $700 More Per Person

By Robert Pear

The New York Times -- WASHINGTON

Federal investigators said Monday that the Bush administration had improperly allowed some private health plans to limit Medicare patients’ choice of health care providers, including doctors, nursing homes and home care agencies.

The investigators, from the Government Accountability Office, also said that the private plans had increased out-of-pocket costs for the elderly and had not saved money for the government, contrary to predictions by Medicare officials.

The study, the most comprehensive assessment of a demonstration project that the administration has described as the best hope for Medicare’s future, focused on the program’s experience with a form of managed care known as preferred provider organizations, the type of health insurance most popular among people under 65.

Medicare spent $650 to $750 a year more for each beneficiary who enrolled in such private plans than it would have spent if the same people had stayed in traditional Medicare, the investigators said.

In negotiations over the Medicare bill last year, the administration pressed for more money and new authority to foster the growth of preferred provider plans, saying they would be more efficient and would save money over time. Administration officials reiterated that view on Monday.

After reviewing the report, Dr. Mark McClellan, administrator of the federal Centers for Medicare and Medicaid Services, insisted that private plans were “an attractive option” that would save money and improve coverage for beneficiaries.

The Government Accountability Office, a nonpartisan investigative arm of Congress, said the administration had “exceeded its authority” by allowing PPOs to restrict patients’ choice of health care providers offering skilled nursing and home health care, dental care and routine physical examinations.

In many cases, it said, the private plans covered such services only when beneficiaries used health care providers designated by the plans themselves. Beneficiaries who went outside the network of preferred providers were often “liable for the full cost of their care,” the report said.

“By law,” the report said, “these plans should have been required to cover all services in their benefit packages even if those services were obtained from providers outside the plans’ provider networks.” But, it said, the administration waived this requirement for 29 of the 33 preferred provider plans, allowing them to deny coverage for some services obtained outside their networks.

The Bush administration “did not have the authority to allow plans to restrict enrollees’ choice of providers” as it did, the report said.

Normally, preferred provider plans encourage patients to use certain doctors and hospitals, but allow them to use other health care providers for an additional cost.