Managed Care Matters

Yesterday's 69-30 Senate vote to reduce the subsidies for Medicare Advantage and Private fee for service plans and rescind the cut in physician reimbursement will have far reaching implications. I watched the historic vote while sitting in a bar in DC (only in DC would the TV over the bar be tuned to CSPAN); when Sen Kennedy walked on the Senate floor in his first appearance since being diagnosed with cancer the outcome was foregone conclusion; his vote would be the 60th. Faced with the inevitable, nine more GOP senators switched their votes to side with the Dems, despite the looming threat of a veto.

The margin in the Senate and the House is enough to overcome that veto. It will also serve notice that the physician lobby and the AMA remains a very powerful force, a lesson that will be heeded when the health care reform process gets serious next year.

The vote is another body blow to big health plans.

Coming amidst announcements of declining revenue projections and battered earnings forecasts, the cut in the MA and PFFS subsidies (13% and 19% respectively) is going to further the slide of healthplans' financial fortunes... At least for those plans with significant MA and PFFS exposure. Think UHC, Humana, Coventry, and Universal American.

The ongoing battle over Medicare reimbursement is another wake-up call to state legislators and regulators. Many states base workers comp fee schedules on Medicare, thereby ceding control over medical payments to a third party that could not care less about the impact of their decisions on a state's work comp system and the willingness of physicians to participate in that system.

Finally, the vote is a major victory for Senate majority leader Harry Reid. According to sources close to the Senator, "there was no plan B" if the required 60 vote threshold wasn't reached.

From here it looks like the back-against-the-wall was just what the doctor ordered, and may well strengthen Reid and his fellow Democrats.