Senators from rural states are wrestling with the Blue Cross and Blue Shield Association, Chicago, over the size of the regions for the new Medicare managed care program.[@@]

The issue came up today at a Senate Finance Committee hearing on the Medicare Advantage managed care program and the new Medicare drug benefits program.

In the past, the old Medicare Plus Choice managed care program focused mainly on persuading private carriers to offer Medicare health maintenance organization coverage. The Medicare Advantage program is trying to persuade more private insurers to offer Medicare preferred provider organization coverage.

Sen. Max Baucus, D-Mont., the ranking Democrat, called in his opening remarks for officials at the Centers for Medicare and Medicaid Services to act promptly to define the broadest possible service regions.

Sen. Charles Grassley, R-Iowa, supported Baucus’s comments.

Rural state senators say establishing the largest possible service regions will help rural residents get coverage at the lowest possible cost.

“The Medicare Advantage Regional Plans will give beneficiaries more coverage choices by requiring plans to serve both urban and rural areas,” Grassley said. “Beneficiaries deserve choices between regular Medicare and other options that can offer them better coordinated care and additional benefits, such as 24-hour consulting nurse services.”

But the Blues have argued in comment letters to the CMS that the program should start with 50 one-state regions.

Single-state regions will give Medicare PPO plans a better chance to make a profit, or at least break even, the Blues write in their letters.

Carriers point out that many private carriers bailed out of the old Medicare Plus Choice program and some carriers went bankrupt because making a profit in the program was so difficult.

But Baucus emphasized the importance of offering good service and low rates to rural Medicare beneficiaries.

“The program starts in less than 16 months,” Baucus said. “I understand health plans have urged CMS to adopt state-based regions. But last fall, the administration argued that the best way to ensure that PPOs would serve rural states like Montana would be to create large regions encompassing several states — and to require these plans to cover the entire region. Given all that extra money — some might argue wasteful amounts of money — that Medicare will pay PPOs to come to rural America, I for one would be more than a little disappointed if they don’t.”

Karen Ignani, president of America’s Health Insurance Plans, lauded Congress for increasing financial support for Medicare Advantage programs in her testimony before the panel.

“I am proud to report that our members have followed through by using the 2004 funding increase to expand benefits and reduce costs for the beneficiaries they serve,” Ignani said. “The Centers for Medicare and Medicaid Services has reported that 95% of the additional funding is being used to help beneficiaries this year through reduced premiums and cost-sharing, increased benefits, and enhanced access to providers. The remaining 5% has been put in a reserve fund to stabilize benefits in 2005.”

She also told the panel that as a direct result of the new rules, premiums for all Medicare Advantage enrollees nationwide have declined by an average of 26%.