Medicare HMO Reimbursement Rates To Increase 10.6% in March Under New Law
CMS on Friday announced that Medicare would increase reimbursement rates for HMOs by an average of 10.6% on March 1, the Wall Street Journal reports (Lueck, Wall Street Journal, 1/19). The record increase -- about five times larger than those in recent years -- resulted because of revisions to the Medicare reimbursement formula mandated by the new Medicare law. The law established a "complex new formula" that will increase Medicare reimbursements to HMOs by an estimated $500 million this year and by a total of $14 billion between 2004 and 2013, the New York Times reports. Federal officials and lawmakers hope that the new reimbursement levels will "reverse the exodus" of HMOs from Medicare, according to the Times. Many HMOs in recent years have withdrawn from Medicare because they said that although their costs increased at about 10% per year, reimbursements only increased by about 2% per year (Pear, New York Times, 1/20). Sixteen HMOs withdrew from Medicare or reduced their service areas in 2004, compared with 33 last year, 58 in 2002 and 118 in 2001, according to CMS (AP/Arizona Republic, 1/18). Between 1999 and 2003, HMOs dropped coverage for more than 2.4 million Medicare beneficiaries. About 4.6 million Medicare beneficiaries, or 11%, currently are enrolled in HMOs; the Bush administration predicts that revisions to the program under the new Medicare law will increase the rate to 35% by 2007.
Under the revised Medicare formula, HMO reimbursement rates will differ by county. HMOs that operate in Riverside County, Calif.; Jefferson County, Mo.; Bergen County, N.J.; Nassau and Suffolk Counties, N.Y.; and Mercer and Delaware Counties, Pa.; will receive the largest Medicare reimbursement rate increases (New York Times, 1/20). HMOs must use the increased Medicare reimbursements to reduce premiums or copayments for beneficiaries; improve benefits; stabilize or expand health care provider networks; or offset future premium increases or reduced benefits. HHS Secretary Tommy Thompson called the increased Medicare reimbursements for HMOs an "investment in our seniors" that will lead to "better services" and "more choice of Medicare options." He added, "This is an important improvement to the Medicare system that addresses a long-standing concern by seniors who prefer managed care plans (CMS release, 1/16).
Outlining its agenda for 2004, AARP on Friday urged Congress to change the new Medicare law allow the federal government to negotiate directly with pharmaceutical companies for lower prescription drug prices for beneficiaries, the New York Times reports. Under the current law, the government is prohibited from interfering with negotiations over drug prices between manufacturers and private companies that administer the drug benefit. The intent of the provision is to "avoid any hint of federal price controls," according to the Times. But AARP CEO Bill Novelli said that the law does not go far enough and urged Congress to authorize the HHS secretary to "negotiate lower drug prices on behalf of Medicare beneficiaries in the event competitive purchasing doesn't work to lower prices." Novelli said, "We are beginning an all-out effort to lower the high cost of prescription drugs," adding that while AARP "had intended to keep after drug costs all along, the public clamor reinforces that" (Pear, New York Times, 1/17). Novelli said that many AARP members do not understand the new law and are unhappy about changes to the program. He noted that 45,000 to 49,000 people have ended their AARP memberships because the group endorsed the Medicare legislation; some members have since rejoined (Sherman, AP/Las Vegas Sun, 1/16).
Other components of AARP's 2004 agenda include lobbying Congress to:
- Allow U.S. residents to purchase prescription drugs from Canada;
- Address the gap in prescription drug coverage between $2,250 and $3,600 in beneficiaries' out-of-pocket costs;
- Link the Medicare deductible and other costs to the Consumer Price Index, instead of automatically increasing such costs as Medicare drug spending rises;
- Abolish asset tests for low-income beneficiaries;
- Endorse AARP's prescription drug discount card;
- Require private companies administering the drug benefit to divulge to beneficiaries which medications are on their preferred drug lists before beneficiaries enroll;
- Provide more money for research to compare cost-effectiveness of drugs in the same treatment class; and
- Tighten regulation of drug advertising (New York Times, 1/17).
In related news, experts are predicting that a growing number of doctors will cease offering some chemotherapy regimens in response to decreased Medicare reimbursements for cancer drugs administered in doctors' offices, the Los Angeles Times reports. To address reported disparities between what doctors paid for the medications and what they received in reimbursements from Medicare, the federal government in January as part of the Medicare law cut payments on most medications administered in doctors' offices to 85% of their average wholesale price, down from 95%. Medicare payments for some drugs were lowered to 81% of AWP. To offset the decreased medication payments, the Medicare law increased payments to doctors for administering medications by 260% for the first hour of chemotherapy and 9% for each subsequent hour. Deborah Kamin, senior director for cancer policy at the American Society of Clinical Oncology, said that Medicare payments for some common chemotherapy drugs remain lower than the purchase price of the drug. Dr. Jack Keech, a physician in Chico, Calif., said that the payment increase for administration of the drugs "did not cover the shortfall" on reimbursement for some drugs, the Los Angeles Times reports. Kamin said that about 80% of chemotherapy drugs are administered in physicians' offices, and hospitals will be unable to accommodate a substantial increase in outpatients seeking chemotherapy services if large numbers of doctors are forced to send their patients elsewhere for treatment (Gellene, Los Angeles Times, 1/17).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.