MEDICARE+CHOICE: HMOs Want ‘Mid-Course’ Correction
As HMOs jump from the Medicare market around the country and enrollment growth slows in Medicare HMOs, the American Association of Health Plans warned yesterday that "mid-course corrections" are necessary if Medicare+Choice is to remain viable. AAHP President Karen Ignagni noted that the future of Medicare "is really dependent on the long term presence of managed care." She said, "Unless we see mid-course corrections, the long-term future of Medicare is at stake" (Rovner, CongressDaily, 9/24). The AAHP attributed the recent problems of Medicare HMOs to medical inflation, lower-than excepted payment increases and increased regulatory burdens. To alleviate the problems, it proposed that health plans be given an opportunity to refile their 1999 rate proposals, and a "more reasonable transition period" for health plans to comply with the regulatory requirements for Medicare+Choice (AAHP release, 9/24).
Industry officials warned that without the adjustments, more HMOs "are likely to announce reductions in their Medicare operations." Ignagni said that if plans are allowed to revise their rates, "some companies that had decided to pull out of certain markets may reverse course." The Wall Street Journal reports that health plans must notify the Health Care Financing Administration by Oct. 1 as to whether or not they are participating in the Medicare program next year. A HCFA spokesperson said that the agency had not yet decided if health plans will be allowed to revise their rates for next year. However, some Clinton "administration officials expressed concern that Medicare beneficiaries will end up paying more while their extra benefits, such as prescription drugs, are diminished. And some analysts questioned "whether HMOs really face a cost squeeze or merely see an opportunity to improve their bottom lines." The Journal notes that despite high-profile pull-outs by Medicare HMOs in some markets, "Medicare officials have received applications from HMOs to expand service into more than 40 counties" (McGinley, 9/25).
In a letter to HCFA administrator Nancy Ann Min DeParle, the AAHP addresses several issues that require the input of both HCFA and Congress:
- The stability of Medicare+Choice payments could be adversely impacted by the new risk adjustment mechanism scheduled for Jan. 1, 2000.
- Adoption of a 10% numerical standard for demonstrating quality improvement contrasts sharply with the explicit rejection of a numerical standard by the National Committee for Quality Assurance.
- The regulations impose new requirements associated with provider-plan relationships that will be expensive to implement and will not add value for beneficiaries because their implementation will divert plan resources that should otherwise be used for patient care.
- HCFA has structured a regulation containing provisions that require absolute compliance that a Medicare+Choice organization never can attain.
- No comprehensive analysis has been conducted of the administrative costs of the requirements associated with the regulation (AAHP release, 9/24).