Improving the Medicare Market Adding Choice and Protections (1996) / Chapter Skim
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1 Overview
1 Overview
Pages 11-38
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. In 1995 the Medicare program paid $178 billion, 11 percent of the total federal budget, to cover 37 million individuals.
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As it is presently structured the Medicare program provides incomplete protection; for example, it provides poor catastrophic coverage, no coverage for outpatient prescription drugs, and high deductibles and copayments for hospitalization costs.
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Although the Medicare benefit package has remained reasonably constant over the years, enrollees' out-of-pocket medical care costs represent an increasing share of their incomes. In 1994 out-of-pocket spending on acute-care services and premiums averaged 21 percent of the incomes of all elderly individuals, moving to 30 percent on average for the poor elderly and people over age 80 (Moon and Mulvey, 1996)
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managed care program has different types of contracts. Until recently, the only private health plans (risk contracts or risk plans)
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The SHMO demonstrations also receive Medicaid funding. In 1995, HCFA announced a new demonstration project called Medicare Choices, designed to offer flexibility in contracting requirements and payment methods for health plans and other organized delivery systems that wish to participate in 2A variant of the traditional cost contract is the health care prepayment plan (HCPP)
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The Medicare Managed Care Population Although risk contracts make up the bulk of the Medicare managed care market and have accounted for most of the program's growth (with 197 risk contracts serving 3.4 million beneficiaries as of March 1, 1996) , Figure 1-1 and Table 1-1 show that enrollment is concentrated in a few states and a few large HMOs.
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No Medicare Risk-Contract HMOs 1–3 HMOs 4 or more HMOs OVERVIEW FIGURE 1–1 Number of Medicare risk contract HMOs, by state, August 1995.
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Rank Enrolleesb Care Plan Alabama 645,000 (1.7) 19 12,952 2 Alaska 34,000 (0.09)
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Totals do not necessarily equal the sum of rounded components. bMedicare Managed Care Enrollees include: TEFRA Risk, Cost, SHMOs, and Health Care Prepaid Plans.
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Kaiser Family Foundation and The Institute for Health Care Research and Policy, Georgetown University, 1995, p.
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conduct a study on accountability and informed purchasing for Medicare beneficiaries in an environment of broader choice and managed care began against a background of rising concern about the pressing need to dramatically reduce the rate of growth in entitlement spending and focused congressional interest in transforming the Medicare program to give beneficiaries the same health plan choices that have shown promise for holding down costs in the private sector. In the fall of 1995 the U.S.
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Department of Health and Human Services to ensure that beneficiaries receive adequate information about their coverage options. Activities at HCFA In 1995 HCFA announced the Medicare Choices demonstration project, which would allow non-HMO managed care plans such as provider networks and POS plans to enroll Medicare patients for the first time, using a variety of payment mechanisms.
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Kaiser Family Foundation and Institute for Health Care Research and Policy, Georgetown University, 1995; Bureau of the Census, 1995)
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This places a special burden on developing public accountability parameters to ensure adequate performance and access standards. Both the aged and disabled groups have relatively high levels of education, with over 50 percent of each group having graduated from high school or attended college.
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Kaiser Family Foundation and The Institute for Health Care Research and Policy, Georgetown University, 1995, p.
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Much of the literature suggests that Medicare beneficiaries enrolled in HMOs have tended to be healthier than those enrolled in the traditional Medicare program, although a more recent study indicates that the Medicare HMO population is becoming more broadly based and that its overall health status mirrors that of the non-HMO population (Price Waterhouse LLP, 1996)
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Numerous studies, however, have shown that Medicare beneficiaries are poorly informed about what the traditional Medicare program covers and have very limited understanding of what managed care is or what the specific benefits of a particular managed care plan are (Sofaer, 1993; McCall et al., 1986; Rice, 1987; Davidson, 1988)
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Three tasks framed the committee's charge: • to commission background papers from experts and practitioners in the field that review the literature and synthesize aspects of the leading issues and current policy proposals as they pertain to ensuring public accountability and informed purchasing in a system of broadened choice; • to guide, develop, and convene an invitational symposium to (1) examine what is known (or not known)
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Each of these deserves a note of clarification for the purpose of this report. Choice and Managed Care The committee's original name was, "Medicare Managed Care: Assuring Public Accountability and Informed Purchasing for Beneficiaries." At its first meeting the committee felt strongly that responsibility for public accountability and informed purchasing should not be limited to the new plans that would be offered to beneficiaries but should pertain equally to the traditional Medicare program.
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Consumer protections are usually mediated on a case-by-case basis, whereas accountability usually implies a broader concept to include responsibility to a group and to a larger public. During the committee's deliberation the article, "What is 4For purposes of comparison, the Physician Payment Review Commission, in its 1996 Annual Report to Congress, defines managed care as follows: "Any system of health service payment or delivery arrangements where the health plan attempts to control or coordinate use of health services by its enrolled members in order to contain health expenditures, improve quality, or both.
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plans should be held accountable to both Medicare beneficiaries and the public at large: to Medicare beneficiaries because of the contractual arrangements between managed care plans and their Medicare enrollees and to the general public because it pays (through Medicare taxes, Part B premiums, and general revenues) for the care that is provided.
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. The committee wanted the title of its activity to reflect the reality that for a significant part of the Medicare population, the responsibility of informed purchasing will need to be delegated in
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. The success of the choice paradigm will require Medicare beneficiaries to act as consumers and individual purchasers and to move from having a passive role to having an active voice, a new role and responsibility that succeeds only if information and standards of accountability that are directly relevant, meaningful, and accessible to them are developed.
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• The committee was fortunate to be able to commission eight papers -- including five literature reviews and two case studies that review the state-of-the-art and consider a continuum of organizational and policy options for assuring public accountability and informed purchasing -- written by national experts. These papers cover the most critical aspects of ensuring public accountability and informed purchasing for Medicare beneficiaries in an environment of choice.
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-- A paper by Elizabeth Hoy, Elliott Wicks, and Rolfe Faland reviews current best practices for structuring and facilitating consumer choice of health plans, looking at model programs developed by leading private and public purchasers. -- A third paper, by Joyce Dubow, focuses particularly on the special considerations required to move Medicare beneficiaries as a more vulnerable cohort into managed care arrangements.
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Given the committee's broad charge and the many issues that potentially fall under the rubric of ensuring public accountability and informed purchasing in an environment of choice and managed care, the committee believed that it was important and essential to set some priorities, parameters, and caveats regarding its work agenda. They are as follows: 1.
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The committee realizes that severely disabled individuals and dually-eligible beneficiaries (individuals who enrolled in both Medicare and Medicaid) may need different and additional protections with regard to public accountability and informed purchasing.
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The committee's major charge and responsibility was to provide direction and guidance on how to promote public accountability and informed purchasing by and on behalf of Medicare beneficiaries in a new market-oriented environment characterized by choice and managed care. The committee was cognizant that in the new health care marketplace, Medicare beneficiaries as consumers or customers will be given both greater freedom and more responsibility for choosing their health plans and for making many of the important decisions associated with purchasing their health care and judging its value, adequacy, and responsiveness.
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