ED providers may find few gains, many costs under Medicare+Choice
ED providers may find few gains, many costs under Medicare+Choice
Expanded Medicare options promise extras for patients. But what about providers?
Medicare officials are offering seniors expanded options in an effort designed to boost enrollment in managed care and to shift millions of patients away from the more costly Medicare fee-for-service program. But as the government moves to increase choice for Medicare beneficiaries, emergency physicians are uncertain whether any of the innovations will include benefits for them.
Traditionally, Medicare patients have been a stable patient population known not to be high, erratic users of emergency department (ED) services. Unlike their much-younger, insured counterparts, Medicare patients have been predictable in their use of emergency services though not exactly lucrative as a source of patient revenue.
But with many beneficiaries being encouraged to enroll in a variety of pre-paid managed care options, utilization trends might change as thousands of seniors begin viewing EDs as another source of acute primary care. And some emergency physicians worry whether the increased enrollments in Medicare managed care will further complicate the ongoing power struggle between providers and payers over the prudent layperson's standard.
"We're extremely concerned about the language that Medicare ultimately chooses to ensure that patients are covered by the prudent layperson's standard as these programs roll out," says Charlotte S. Yeh, MD, chairman of the government affairs committee of the American College of Emergency Physicians in Dallas, TX.
Reform will alter ways providers get paid
In an unprecedented action, the federal government has released a set of massive new rules that will ultimately affect some 37 million Medicare beneficiaries. The reforms, an outgrowth of the federal Balanced Budget Act of 1997, essentially christened the implementation of the so-called Medicare+Choice.
The program not only changes the way many Medicare patients will be covered by the federal health care program through contracts with private insurers, it includes accompanying budget act provisions that will also inevitably alter the way providers will be paid for rendering services to Medicare patients.
For physicians and hospitals, especially those in emergency medicine, the changes to the existing Medicare program will, in many cases, involve a shift toward greater amounts of capitation and heavier price discounting from conventional fee-for-service payments. Exactly how emergency medical groups will be touched by these reforms remains open because most emergency practitioners are not presently capitated, although many hospitals operate under capitated risk arrangements.
The changes in payments and rates will take time to be fully felt, a year at least, according to government officials. But physicians are being advised by policy analysts in Washington, DC that they are apt to feel the initial effects of the massive reform fairly quickly as efforts unfold beginning this year to correct perceived inconsistencies in the way providers are paid in various regions of the country.
Although most of the changes are intended to directly affect the number of managed care organizations (MCOs) that presently do business with Medicare, providers will ultimately feel a ripple effect as payment rates change and health plans attempt to adjust to the new game plan issuing from Washington. "Some physicians may see a loss of Medicare patients if health plans find it too difficult to adapt to the new Medicare options," says Sarah Thomas, a senior analyst with the Washington, DC-based Medicare Payment Assessment Commission.
For more than a year, White House officials have undertaken steps to correct what has been described as payment-rate gaps in the Medicare managed care system. The gaps were said to be inadvertently created by the formula Medicare has used to determine payment rates to health plans. The formula uses regional economic weights on an Average Adjusted Per Capita Cost (AAPCC) basis in setting rates.
Existing payment formula judged unfair
But the formula unfairly doles out large yearly increases to some health plans in some states, while short-changing others. In addition to making the annual payment rate increases fairer under the new reforms, the effort would also save Medicare millions in unspecified dollars. The Clinton administration contends that Medicare is overspending on managed care by as much as a $1billion per year.
The rate adjustment is just one of a series of reforms aimed at stimulating greater enrollment by seniors in managed care. The regulations were ordered last year by the federal Balanced Budget Act of 1997, which gives Medicare beneficiaries access to several different types of mostly managed health plans. The expanded programs, known collectively as Medicare+Choice include:
· Health maintenance organizations (HMOs) that already contract with Medicare;
· HMOs with point-of-service options, which allow beneficiaries to go outside the network but at a higher cost;
· Provider-sponsored organizations (PSO), which are health care provider groups that contract directly with the government to function like licensed HMOs;
· Preferred-provider organizations (PPOs), flexible programs that allow beneficiaries to get services fromnwithin the network or go outside the provider panel and still have a portion of their medical expenses paid under the program; and
· Private fee-for-service plans, indemnity insurance programs that resemble conventional Medicare payments and traditional benefits but are administered by a private insurer, which will determine exact payments.
In addition, as part of the series of choices, the Health Care Financing Administration (HCFA) will offer up to 390,000 beneficiaries initially high-deductible insurance policies and savings accounts specifically set aside for medical care.
The budget act also calls for HCFA to revamp the way Medicare pays providers for indirect and graduate medical education costs by making payments go directly to hospitals and medical schools rather than as part of the annual Medicare cost report.
But the biggest bone of contention could be the new rate-setting formula for health plans. Last year, health care organizations applauded the proposal on medical education but expressed mixed reactions to the rate-adjustment idea.
According to the budget plan, as of last January Medicare began paying contracting HMOs the higher of either $367 per-member-per-month (PMPM) for each enrollee or an amount equal to 102% of the 1997 PMPM rate, which represents a two percentage point increase. In either case, the rate adjustment reflects unspecified cost savings over the conventional fee-for-service program.
New rate-setting formula will hit regions differently
HCFA had considered using another method of adjusting rates in certain parts of the country where the fixed PMPM rate is presently higher than the national average rate-a blended local/national rate using the AAPCC-based formula as a basis for the increases. But HCFA decided to delay its implementation until 2000 due to a lack of funding to pay for it.
As is, the plan is expected to hit different regions of the country to different degrees. In early HCFA projections, it is expected to freeze spending in highly populated, high-cost urban areas such as New York, slow spending in mid-size counties, and raise rates for the smallest counties while guaranteeing them a set PMPM minimum.
In general, rural counties are expected to see the most sizable HMO rate increases, while inner city providers in places such as Bronx, NY would see extremely small year-to-year increases; however, providers may not actually see the fruits of any rate adjustments as reimbursements. James Moser, a senior economist with the American Medical Association in Chicago, IL was one of the first to sound the message: "Once you make the changes, let's make sure the money gets to physicians," he told an editor at American Health Consultants, the publisher of this newsletter.
That may not happen, according to some observers. A recent article in The Wall Street Journal cautioned providers that Medicare's plan was not so much designed to improve access and options for seniors but to find cheaper ways to finance their health care.1 "Medicare's Austerity Eases More Elderly into Frugal HMOs," the article's headline stated.
Under the plan, physicians are apt to have to spend more "face-time" with patients, and find tougher drug protocols and less clinical independence than ever, according to the piece. And within the mix of various plan options, some providers believe certain hospitals and physicians could end up treating the sickest, most expensive Medicare patients, depending on the HMO that serves their market.
But some emergency physicians see a brighter side to the trend. "Overall, it sets an important precedence for the medical community," says Larry Bedard, MD, a former president of the American College of Emergency Physicians and a practicing physician in Sausalito, CA.
Bedard expects Medicare+Choice to hasten the consolidation of emergency medical groups into large, efficiently run organizations with the fiscal and clinical strength to influence contracting and clinical decision-making among hospitals and payers.
The expansion of options will also revitalize the growth of PSOs, Bedards says, which have begun to languish due to rigid financial and regulatory requirements that have prevented all but the most powerful medical groups from meeting.
"Ultimately, everything will depend on the individual payment rates and contract. In that sense, Medicare managed care will be no different to us as physicians than any commercial contract today. Only the patients and their needs will vary," Yeh concludes.
Reference
1. Anders G. Medicare's austerity eases more elderly into frugal HMOs. The Wall Street Journal, April 16, 1998: A1and A10.
Subscribe Now for Access
You have reached your article limit for the month. We hope you found our articles both enjoyable and insightful. For information on new subscriptions, product trials, alternative billing arrangements or group and site discounts please call 800-688-2421. We look forward to having you as a long-term member of the Relias Media community.