About 60% of Medicare Managed care enrollees are in just six states
California 1,209,046
Florida 494,302
Pennsylvania 212,464
Arizona 190,487
New York 185,533
Massachusetts 91,356
Source: HCFA, Office of Managed Care, March 1996
Prepared by the AARP Public Policy Institute, April 1996
About 10% of the Medicare market is now in managed care, but according to Paul Saucier of the National Academy for State Health Policy, Portland, ME, that number is expected to climb to 25% by 2002. In California, the allure of extras offered by Medicare HMOs, including prescription drugs, eye care and dental care, has already boosted Medicare HMO enrollment to over that 25% figure.
The impact of Medicare managed care will extend far beyond the borders of the Medicare program. (Witness the frenzy of activity over provider-sponsored networks at the prospect of allowing these groups to participate in the Medicare managed care program.)
Here, several experts discuss how growing Medicare managed care enrollment will impact state Medicaid programs and other programs for low-income elderly, rural health, the home care market and private purchasers such as employer coalitions.
Rural health
Andrew Coburn, director of the Maine Rural Health Research Center at the Muskie Institute of Public Affairs at the University of Southern Maine, Portland, ME
Medicare managed care in rural communities is not occurring enough to talk about, although there are contracts for Medicare managed care in some areas. The real impact of Medicare managed care at this point is the expectation among rural providers that it is going to happen and that they will need to contract to provide managed care. We have been told by providers that that expectation is influencing the rate at which they are talking with each other and taking steps to organize into networks. They know that if they want to hold on to Medicare beneficiaries, who can account for as much as 60-70% of the rural market, they need to provide panels of providers. The fear is that if they are not prepared to contract, managed care plans will contract with providers in adjacent urbanized areas that have not traditionally taken care of these patients.
What we’ve found is that the biggest driver of managed care in rural areas is Medicaid. Medicare managed care will accelerate the development of new organizational and financial structures that are the building blocks to effectively provide managed care.
The problem for many rural areas is that capitation rates under the adjusted average per capita cost (AAPCC) are low. The capitation rate of $225-250 in many rural areas keeps HMOs out of the market. It takes a capitation rate of at least $275-300 to make Medicare managed care work in rural areas and to incentivize consumers to sign on with managed care.
Even if the AAPCC is fixed, as in legislation proposed in the House recently ( the Rural Health Development Act would effectively set a floor for the AAPCC) ,there are still significant barriers to Medicare managed care beyond the issue of are there enough providers out there?’
How interested rural consumers are in enrolling in managed care is an unknown question. We don’t know anything about how they differ from urban consumers. Managed care is a much less familiar product in rural areas.
Private purchasers
Paul Pietzsch, president, Community Health Purchasing Corp. Des Moines, IA
A key idea, as Medicare managed care develops, is that purchasers for the public sector and the private sector need to get together in order to sen#d a common signal to the health care marketplace. Purchasers need to coordinate specifications for accountability, outcomes, report cards. Having two sets of rules is burdensome and less efficient. If public and private purchasers don’t develop a joint vision and joint objectives, they’ll cancel each out and one will go left and the other right. Providers won’t know how to respond.
Our buying group for employers accounts for about 20% of the marketplace. In working with doctors and hospitals to develop continuous quality improvement and report cards, they remind us that we’re big, but Medicaid and Medicare, which account for about 45% of the market, are bigger. Providers tell us that whatever Medicare and Medicaid want to do will impact on their ability to do what we’re asking them to do.
If there are different incentives for providers, we won’t be able to fundamentally change the behavior of the system. If private purchasers are paying first dollar coverage for wellness and prevention and charging copayments and deductibles for emergency room and hospital use while public purchasers don’t offer coverage for preventive services and don’t have copayments and deductibles for emergency room and hospital use, it complicates providers’ ability to respond to payment systems. We’ve also had some discussions with the Health Care Financing Administration (HCFA) on the need for consistent report cards and accountability standards.
State Medicaid programs
Paul Saucier, project director, National Academy for State Health
Policy, Portland, ME.
One plausible scenario, as we move toward increasing Medicare managed care enrollment, is that this will reduce the pressure on states, which are also providing health-care benefits to elderly low-income recipients through their Medicaid programs. But, it depends on how the market develops.
Theoretically, Medicare managed care would be a good thing for states picking up the cost of drugs in their Medicaid dual eligible program, for example. But there’s also the potential risk of cost-shifting to the Medicaid program. How would Medicaid know to reject a claim if the HMO charges drug costs for a dual eligible to the state program? The state wouldn’t necessarily know which dual eligibles were enrolled in Medicare HMOs. These are two different systems. The states and HCFA have to share information and work together to assure accountability and make sure plans aren’t playing one payer against the other.
Another issue is that, to date, risk-contract plans have not been of great interest to the states because they don’t necessarily have long-term care experience and, also, because there simply are not enough risk-contract plans now to do statewide coverage. States are increasingly looking for statewide solutions. They are willing to do pilot programs, but their unit of reference is often the whole state. Because the AAPCC can differ dramatically from county to county, there needs to be some kind of uniformity imposed on rates for statewide coverage. The rule that 50% of plan enrollment be non-Medicaid and non-Medicare is also an impediment.
Most observers are expecting changes in the Medicare program that will lead to even faster growth in managed care at the same time as the population is aging. The projection is that 25% of the Medicare population will be enrolled by 2002. As plans start moving into medium markets, perhaps the web of plans can connect plans to provide for statewide coverage. As enrollment increases in the Medicare population, there also may be less opportunity for favorable selection which is a concern now based on the experience we’ve seen in the plans to date.
State pharmaceutical assistance programs
Tom Snedden, director of the Pharmaceutical Assistance Contract for the Elderly (PACE), Harrisburg, PA
I don’t think Medicare managed care will make programs like PACE obsolete anytime in the near future. Older people are resistant to joining managed care plans, free prescription drup benefits or not. HMO certified plans are doing a good job of boosting enrollment but the penetration is not anywhere near 25%. I think the projections of enrollment are overoptimistic.
Many plans are using free prescription drug coverage as an inducement and enticement for Medicare beneficiaries to enroll, but I don’t think they’ll be able to continue to do that for very long. Our costs for providing prescription drug coverage in Pennsylvania to those over 65 have quadrupled in the 12 years since the program began. The cost is now $220 million, which includes rebates from pharmaceutical manufacturers. Plans will find it necessary before long to charge premiums for the prescription benefit, which will dampen the demand. When you’re trying to make an impression, the prescription piece is important.
The history of our program is that, as effective as we try to be in controlling costs, overall costs go up even though we serve a smaller population, and the income threshholds have been adjusted only very minimally. The budget has increased because the cost of drugs has gone up dramatically and because people are using more drugs.
Only 10 states have programs for prescription drug coverage for the elderly. The trend stopped around 1987 because of budget problems in the states. But we continue to hear from almost every other state. They would all like to start a program like PACE, but you need a minimum of $50 to $100 million; otherwise forget it.
We have elderly people now who are in Medicare risk-contract plans who continue to use PACE. We are trying to coordinate coverage with the six HMO-certified plans in the state. Plans are upset because enrollees are not using their prescription drug benefit. Because of loss ratios, they have got to show expenditures in this item and they’re not anywhere near. Also, they want Medicare clients to see the benefit of belonging to a managed care plan. Beneficiaries are using PACE instead of their plan’s benefit because our copayment is lower; also the pharmacists prefer to dispense under PACE because their payment is higher. We are working to find the overlap and to coordinate the benefits so that those who are eligible for PACE and who also are enrolled in a Medicare risk-contract plan exhaust the managed care plan’s benefit first and then use PACE at that point.
Home care
Bill Dombi, vice president for law, National Association for Home Care, Washington, DC
Under managed care, there is a move to use use fewer home care aide services and to place greater responsibility on the family. This can be a major burden on family members. The attitude of many managed care plans still is that a significant portion of home care services are not medically necessary and should be handled by the individual or by family and friends. Home care services tend to be limited to teaching and training the patient and not supported with direct services.What we’re seeing in areas with high managed care enrollment is that managed care even impacts the delivery of home care services in the fee-for-service sector, down to the development of care plans. In states like California we see home care patients averaging 40 visits while in Texas the average is well over 100.
The home care benefit has grown signficantly under Medicare in the last six years. Following a suit filed against the government by our organization over denial of coverage for home care services, home care spending has increased from $2.5 billion in 1989 to $17 billion currently. There is no cap on home care coverage if patients are confined because of their condition and require some skilled nursing service. But, home care cannot be around-the-clock. It must be part-time or intermittent.
One of the positive effects of managed care is that it is helping to align the industry, clinically, administratively and financially, for changes under Medicare. Prospective payment in home care will go into effect next year.
The prognosis for the industry is that there will be more mergers and consolidations, not only across broad geographic areas, but across services such as home health care, medical supply and infusion therapy. There will be integration in a formal sense and also in a virtual sense, that is groups will join together for managed care contracts only.
About 60% of Medicare Managed care enrollees are in just six states
Ca 1, 209,046
FL 494,302
PA 212,464
AZ 190,487
NY 185,533
MA 91,356
*HCFA, Office of Managed Care, March 1996
Prepared by the AARP Public Policy Institute, April 1996
Five experts offer their assessments. Increasing Medicare managed care enrollment will have wide-ranging impact on health care
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.
