Expect Changes In Medicare HMO Inpatient Rates


Per the Balanced Budget Act and Medicare, expect changes in payment rates for Medicare HMOs beginning in a couple of years. The budget legislation mandated that the Health Care Financing Administration implement a risk-adjusted payment system for all Medicare+Choice plans. HCFA says it will be ready with the new risk-based payment methodology by 1999 that will factor in the health status of a plan's Medicare members.

HCFA will probably adopt the Principal Inpatient Diagnostic Cost Group formula, which adjusts payment rates according to the diagnosis that the patient receives upon hospital admission. The more risk-prone a patient is when entering the hospital, the greater the payment.

Some experts predict that payments will increase — or decrease — by up to 40 percent for plans most affected by the inpatient risk adjustment. HCFA says that overall Medicare payments may be reduced an average of 9 percent as a result of risk adjustment, but that analysis is based on an estimate of HMOs' new — not current — enrollees.

Alice Rosenblatt, WellPoint Health Network's leading actuary, says the effects on smaller plans probably will be the most significant. "My biggest concern is what impact big payment changes will have on supplemental benefits for beneficiaries. You can't give the drug benefit one year, then take it away the next."

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