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Post-Election Spotlight Focuses On Medicare's Nuts and Bolts

MANAGED CARE November 1996. © MediMedia USA
Washington Initiatives

Post-Election Spotlight Focuses On Medicare's Nuts and Bolts

Washington Initiatives

It's unclear whether older Americans were more scared or bemused by the campaign rhetoric about Medicare. But in the wake of the election, Medicare is still scaring a lot of politicians. New data suggest that the Part A trust fund will run out of money in 1999, two years earlier than previous worst-case predictions. At the end of 1996 alone, the books will ooze $6 billion in red ink. fund will run out of money in 1999, two years earlier than previous worst-case predictions. At the end of 1996 alone, the books will ooze $6 billion in red ink.

It's unclear whether older Americans were more scared or bemused by all of the campaign rhetoric about Medicare. But in the wake of the election, Medicare is still scaring a lot of politicians. New data suggest that the Part A trust fund will run dry in 1999, two years earlier than previous worst-case predictions. At the end of 1996 alone, the books will ooze $6 billion in red ink.

Notching back provider payments will no longer suffice. To save Medicare will take far more than the $270 billion in cuts proposed during the last session by the Republicans, but nixed by the White House, according to one brave legislator, California Republican Rep. Bill Thomas. The trick, according to California Democrat Fortney Stark, is how to do this without turning Medicare into a voucher program for managed care.

The pols now speak darkly of changing the structure of the program. But to what? Almost certainly, as promised in the presidential debates, a nonpartisan commission will be established. Estimated working time: one year. Health and Human Services Secretary Donna Shalala says an immediate priority is to "save" about $100 billion, which she says (debatably) will buy a decade to make longer term fixes.

There's no definitive word on how this would be done, but providers would do well to find a rock and get under it. Managed care payments have risen 16 percent in the last two years — an increase that is "not sustainable," according to Health Care Financing Administration chief Bruce C. Vladeck.

According to Stuart Altman, a former chairman of the Prospective Payment Assessment Commission, Medicare is paying HMOs 95 percent of the average cost of care in the fee-for-service system.

"Things are going to get tougher," Altman predicts.

Speaking of Medicare, a couple dozen House members and a fistful of health care organizations urged the Clinton administration to publish for comment a sticky Medicare rule, first raised to similar outrage in 1989, that would require that an HMO's cost-effectiveness be considered in deciding whether to offer it a Medicare risk contract.

HCFA originally planned to publish the rule as a final regulation without a comment period, saying that the cost-effectiveness criterion "would not always be used" and that the agency had already met with a number of providers before issuing the rule.

To make sure HCFA didn't jam the regulation through, a last-minute rider was slapped onto the spending bill for Labor and Health and Human Services to withhold the funds needed to implement the regulation if it is put into effect without a comment period.

HCFA has approved nine point-of-service products for seniors' HMOs and is looking at others.

POS plans allow seniors to go out of network, although with dollar limits, chunky deductibles and coinsurance requirements. Obviously, such plans will require tweaking of capitation and other physician reimbursement methods, and attention to policies for handling prescription payments. In this context, HCFA also revealed that it has worked up a model application against which to measure POS and other plans submitted for Medicare participation. That way, the agency says, it can just look at how a proposed plan differs from the template. It isn't known when this system will go into effect.

Or else you'll receive "close scrutiny," HCFA announced sternly.

HCFA Office of Managed Care Director Bruce M. Fried warned managed care officials that to stifle grievances violates patients' 14th Amendment rights to due process and equal protection.

HCFA itself, he revealed, "is far down the road" on a proposed rule outlining adequate grievance procedures. For one thing, the agency plans to require providers to act on grievances quickly rather than run out the clock on the 60 to 120 days allowed under current law. That rule is expected out by the end of the year.

In the meantime, the agency scolded providers, directing them to shorten their own procedures, sharpen internal communication on who is aggrieved and why, and train staff in the proper way of handling grievances.

HCFA also will decide what services are subject to appeal. In addition to pre-service denials, these will include reductions in care and service terminations, as well as services falling under optional supplemental coverage.

With an eye on its beefed-up authority under the Kennedy-Kassebaum health insurance law, the HHS inspector general's office is searching for 20 experienced attorneys to work on Medicare fraud and abuse.

This will double the existing staff. A new industry guidance branch will render advisory opinions on the applicability of fraud-and-abuse laws, develop new anti-kickback regs and issue periodic fraud alerts.

The IG's office had planned to issue for comment a regulation on how advisory opinions should be issued, but that has been pushed back a bit.

Yes, it's true. The 269 health plans currently contracting with HCFA will have to start collecting information Jan. 1 on a range of Health Plan Employer Data and Information Set (HEDIS 3.0) measures.

The requirement is seen as a major push toward using outcomes and patient perceptions as ways of judging HMO effectiveness. Hospitals, too, could be affected, if their affiliated HMOs start asking for more information.

The first reporting date will be June 30, 1997.

For the first time, the exempt organization division of the Internal Revenue Service is focusing on auditing new forms of health care organizations. In fact, division director Marcus Owens said recently, health care is priority number one. Oh, joy. ... Congress has repealed the Medicare/Medicaid Data Bank measure that it enacted in 1993. The data bank had been designed to allow the agency to recover payments mistakenly made by Medicare and Medicaid when a third party, usually an employer, was the primary payer. ... With stately deliberation, the Department of Veterans Affairs is edging up on its pharmacy benefits program, with reviews completed on 15 classes of drugs. "By this time next year, we will have a national formulary," says Albert Patterson, chief of drug and pharmacy product management at the Edward Hines Jr, Veterans Administration Hospital in Hines, Ill. Under contracts already completed, the VA saved $14 million on ulcer medication alone. In addition to the formulary, the Veterans Administration is at work on standardized treatment plans. ... Look for institutional performance reports to be posted on the Internet by 1998, said the Joint Commission on Accreditation of Healthcare Organizations, which is again accrediting HMOs and will start to accredit PPOs. Some hospitals quickly registered their concern, saying that the reports can be misinterpreted or even used nefariously without an accompanying explanation of the report by the hospital in question. "Great! Get out into the community and explain your report," the Joint Commission responded — or words to that effect.

— Jean Lawrence

MANAGED CARE November 1996. ©1996 Stezzi Communications