Medicare pilot project now in doubt HMOs, lawmakers are concerned about competitive bidding

Cardin schedules meetings

Money-saving test could be moved from Baltimore area

June 17, 1996|By Diana K. Sugg | Diana K. Sugg,SUN STAFF

Responding to pressure from managed care plans and Maryland's congressional delegation, federal officials have agreed to reconsider a pilot project intended to save the government money on coverage of Medicare patients in Baltimore and six Maryland counties.

The experiment, scheduled to start Jan. 1, is one of several efforts by the U.S. Health Care Financing Administration (HCFA) to get a better deal from managed care plans, mainly health maintenance organizations (HMOs), that enroll Medicare patients.

It would be the nation's first test of competitive bidding to determine what rates HMOs should be paid, with the goal of cutting the money they get per patient. The step could have sweeping implications for patients -- mostly the elderly -- touching everything from premiums to benefits to choice of plans.

But the initiative may be delayed or moved because of concerns raised by HMOs and several lawmakers, led by Rep. Benjamin L. Cardin, a Democrat who represents Maryland's 3rd District. He is setting up meetings for the next few weeks among the parties, including HMO representatives, senior citizen groups, hospitals, lawmakers and HCFA officials.

"We have a commitment that they will re-evaluate whether Baltimore is an appropriate place for a pilot, and if it is determined to be Baltimore, what modifications can be made to alleviate concerns," said Cardin, who serves on the House Ways and Means Committee's health subcommittee, which has jurisdiction over Medicare.

One problem is that the project's start date coincides with the launch of a statewide initiative to move roughly 210,000 Medicaid patients into HMOs. It is unclear whether the managed care plans are prepared to handle both moves at once.

Another issue is Maryland's rate-setting system for hospitals. The results of the experiment might not apply in other states because none has such a system.

Also, under the project, plans would be paid the same rate in seven counties, though average health costs per month for a Medicare patient vary from a high of $624.74 in Baltimore City to $420.70 in Queen Anne's County. The fear is that HMOs -- being paid the same no matter what county patients were in -- would migrate toward the cheaper counties, leaving few options for those in more expensive areas.

The jurisdictions in the test area are Baltimore, and Baltimore, Anne Arundel, Howard, Carroll, Harford, and Queen Anne's counties. Roughly 9,000 of the 325,000 Medicare recipients in the test area are enrolled in managed care plans. Six managed care plans operate in the Maryland Medicare market, and two others are awaiting federal permission.

"For a lot of people, the status quo is just dandy, and when you try to make changes, people are nervous," said Barbara Cooper, acting director of HCFA's Office of Research and Demonstrations. "One time we announced that we were going to do competitive bidding for labs, and the lab industry went crazy and went to Congress to try to get it stopped."

In most places, Medicare beneficiaries can choose between the traditional fee-for-service system -- paying more out-of-pocket costs for the freedom to pick their own physicians -- or the new managed care plans. These plans, often offer no out-of-pocket costs and more benefits. But visits to specialists and diagnostic tests are restricted.

Studies have found that healthier seniors often end up in HMOs, so the government isn't saving any money -- and may be paying too much. The Maryland project was proposed as a way to try to reduce costs. All the plans that have Medicare enrollees would be required to submit a bid. Once HCFA determines what the right rate should be, any plan that has submitted a higher bid would be forced to pass on that difference to patients in the form of a premium.

The premiums would make HMOs so unattractive that all Medicare customers would end up in the plans without premiums, HMO representatives said.

They also said that the project's design would hinder competition, because the plans would have to participate and offer the same benefit package. That would prevent them from customizing benefits, said Camille Dobson, spokeswoman for the Maryland Association of HMOs. She also said it would create problems with the current system, in which they tailor packages for employers who have made HMO coverage a benefit for their retirees.

Cardin said HCFA does need to change how it determines the rates, so the agency isn't overpaying, but he wants to make sure that any new method doesn't diminish the number of plans available to the elderly. He also is concerned about how enrollment and marketing are conducted.

In Maryland and across the country, elderly and disabled people covered by Medicaid and Medicare say they have been tricked and lied to by managed care marketers trying to enroll them. Under the project, HMOs would be allowed to do marketing, but a third-party contractor would do the enrollment and hold information sessions to explain the system to the patients, Cooper said.

Sean Cavanaugh, associate director for policy development at the state's rate-setting commission, the Health Services Cost Review Commission, said he didn't believe the project would hurt the system.

"We think it holds some potential to be very productive," he said. "From HCFA's vantage point, this is great. But after the fact, when some plans have to live with it, you have to wonder whether they can in fact live with it. Will this drive them out of the market if they have to charge a premium?"

Pub Date: 6/17/96

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