Medicare changes could spur HMO competition Trial of plan might be in this area, official says

July 24, 1996|By M. William Salganik | M. William Salganik,SUN STAFF

An official of the federal agency that administers the Medicare program said yesterday it would consider some rule changes for a proposed test in the Baltimore market of competitive bidding for Medicare by health maintenance organizations.

Barbara S. Cooper, deputy associate administrator for policy for the Health Care Financing Administration, said HCFA would consider allowing HMOs to charge different rates in different counties. Also, she said, HCFA might consider allowing more than one round of bidding.

Despite objections that have delayed the experiment -- HCFA initially had hoped to be seeking bids about now -- Cooper said HCFA intends to go ahead. However, she said, there is no firm timetable, and the agency wants to continue consulting with the HMO industry and the Maryland congressional delegation, who have questioned whether the experiment should be conducted in Baltimore.

Cooper spoke at a breakfast meeting of the Greater Baltimore Committee Health Care/Insurance Industry Group. Also at the breakfast, Marty Roach, director of the Maryland Association of Health Maintenance Organizations, argued against conducting the test in the Baltimore market.

Currently, when Medicare recipients choose an HMO, HCFA pays the HMO 95 percent of the average cost of care for fee-for-service Medicare recipients in that county. HCFA is seeking to test a number of ways of reducing costs, Cooper said. One potential way, she said, was to see if competitive bidding could allow the market to work to produce lower charges by HMOs, since the HMOs get discounts from doctors and have healthier-than-average populations.

Other cost-cutting methods are the subject of demonstration projects in other markets, she said.

Cooper said HCFA chose Baltimore for the bidding test because it has enough HMOs to provide true competition; its current payment rate is above the national average, so there is room for savings; and it has a fairly small Medicare HMO enrollment currently, so the test would not disrupt long-term relationships.

Roach, however, said the system could result in discouraging seniors from enrolling in HMOs. Currently, the HMOs are offering membership without a monthly premium for the member, but any that bid above the level approved by HCFA would have to start charging.

Imposing monthly premiums, she argued, could mean some of the six HMOs currently offering Medicare plans would be forced out of the market.

Also, she said, the Baltimore market provides a poor test of bidding since HMOs cannot negotiate lower rates with hospitals -- hospital rates in Maryland are set by a state commission -- and hospital charges constitute 57 percent of medical expenses.

Pub Date: 7/24/96

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