PRIVATE HEALTH PLANS IN MEDICARE
The Medicare Risk Contract Program in its current form
(section 1876 of the Social Security Act) was authorized as
part of the Tax Equity and Fiscal Responsibility Act of 1982
(TEFRA). It gives Medicare beneficiaries the option to enroll
in a private health plan, typically a health maintenance
organization (HMO). (An HMO is a type of managed care plan that
acts as both insurer and provider of health care services to an
enrolled population.) The program receives a predetermined, per
capita payment from Medicare for each enrolled beneficiary and
is at risk for providing each enrollee Medicare-covered items
and services. The Risk Contract Program built upon an earlier
Medicare provision, originating in the 1970s, which authorized
private plans to contract with Medicare on a cost-reimbursement
basis.
The Balanced Budget Act of 1997 made several major changes
to underlying Medicare law dealing with private health plans.
First, it replaces the risk program (and most other Medicare
managed-care options, such as plans with cost contracts) with a
program called Medicare+Choice (new part C of Medicare).
Second, it creates a new set of private plan options for
Medicare beneficiaries. Third, it establishes a new method for
paying participating private health plans. Under the Balanced
Budget Act of 1997, every individual entitled to Medicare part
A and enrolled in part B will be able to elect the existing
package of Medicare benefits through either the existing
Medicare fee-for-service program (traditional Medicare) or
through a Medicare+Choice plan.
This section describes the rules and standards under which
both the old and new program operate. The Risk Contract Program
is characterized as the ``current'' program; the new program is
generally referred to as Medicare+Choice.
Plan Options and Rules for Enrollment Before the Balanced Budget Act of
1997
Prior to the implementation of Medicare+Choice, which
should be fully in place by 1999, persons enrolling in Medicare
have two basic coverage options. They may elect to obtain
services through the traditional fee-for-service system under
which program payments are made for each service rendered.
Alternatively, under section 1876 of the Social Security Act,
they may elect to enroll with a managed care organization which
has entered into a payment agreement with Medicare.
Three types of managed care organizations are authorized
under section 1876 to contract with Medicare: an entity that
has a risk contract with Medicare, an entity that has a cost
contract with Medicare, and a health care prepayment plan
(HCPP) that has a cost contract to provide Medicare part B
services. Risk contracts are frequently referred to as TEFRA
risk contracts and cost contracts are frequently referred to as
TEFRA cost contracts because the TEFRA legislation established
the rules governing these types of contracts.
Risk contracts
Both HMOs and competitive medical plans (CMPs) are
permitted to sign risk contracts with Medicare. (A CMP is a
health plan that is not a federally qualified HMO but that
meets specific Medicare requirements.) By contrast, provider-
sponsored organizations (PSOs) and preferred provider
organizations (PPOs) that are not organized under the laws of a
State and are neither a federally qualified HMO or CMP are not
eligible to contract with Medicare under the Risk Contract
Program. Allowing PSOs and PPOs to compete for Medicare
beneficiaries is one of the major changes made by the Balanced
Budget Act of 1997.
Medicare makes a single monthly capitation payment for
each of its enrollees. This payment has been called the
adjusted average per capita cost (AAPCC). The Balanced Budget
Act of 1997 changed the capitation payment methodology, as
discussed below. In return, the entity agrees to provide or
arrange for the full range of Medicare services through an
organized system of affiliated physicians, hospitals, and other
providers.
In general, a beneficiary in an area served by an HMO or
CMP with a risk contract may voluntarily choose to enroll in
the organization. With a few exceptions, the beneficiary must
obtain all covered services through the HMO or CMP, except in
emergencies. Typically, the beneficiary is not responsible for
many of the cost-sharing charges associated with traditional
Medicare. In some cases, the beneficiary may be charged a
monthly premium by the organization. In 1995, risk plans were
authorized to offer point-of-service (POS) options in which
enrollees can go out of plan for services, with cost-sharing
responsibilities varying with the choice of provider (higher
cost sharing is associated with the use of nonnetwork
providers).
Cost-based plans
Beneficiaries may also enroll in organizations with TEFRA
cost contracts. These entities must meet essentially the same
conditions of participation as risk contractors. Under a cost
contract, Medicare pays the actual cost the entity incurs in
furnishing covered services (less the estimated value of
beneficiary cost sharing).
The other type of cost-based arrangement is the health
care prepayment plan. A HCPP arrangement is similar to a TEFRA
cost contract except that it provides only part B services.
Further, there are no specific statutory conditions to qualify
for a HCPP contract.
Enrollment
With certain exceptions, any Medicare beneficiary residing
in the area served by a risk plan or cost plan may enroll.
Under the rules in effect until Medicare+Choice is implemented,
the plans must have an annual open enrollment period of at
least 30 days duration. During this period, they must accept
beneficiaries in the order in which they apply up to the limits
of its capacity, unless doing so would lead: (a) to violation
of the rule requiring HMOs to have no more than 50 percent of
their enrollees as Medicare-Medicaid beneficiaries, or (b) to
an enrolled population unrepresentative of the population in
the area served by the HMO. As of January 1, 1997, the
Secretary is authorized to waive this ``50-50 rule'' if she
finds it in the public interest. This provision was included in
the Balanced Budget Act of 1997, which also repeals the 50-50
rule as of January 1, 1999.
An enrollee may request termination of his or her
enrollment at any time. An individual may file disenrollment
requests directly with the HMO or at the local Social Security
Office. Disenrollment takes effect on the first day of the
month following the month during which the request is filed.
The HMO may not disenroll or refuse to reenroll a beneficiary
on the basis of health status or need for health services.
The Secretary is authorized to prescribe procedures and
conditions under which eligible organizations contracting with
Medicare may inform beneficiaries about the organization.
Brochures, application forms, or other promotional or
informational material may be distributed only after review and
approval by the Secretary of Health and Human Services (DHHS).
HMOs must provide enrollees, at the time of enrollment and
annually thereafter, an explanation of rights to benefits,
restrictions on services provided through nonaffiliated
providers, out-of-area coverage, coverage of emergency and
urgently needed services, and appeal rights. A terminating HMO
must arrange for supplementary coverage for Medicare enrollees
to pay for certain cost-sharing charges during any preexisting
condition exclusion under their successor coverage for the
lesser of 6 months or the duration of the exclusion period.
Trends in Plan Availability and Enrollment
As of 1997, a small but growing portion of Medicare
beneficiaries are enrolled in managed care plans. Recent growth
in enrollment reflects increases in both the number of plans
with Medicare risk contracts and the number of Medicare
enrollees per plan.
Availability of Medicare risk plans
In the 1980s, many large HMOs did not participate in
Medicare. Participation by health plans, however, has grown
rapidly in the past 5 years, especially since 1993 (chart 2-1).
CHART 2-1. NUMBER OF RISK PLANS PARTICIPATING IN MEDICARE, 1987-97
Note: All data are for December, except that June data are
used for 1997.
Source: Physician Payment Review Commission (now Medicare
Payment Advisory Commission) analysis of data from Health Care
Financing Review, 1996 Statistical Supplement and Medicare
Managed Care Contract Reports.
By law, each risk plan is available for a specific service
area. Plans define their service areas as a set of counties and
partial counties (partial counties are identified by ZIP code).
Typically, a plan serves some portion of a single State or a
multistate metropolitan area. Analysis by the Physician Payment
Review Commission (PPRC; 1997) shows that, in June 1997, 67
percent of all Medicare beneficiaries had at least one risk
plan available to them (chart 2-2). (PPRC has now merged with
the Prospective Payment Assessment Commission to become the
Medicare Payment Advisory Commission or MedPAC.) Almost 60
percent of all beneficiaries had a choice of plans, and one-
third had five or more available to them. In 2 years, the
proportion of all beneficiaries without access to at least one
risk plan had dropped 12 percent, while the number with access
to at least five plans had more than doubled.
CHART 2-2. DISTRIBUTION OF MEDICARE BENEFICIARIES BY NUMBER OF RISK
PLANS AVAILABLE IN THEIR AREA, 1995-97
Note: Area is defined as the ZIP codes in a risk plan's
service area.
Source: Physician Payment Review Commission (now Medicare
Payment Advisory Commission) analysis of Health Care Financing
Administration enrollment data.
Access to risk plans, however, is much greater in urban
areas than in rural areas (chart 2-3). All residents of central
urban areas have at least one plan available, and most have
more. By contrast, rural beneficiaries rarely have even one
plan available.
Enrollment trends for Medicare managed care
Historically, few Medicare beneficiaries have enrolled in
HMOs, but the numbers have risen steadily to 14.2 percent of
all beneficiaries in mid 1997 (chart 2-4). The largest numbers
and all of the growth have been in risk plans, in which
enrollment increased from 3.3 percent in 1990 to 12.6 percent
in June 1997. By contrast, enrollment in cost contracting plans
fell to a low of 1.6 percent in 1997. Nationally, enrollment in
risk plans grew about 30 percent from June 1996 to June 1997.
CHART 2-3. DISTRIBUTION OF MEDICARE BENEFICIARIES IN URBAN AND RURAL
LOCATIONS BY NUMBER OF AVAILABLE PLANS, JUNE 1997
Note: Urban counties are divided into central counties and
others; rural counties are divided into urban fringe counties
and others.
Source: Physician Payment Review Commission (now Medicare
Payment Advisory Commission) analysis of Health Care Financing
Administration enrollment data.
In addition to enrollment in risk and cost plans, over
16,000 beneficiaries had enrolled in plans offered through the
Medicare Choices Demonstration Project as of mid 1997. This
project was established to give Medicare beneficiaries expanded
choices among types of managed care plans and test new ways to
pay for managed care.
Patterns of enrollment differ across urban and rural
locales. Risk plan enrollment in central urban areas (cities at
the core of metropolitan areas) was about 24 percent in June
1997, about twice the level in outlying urban areas. That level
was up from 17 percent 2 years earlier. Risk plan enrollment in
rural areas was about 1.8 percent. Although low, it has been
rising rapidly over the past 2 years. Enrollment in cost
contract plans is more evenly distributed.
Enrollment patterns are not uniform around the country,
with risk plan enrollment higher generally in western States
(chart 2-5). In particular, over one-third of the beneficiaries
in Arizona (37 percent) and California (37 percent) were in
risk plans in June 1997. The highest levels of enrollment in
eastern States were in Florida (24 percent), Massachusetts (17
percent), Pennsylvania (19 percent), and Rhode Island (16
percent).
CHART 2-4. PERCENT OF MEDICARE BENEFICIARIES ENROLLED IN RISK AND COST
PLANS, 1990-97
Note: All data are for December, except that 1997 data are
from June.
Source: Physician Payment Review Commission (now Medicare
Payment Advisory Commission) analysis of Medicare Managed Care
Contract Reports.
Further evidence of the degree of concentration is that
five States account for just over two-thirds of all risk
enrollees but just over one-third of all Medicare
beneficiaries. Almost half of all risk enrollees live in
California and Florida. New enrollees, however, come from a
somewhat different mix of States than do current risk
enrollees. Beneficiaries in California and Florida represent
under one-fourth of net new enrollment between June 1996 and
June 1997, whereas Pennsylvania has the largest share of new
enrollees (14 percent).
Although enrollment in the risk program initially was
concentrated on the west coast and Florida, other areas,
especially in the East and Midwest, have seen rapid rises in
risk plan enrollment over the last 2 years. Urban areas with
the greatest share of national enrollment growth tend to be
those where Medicare payments are high. New competition has
entered many of these markets, but the newer entrants do not
necessarily attract the most new enrollees.
Although nearly 300 risk plans participate in Medicare,
risk contracts are concentrated among a few large national
firms. Just 12 large national firms enroll over three-fourths
of all risk plan enrollees (chart 2-6). The largest firm is
Pacificare (including its recent merger partner, FHP) with 21
percent of risk plan enrollees nationwide. Kaiser Permanente,
the Blue Cross Blue Shield companies, and Humana are the next
largest firms participating in Medicare. The concentration of
enrollment appears to be declining, possibly because of the
large number of recent new entrants into the program.
Countering this trend, however, may be corporate mergers, which
tend to increase enrollment concentration.
CHART 2-5. PERCENT OF MEDICARE BENEFICIARIES ENROLLED IN RISK PLANS, BY
STATE, JUNE 1997
Note: Enrollment in eight States falls in a different
category than it would based on HCFA's monthly reports because
certain plans serve beneficiaries in States other than where
they are located.
Source: Physician Payment Review Commission (now Medicare
Payment Advisory Commission) analysis of Health Care Financing
Administration enrollment data.
Projections of enrollment show continued growth. Forecasts
by the Congressional Budget Office (CBO) suggest enrollment
will reach about 34 percent by 2005, modestly above the 29-
percent rate projected under prior law.
CHART 2-6. PERCENT OF PLAN ENROLLEES WHO ARE IN RISK PLANS AFFILIATED
WITH NATIONAL FIRMS, JUNE 1997
Source: Physician Payment Review Commission (now Medicare
Payment Advisory Commission) analysis of Health Care Financing
Administration enrollment data.
Plan Options and Rules for Enrollment in Medicare+Choice
The Balanced Budget Act establishes Medicare+Choice, which
will give beneficiaries an expanded array of private plan
alternatives to traditional Medicare. Each Medicare+Choice plan
will have to provide the same benefits as required under
traditional Medicare. Standards for Medicare+Choice plan
organization and performance are discussed below. Also
discussed below are beneficiary and provider protections.
Plan options
A Medicare+Choice plan can be: (1) a coordinated care
plan, (2) a private fee-for-service plan, or (3) on a limited
demonstration basis, a combination of a medical savings account
(MSA) plan and contributions to a Medicare+Choice MSA.
Coordinated care plans may be offered by an HMO (with or
without a point-of-service plan), a PPO, or a PSO. PPOs are
generally groups of physicians and hospitals who contract with
an insurer or employer to serve a group of enrollees on a fee-
for-service basis at negotiated rates that are lower than those
charged to nonenrollees. PPOs do not traditionally have primary
care gatekeepers. A PSO is generally a cooperative venture of a
group of providers who control its delivery and financial
arrangements.
The Balanced Budget Act defines a private fee-for-service
plan as a plan that: reimburses hospitals, physicians, and
other providers at a rate determined by the plan on a fee-for-
service basis without placing the provider at financial risk;
does not vary rates for a provider based on the utilization
relating to the provider; and does not restrict the selection
of providers among those who are lawfully authorized to provide
the covered services, and who agree to accept the terms and
conditions of payment established by the plan.
The Balanced Budget Act defines an MSA plan as a plan that
reimburses Medicare-covered services after a specified
deductible (up to $6,000) is met. The difference between the
premium for the high-deductible plan and applicable
Medicare+Choice capitation payment would be placed into an
account for the beneficiary to use in meeting his or her
expenses below the deductible. The MSA option is offered on a
demonstration basis. Up to 390,000 individuals can enroll in
MSA plans (specific rules for MSA plans are described below).
As Medicare+Choice begins operation, probably late in
1998, most existing risk and cost-based contracts will be
phased out. No new risk contracts may be initiated after
Medicare+Choice standards are released, and no risk contracts
may be renewed after January 1999. Existing risk-contract plans
will be able to convert to Medicare+Choice if they meet the new
program requirements. Effective immediately, no new cost-based
contracts may be initiated, and most cost-based contracts may
not be renewed beyond December 2002.
Enrollment rules for Medicare+Choice
With two exceptions, beneficiaries will be able to enroll
in any Medicare+Choice plan that serves their area. The first
exception applies to beneficiaries not enrolled in part B. The
second exception applies to persons qualifying for Medicare on
the basis of end-stage renal disease (ESRD); however, persons
already enrolled who later develop ESRD may remain enrolled in
the plan.
After a transition period (through 2001) in which
individuals are able to make and change elections on an ongoing
basis, elections will be made and changed only during an annual
coordinated election period. There will also be a 3-month
period after making an election in which individuals can change
their election (except for a 6-month period in 2002).
Additional election periods (called special election periods)
will apply for newly eligible Medicare beneficiaries (based on
age, but not disability) and beneficiaries who experience
certain events; for example, the individual is no longer
eligible to participate in a plan because she moves or because
the plan has terminated its contract with Medicare. Table 2-28
summarizes the enrollment schedule for Medicare+Choice.
TABLE 2-28.--TRANSITION TO ANNUAL COORDINATED ELECTION OF
MEDICARE+CHOICE PLANS
------------------------------------------------------------------------
Date Event
------------------------------------------------------------------------
June 1, 1998...................... Secretary of DHHS must issue
regulations implementing standards
(other than those for solvency) for
Medicare+Choice plans.
Medicare+Choice contracts cannot be
signed until such standards are in
place. Upon signing a contract with
DHHS, Medicare+Choice plans begin
accepting Medicare beneficiaries on
a continuous open enrollment and
continuous disenrollment basis.
November 1998..................... Medicare+Choice Information Fair
nationwide coordinated educational
and publicity campaign. Individuals
can begin enrolling in
Medicare+Choice MSAs (with coverage
becoming effective January 1,
1999).
January 1, 1999................... Current risk contract enrollees are
hereafter considered to be enrolled
in Medicare+Choice plans. MSA plans
begin providing coverage.
November 1999..................... First coordinated annual election
period for Medicare+Choice plans
(for coverage becoming effective
January 1, 2000) and first mailing
of informational materials to all
Medicare beneficiaries.
December 31, 2001................. Last day of continuous open
enrollment/disenrollment during
which an individual can change
elections an unlimited number of
times.
January 1, 2002................... First year in which elections become
locked in. First 6 months of 2002
is a transition period when an
individual can change election only
once (other than an election during
the coordinated annual election
period or in the case of an event
qualifying for a special election).
Limited exceptions are provided.
December 31, 2002................. New elections end for
Medicare+Choice MSA plans (unless
390,000 cap is reached prior to
this date).
January 1, 2003................... New elections become effective the
first day of January following each
election period. Each year there is
a 3-month period when an individual
can change election one time.
Otherwise, elections cannot be
changed until the next annual
coordinated election period (unless
individual qualifies for special
enrollment period). Limited
exceptions are provided.
------------------------------------------------------------------------
Source: Congressional Research Service analysis of provisions in the
Balanced Budget Act of 1997.
Marketing rules
Medicare+Choice organizations and the plans they offer to
Medicare beneficiaries must meet certain marketing rules. They
will have to submit marketing material to the Secretary at
least 45 days before distribution. The material can then be
distributed if it is not disapproved by the Secretary (whereas
in the previous rules active approval was required). The
Secretary is required to disapprove such material if it is
inaccurate or misleading. Each organization must conform to
fair marketing standards, and must not permit an organization
to provide for cash or other monetary rebates as an inducement
for enrollment or otherwise. The Secretary is permitted to
prohibit an organization or its agent from completing any
portion of any election form on behalf of any individual.
Information to beneficiaries
The Secretary is required to provide for activities to
disseminate broadly information on traditional Medicare and
Medicare+Choice plans to current and prospective Medicare
beneficiaries. The information has to be comparative in order
to help beneficiaries make informed choices among available
options. The Secretary is required to conduct an educational
and publicity campaign during November 1998 to inform
Medicare+Choice individuals about the identity of
Medicare+Choice plans and risk contract plans offered in
different areas and the election process. As shown in table 2-
28, the Secretary is required to provide comprehensive
information, including plan comparisons, to beneficiaries every
November, beginning with 1999.
Specifically, the Secretary is required to mail to all
individuals eligible for Medicare+Choice general and
comparative plan information. This mailing must occur at least
15 days before each annual, coordinated election period. (Such
information will also be sent to newly eligible beneficiaries
in advance of their initial enrollment period.)
The general information is to include: (1) benefits and
cost-sharing requirements under the traditional Medicare
Program; (2) the procedures for electing traditional Medicare
and Medicare+Choice; (3) a general description of procedural
rights (including grievance and appeals procedures) for both
traditional Medicare and Medicare+Choice; (4) information on
benefits and other features of supplemental coverage, including
Medigap and Medicare Select; and (5) notice that a
Medicare+Choice organization may terminate its contract with
Medicare or otherwise cease to be available to an enrolled
individual and what would happen in that event.
The comparative plan information for Medicare+Choice will
have to include: (1) benefits, cost-sharing requirements, and
the extent to which an enrollee may obtain benefits through
out-of-network providers; (2) plan premiums; (3) plan service
areas; (4) quality and performance information, including
disenrollment rates, enrollee satisfaction, health outcomes,
and compliance data; (5) supplemental benefits, if any, and
their premiums.
The Secretary is required to maintain a toll-free number
and internet site to facilitate access to information on
Medicare+Choice plans. Nonfederal entities may be used to carry
out information activities required under the Balanced Budget
Act. The Medicare+Choice organizations will be required to
furnish the Secretary with the information needed to enable the
Secretary to comply with these requirements.
Medicare+Choice organizations will be required to pay a
``user fee'' to offset HCFA's costs of providing beneficiaries
with comparative plan information, conducting annual
information fairs, maintaining the toll-free information number
and internet site, and conducting the other activities designed
to inform Medicare beneficiaries about their insurance options.
This user fee must equal the organization's share (as
determined by the Secretary) of the aggregate amount of fees
which are appropriated for a fiscal year. The amounts collected
are authorized to be appropriated, and are capped at $200
million in fiscal year 1998; $150 million in fiscal year 1999;
and $100 million in fiscal year 2000 and subsequent years.
However, Public Law 105-78, providing for appropriations for
the Departments of Labor, Health and Human Services, and
Education, provides for only $95 million in user fees for
fiscal year 1998. Report language accompanying the legislation
suggests that HCFA should give priority in using these funds
to: (1) publishing a comparative booklet to be mailed to
beneficiaries describing the new Medicare+Choice plans; (2)
contracting for a toll-free number and maintaining an internet
site for questions about Medicare+Choice options; and (3)
operating Medicare+Choice information fairs and funding future
dissemination of information through local information centers
and other forms of public relations.
Nondiscrimination
Medicare+Choice organizations are required to accept
eligible individuals without restriction during election
periods (also referred to as open enrollment periods). In
general, organizations and plans cannot deny enrollment on the
basis of health status related factors. These include: health
status, medical condition (including both physical and mental
illnesses), claims experience, receipt of health care, medical
history, genetic information, evidence of insurability
(including conditions arising out of acts of domestic
violence), and disability. These provisions do not apply if
they will result in enrollment misrepresentative of the
Medicare population in the service area. An organization can
deny enrollment in the event it has reached the limits of its
capacity. Organizations also cannot terminate an enrollee's
election except for failure to pay premiums on a timely basis,
disruptive behavior, or because the plan ends for all
Medicare+Choice enrollees.
Payments to Plans Through 1997
There are two basic components of the risk program payment
methodology used through 1997. The first is the actuarial
method used to calculate risk plan payment rates each year. The
second is the adjusted community rate (ACR) mechanism through
which risk contracting plans determine the amount of Medicare
noncovered benefits that they will provide to Medicare
enrollees and the premiums they are permitted to charge for
those benefits. As described below, the Balanced Budget Act
made substantial changes in the calculation of plan payment
rates, but only modest changes in the ACR mechanism.
Capitation payments to risk contracting plans
Under the old system, Medicare paid risk plans 95 percent
of an actuarial projection, at the county level, of what the
program would have paid if the beneficiary had remained in the
traditional fee-for-service sector. This payment rate was known
as the adjusted average per capita cost (AAPCC). The Health
Care Financing Administration (HCFA) recalculated AAPCCs every
calendar year based on estimates of national average spending,
county spending, and beneficiary characteristics.
National Medicare per capita expenditures.--In the first
stage of the AAPCC calculation, HCFA actuaries used historical
program expenditures to project national per capita program
expenditures for the coming calendar year. These U.S. per
capita costs (USPCC) were needed to update historical spending
at the county level. Separate projections were made for part A
services and part B services for the aged, the disabled, and
people with ESRD. These projections took into account expected
inflation and changes in utilization patterns and services
covered by the Medicare Program. The USPCC was reported in
terms of monthly per capita expenditures because risk plans are
paid on a monthly basis.
County level Medicare per capita expenditures.--In the
second stage, HCFA estimated expected per capita program
expenditures for the aged and the disabled in each county, and
for people with ESRD in each State. County level per capita
spending differed from the national average because of
differences in input prices, practice patterns, health status,
utilization, and Medicare payments for special purposes such as
graduate medical education and support for disproportionate-
share hospitals. Risk adjusters were applied to these data to
approximate what Medicare per capita spending in the fee-for-
service sector would have been in each year if a county had the
same demographic characteristics as the nation as a whole.
These projected risk-weighted per capita payments are the
AAPCC.
Enrollee-level payment to plans.--Finally, HCFA calculated
what it would pay a risk plan for each individual enrollee.
This payment was based on 95 percent of the AAPCCs for the
enrollee's county of residence and was adjusted by national
risk adjusters to reflect each enrollee's demographic
characteristics, such as age, sex, and whether the person is in
a nursing home (see section below on risk adjustment). Medicare
also paid plans 95 percent of the State level end-stage renal
disease AAPCCs for enrollees with end-stage renal disease.
Payment issues
For several years, certain issues have been raised about
the AAPCC-based payment methodology. Payment rates varied
widely across the country and from year to year. Risk plans
also were paid for graduate medical education and
disproportionate-share hospital (DSH) payments that they may
not actually have incurred.
Geographic variation and volatility.--Certain policies in
place under the old system led to significant variation in risk
payments across the country. Nationally, in 1997, AAPCCs ranged
from $221 to $767. AAPCCs for central urban counties ($546) and
other urban counties ($436) were higher on average than AAPCCs
for rural counties adjacent to urban areas ($393) or the most
rural counties ($371). Furthermore, because Medicare risk
payments were county based, neighboring counties often had
substantially different AAPCCs that could not be explained by
differences in plan costs. For example, the AAPCC varied by
over $200 per month among the counties adjacent to Chicago or
to Washington, DC. These geographic variations in AAPCCs
resulted from local differences in fee-for-service Medicare
expenditures that in turn reflected service use patterns (both
volume and intensity), provider input prices (for example, cost
of wages or supplies), and Medicare payments for special
purposes (for example, payments for graduate medical
education).
In addition, many counties experienced substantial changes
in the AAPCC from year to year, despite the use of multiple
years of expenditure data to smooth changes in per capita
spending. Per capita costs for counties with small Medicare
populations fluctuated more over time than per capita costs for
counties with larger Medicare populations.
Both the levels of AAPCC-based payment rates and their
volatility over time have influenced Medicare risk plan
enrollment rates. PPRC's analysis indicated that, in urban
counties, the level of payments is one of the important factors
influencing enrollment rates, with higher enrollment rates
where payment rates are high. Payment volatility appears to
have had a weaker but measurable effect, with lower enrollment
rates where volatility is high.
Medical education and disproportionate-share payments.--
Medicare fee-for-service payments for inpatient hospital stays
include payments for direct and indirect medical education
costs incurred by teaching hospitals and extra payments to
hospitals that serve a disproportionate share of low-income
beneficiaries. Under the old payment system, these payments
were retained in the expenditures used to calculate the AAPCCs.
As a result, an AAPCC reflected a county's average monthly per
capita cost for fee-for-service medical education and
disproportionate share hospitals. These amounts may not
correspond with actual risk plan costs, however, because not
all plans have medical education programs or use teaching or
disproportionate-share hospitals. Each type of payment averaged
about 3 percent of the AAPCC rates overall. The shares of total
payments, however, varied across the country.
Payments for services in VA or defense facilities.--In
some areas, many Medicare enrollees obtain services from
Veterans Administration or Department of Defense facilities. As
a result, Medicare expenditures are reduced in these areas.
Because the AAPCCs were based on Medicare fee-for-service
expenditures, the exclusion of these services meant that the
AAPCC did not represent the average service use of Medicare
beneficiaries in the fee-for-service sector. The value of the
services provided by these non-Medicare Programs averaged about
3 percent of total Medicare per enrollee costs across all
States, although it varied substantially across individual
States.
Medicare+Choice Payments to Plans
The Balanced Budget Act substantially restructured the
system for setting the rates by which Medicare pays plans.
While Medicare+Choice is not yet in place, the Balanced Budget
Act requires HCFA to determine 1998 payments to risk plans
using the new capitation payment methodology. The rates for
1998, the first to be so calculated, were issued in September
1997.
In general, the program makes monthly payments in advance
to each participating health plan for each covered individual
in a payment area (typically a county). The Secretary is
required to determine annually, and announce by March 1 before
the calendar year concerned, the annual Medicare+Choice
capitation rate for each payment area, and the risk and other
factors to be used in adjusting such rates.
Payments to Medicare+Choice organizations and payments to
Medicare+Choice MSAs are made from the Medicare Trust Funds in
proportion to the relative weights that benefits under parts A
and B represent of Medicare's actuarial value of the total
benefits.
Calculation of the payment rate
The major factors for determining Medicare's annual
Medicare+Choice capitation rates are summarized in table 2-29.
The annual Medicare+Choice capitation rate, for a payment area
(for a contract for a calendar year) is set at the highest of
three amounts calculated for each county:
--a rate calculated as a blend of an area-specific (local)
rate and a national rate,
--a minimum or floor rate, and
--a rate reflecting a minimum increase from the previous
year's rate.
Each year, the two components of the blended rate and the floor
rate will be updated by a national growth percentage. Each part
of the system is described in more detail below.
Blended rates.--The blended capitation rate is designed to
shift county rates gradually away from local rates, which
reflect the wide variations in fee-for-service costs discussed
above, toward a national average rate. Blending is designed to
reduce payments in counties where AAPCCs historically have been
higher than the national average rate, and to increase payments
in counties where AAPCCs have been lower. The blended rate is
defined as the sum of:
--a percentage of the annual area-specific Medicare+Choice
capitation rate for the year for the payment area, and
--a percentage of the input-price adjusted annual national
Medicare+Choice capitation rate for the year.
The area-specific (local) rate is based on the 1997 AAPCC
for the payment area with two adjustments. First, the area-
specific rate is reduced to remove an amount corresponding to
graduate medical education (GME) payments (described below).
Second, rates are updated each year by the national growth
percentage (described below).
The national rate is the weighted average of all local
area-specific rates. This component of the blend is adjusted to
reflect differences in certain input prices, such as hospital
labor costs, by a formula stated in the law. The Balanced
Budget Act allows the Secretary to change the method for making
input-price adjustments in the future.
The percentage applied to the area-specific rate will be
reduced in increments over 6 years from 90 percent in 1998 to
50 percent in 2003, while the corresponding percentage for the
national rate is increased over the same 6 years from 10
percent to 50 percent (table 2-29). In 2003, the blended rate
will be based on 50 percent of area-specific costs and 50
percent of national, input-price adjusted costs. Each year, the
blended rates may be raised or lowered to achieve budget
neutrality (described below).
TABLE 2-29.--MAJOR FACTORS FOR DETERMINING MEDICARE PAYMENTS TO
MEDICARE+CHOICE PLANS
Factor Rule established in the Balanced Budget Act of 1997
------------------------------------------------------------------------
------------------------------------------------------------------------
Blended counties (blend of General.......... Transition over 6
local and national rates). years to 50-50 blend
of local and
national rates.
National rates are
adjusted for
differences in input
prices.
1998............. 90 percent local, 10
1999............. percent national.
2000............. 82 percent local, 18
2001............. percent national.
2002............. 74 percent local, 26
2003 and after... percent national.
66 percent local, 34
percent national.
58 percent local, 42
percent national.
50 percent local, 50
percent national.
Minimum payment (``floor'') 1998............. Minimum of $367 or
rate. 150 percent of 1997
payment outside the
United States.
1999 and after... Previous year's
payment times annual
percentage increase.
Minimum percent increase...... 1998............. 102 percent of 1997
1999 and after... payment rate.
102 percent of prior
year's rate.
Treatment of payments for GME payments excluded
graduate medical education in equal intervals
(GME) and disproportionate- over 5 years. DSH
share hospitals (DSH). payments not
excluded.
Budget neutrality............. Total Medicare+Choice
payments may not
exceed what would
have been spent if
payments were
entirely based on
local rates.
Annual percentage increase.... 1998............. Increase in Medicare
1999-2002........ per capita
After 2002....... expenditures minus
0.8 percentage
points.
Increase in Medicare
per capita
expenditures minus
0.5 percentage
points.
Increase in Medicare
per capita
expenditures.
Risk adjustment............... Payments are adjusted
by Secretary to
reflect demographic
and other factors.
Study is to be done
of risk adjusters
based on health
status. Starting
2000, payments are
risk adjusted based
on Secretary's
recommendations.
------------------------------------------------------------------------
Source: Congressional Research Service analysis of provisions in the
Balanced Budget Act of 1997.
Minimum (floor) rates.--Each county is also subject to a
floor rate, designed to raise payment in certain counties more
quickly than would occur through the blend alone. The minimum
rate is set at $367 for 1998 (but not to exceed, in the case of
an area outside the 50 States and the District of Columbia, 150
percent of the 1997 payment rate). For subsequent years, this
payment amount will be increased by the national growth
percentage (described below). In about one-third of all
counties, the 1998 payment rate had to be raised to meet the
floor.
Minimum percentage increase.--The minimum increase rule
protects counties that would otherwise receive only a small (if
any) increase. In 1998, the minimum rate for any payment area
is 102 percent of its 1997 AAPCC. For subsequent years, it will
be 102 percent of its annual Medicare+Choice capitation rate
for the previous year.
Exclusion of payments for graduate medical education.--
Payments (direct and indirect) for GME are excluded or ``carved
out'' of the payments to Medicare+Choice plans over 5 years.
Specifically, in determining the local rate prior to
determining the blended rate, amounts attributable to payments
for the indirect costs of medical education and for direct
graduate medical education costs are deducted from the 1997
payment amount. The amount excluded begins at 20 percent in
1998, rising in equal amounts until it reaches 100 percent in
2002. Payments for disproportionate-share hospitals are not
carved out.
National growth percentage.--The national per capita
Medicare+Choice growth percentage is defined as the projected
per capita increase in total Medicare expenditures minus a
specific reduction set in law. In 1998, the reduction is 0.8
percentage points; from 1999 through 2002, it is 0.5 percentage
points. There is no reduction after 2002. (Starting with the
1999 rates, adjustments will be made for errors in the previous
year's projection of spending.) The actual national growth
percentage for 1998, after the reduction, is 2.6 percent.
Estimated growth percentages for the period 1999-2002 have been
estimated by CBO to range from about 4-6 percent.
Budget neutrality.--Once the rates are calculated for each
county, based on the greatest of the blended rate, floor, and
minimum increase, total payments are compared to a budget-
neutral amount. A budget neutrality adjustment is applied as
necessary to the blended rates to ensure that the aggregate of
payments for all payment areas equals that which would have
been made if the payment were based on 100 percent of the area-
specific capitation rates for each payment area. In no case may
rates be reduced below the floor or minimum increase amounts
for the particular county. In some years, it may not be
possible to achieve budget neutrality because no county rate
may be reduced below its floor or minimum increase. The law
makes no provision for achieving budget neutrality after all
county rates are at the floor or minimum increase. When this
situation occurred for the 1998 rates, HCFA chose to waive the
budget-neutrality rule rather than one of the other rules.
Rates for disabled and ESRD beneficiaries.--Payment rates
for disabled and ESRD beneficiaries are set using a similar
method as that for aged beneficiaries except that ESRD rates
are calculated on a statewide basis. In particular, the same
floor rates also apply to both groups of beneficiaries, even
though payments for disabled beneficiaries have been
historically 15 percent lower than for aged beneficiaries.
Geographic basis for payment rates.--A Medicare+Choice
payment area is defined as a county or equivalent area
specified by the Secretary. (In the case of individuals
determined to have ESRD, the Medicare+Choice payment area is
each State, or other payment areas as the Secretary specifies.)
Upon request of a State for a contract year (beginning after
1998), the Secretary will redefine Medicare+Choice payment
areas in all or a portion of the State to: (1) a single
statewide payment area; (2) a metropolitan system; or (3) a
single payment area consolidating noncontiguous counties (or
equivalent areas) within a State.
Special rules for MSA plans.--Special rules will apply for
payments to MSA plans. If the monthly premium for an MSA plan
(that is, a high deductible plan) for a Medicare+Choice payment
area is less than the monthly capitation rate for the area and
year involved, the Secretary is required to deposit the
difference in a Medicare+Choice MSA established by the
individual. For cases when an MSA election was terminated
before the end of the year, the Secretary will have to
establish a procedure to recover deposits attributable to the
remaining months.
Risk adjustment
Actual payments to plans depend on the characteristics of
the beneficiaries who enroll. The rate for an enrollee's county
of residence (or State in the case of ESRD enrollees) is
adjusted by national risk adjusters to reflect each enrollee's
demographic characteristics (table 2-30).
TABLE 2-30.--CALCULATION OF RISK PLAN MONTHLY PAYMENT ON BEHALF OF SELECTED BENEFICIARIES, LOS ANGELES COUNTY,
CALIFORNIA, 1998
----------------------------------------------------------------------------------------------------------------
Part A Part B
(Part A risk + (Part B risk = Total
rate adjuster) rate adjuster) payment
----------------------------------------------------------------------------------------------------------------
Male \1\ ($364.81 0.65) + ($270.19 0.80) = $453.28
Female \2\ ($364.81 2.10) + ($270.19 1.65) = $1,211.91
----------------------------------------------------------------------------------------------------------------
\1\ Age 68, non-Medicaid, noninstitutionalized, nonworking.
\2\ Age 87, non-Medicaid, institutionalized, nonworking:
Note.--The monthly payment for an average beneficiary in Los Angeles County is $635.00.
Source: Medicare Payment Advisory Commission analysis.
The risk adjusters currently in use reflect the relative
level of program spending for groups defined on the basis of
age, sex, institutional status, Medicaid enrollment, and
working aged with employment-based insurance coverage (table 2-
31). Disability and ESRD status are handled through separate
rates for each county (or State, in the case of ESRD), rather
than as a national risk adjuster.
The Physician Payment Review Commission, among others, has
presented evidence of significant risk selection in the
Medicare managed care program. For the 6 months before
enrolling in managed care plans, beneficiaries' costs were 37
percent below those of a fee-for-service comparison group. In
the 6 months after disenrolling, beneficiaries' costs were 60
percent above the fee-for-service average (chart 2-7). The
current system does a poor job of risk adjustment because the
risk adjusters used provide little information about
beneficiaries' health and explain only 1 percent of the
variation in their health case costs.
TABLE 2-31.--MEDICARE RISK ADJUSTERS FOR AGED BENEFICIARIES, 1998
----------------------------------------------------------------------------------------------------------------
Noninstitutional
-----------------------------
Sex and age group Institutional Non- Working
Medicaid Medicaid aged
----------------------------------------------------------------------------------------------------------------
Part A--hospital insurance:
Male:
85 and over............................................... 2.25 2.60 1.35 0.90
80-84..................................................... 2.25 2.35 1.20 0.80
75-79..................................................... 2.25 1.95 1.05 0.70
70-74..................................................... 2.25 1.50 0.85 0.45
65-69..................................................... 1.75 1.15 0.65 0.40
Female:
85 and over............................................... 2.10 2.10 1.20 0.80
80-84..................................................... 2.10 1.70 1.05 0.70
75-79..................................................... 2.10 1.45 0.85 0.55
70-74..................................................... 1.80 1.05 0.70 0.45
65-69..................................................... 1.45 0.80 0.55 0.35
Part B--supplementary medical insurance:
Male:
85 and over............................................... 1.95 1.70 1.15 1.00
80-84..................................................... 1.95 1.70 1.15 0.90
75-79..................................................... 1.95 1.55 1.10 0.80
70-74..................................................... 1.80 1.35 0.95 0.65
65-69..................................................... 1.60 1.10 0.80 0.45
Female:
85 and over............................................... 1.65 1.25 1.00 0.85
80-84..................................................... 1.65 1.25 0.95 0.75
75-79..................................................... 1.65 1.25 0.95 0.70
70-74..................................................... 1.65 1.15 0.85 0.55
65-69..................................................... 1.50 1.05 0.70 0.40
----------------------------------------------------------------------------------------------------------------
Note.--Values indicate the multiplier used for a beneficiary with a particular set of characteristics; average
beneficiary has a multiplier of 1.00. A separate set of risk adjusters is used for disabled beneficiaries.
Source: Health Care Financing Administration.
By March 1, 1999, the Secretary must submit to Congress a
report on a method of risk adjustment of payment rates that
accounts for variations in per capita costs based on health
status. The Balanced Budget Act calls for the new risk
adjustment methodology to be in effect for payments to plans as
of January 1, 2000.
CHART 2-7. COSTS AS A PERCENTAGE OF AVERAGE MEDICARE SPENDING PER
BENEFICIARY
Source: Physician Payment Review Commission (now Medicare
Payment Advisory Commission) analysis of 1989-94 Medicare
claims and denominator files, 5-percent sample.
Unresolved issues for plan payment
As policy changes in the method of paying plans are
implemented, several unresolved issues remain. Some issues are
relatively technical, such as the absence of any alternative
mechanism to achieve budget neutrality in a situation where all
rates are reduced to floors or minimum updates. Other issues,
among those described above, were not resolved by the Balanced
Budget Act of 1997. They include adjustments to local rates for
Medicare payments to disproportionate-share hospitals or for
services beneficiaries receive from Veterans Administration and
Department of Defense facilities, and basing payment on
geographic areas larger than counties. Longer range issues
include determining whether adequate progress toward reducing
variation in rates will result from the rules in the Balanced
Budget Act.
County Payment Rates, 1997-2003
The payment rates used in 1998 are the first to be
calculated under the new rules established by the Balanced
Budget Act. Based on HCFA's projection of overall Medicare
growth, the national growth percentage for 1998 is set to be
2.6 percent for aged beneficiaries. This amount results from an
estimated 3.4 percent Medicare spending growth, less the 0.8-
percent reduction required by the Balanced Budget Act. The
carve-out for graduate medical education spending for an
average county is about 0.8 percent, so the effective average
increase in county payment rates, before floors and minimum
increases are applied, is 1.8 percent.
After applying the floors and minimum increases, the
average county payment rate (weighted by beneficiaries) is
$484, about a 3-percent increase over 1997. The difference
between this average and the 1.8-percent increase expected from
the formula results from the Balanced Budget Act requirement to
create floor rates and minimum increases. The fact that the
1.8-percent increase is below the minimum increase of 2 percent
also illustrates why the budget-neutrality requirement could
not be met for 1998 rates.
The increases from 1997 to 1998 would have been even lower
under the policy that was replaced by the Balanced Budget Act.
This is because the Balanced Budget Act did not provide for a
correction for HCFA's overprojection of 1997 spending a year
earlier. Had such a correction been applied, the 1997 base
rates used as the starting point for the calculation of 1998
monthly county rates would have been lower by an average of
about $10. After the statutory reduction, the effective
national growth percentage would then have been 0.3 percent
instead of 2.6 percent.
As noted above, each county rate is set at the greatest of
the amounts calculated under three rules--its blended rate,
minimum increase, and floor. Because of the low national growth
percentage in 1998, no county rate will be set by the blended
rate rule. About one-third of all counties are set at the
floor, with the rest receiving the minimum 2-percent increase
(chart 2-8).
Sample calculations show how the rates are determined
(table 2-32). After the initial calculation of rates under the
three rules (blended, floor, and minimum increase) but before
budget neutrality, the rates are set simply at the highest of
these three amounts. Among the sample counties shown in the
table, there are two counties whose rates are determined by
each rule. The budget-neutrality adjustment only applies to the
counties whose rates are set by the blended-rate rule (Hennepin
and Fairfax Counties in table 2-32) because rates may never
fall below the rates set by the other two rules. The 1998 rates
for such counties were reduced below where they would have been
by about 1-2 percent because of this adjustment. Had the
budget-neutrality adjustment been smaller, then rates for these
counties would have been set between the blended and minimum-
increase amounts.
Geographic variations
Large variation in county payment rates was one of the
motivating forces behind some of the changes enacted in the
Balanced Budget Act. The establishment of a floor rate removed
some of the greatest variation. The combination of the low
national growth percentage and the budget-neutrality rule,
however, delayed the application of the blended-rate rule. Only
when county rates are more heavily based on the national
component of the blend will more of the county variation be
reduced.
CHART 2-8. RULE USED TO DETERMINE COUNTY PAYMENT RATES, BY YEAR, 1998-
2003
Note: Analysis based on actual rates for 1998 and simulated
rates for 1999-2003, using dynamic enrollment growth
assumptions.
Source: Medicare Payment Advisory Commission simulations of
payment rates under the Balanced Budget Act of 1997.
TABLE 2-32.--CALCULATION OF MONTHLY PAYMENT RATES FOR SAMPLE COUNTIES, 1998
----------------------------------------------------------------------------------------------------------------
Calculation under separate Determination of rate
rule ------------------------
1997 ----------------------------- Actual
County actual Before rate (after
rate Minimum Blend budget budget
update Floor (90:10) neutrality neutrality
adjustment adjustment)
----------------------------------------------------------------------------------------------------------------
Los Angeles, CA................................. 622.55 635.00 367.00 625.92 635.00 635.00
Dade, FL........................................ 748.23 763.19 367.00 737.10 763.19 763.19
Hennepin, MN.................................... 405.63 413.74 367.00 419.34 419.34 413.74
Fairfax, VA..................................... 400.54 408.55 367.00 417.44 417.44 408.55
Arthur, NE...................................... 220.92 225.34 367.00 244.89 367.00 367.00
Presidio, TX.................................... 229.70 234.29 367.00 255.58 367.00 367.00
----------------------------------------------------------------------------------------------------------------
Note.--Before budget-neutrality adjustments are applied, county rates are determined by the highest of the three
rates calculated under separate rules. In 1998, the budget-neutrality adjustment lowered all blended rates so
that they were no higher than the minimum update or floor rates. As a result, rates for Hennepin and Fairfax
Counties were set by the minimum update rule instead of the blend rule.
Source: Medicare Payment Advisory Commission analysis.
Across the counties, there is a substantial range above
and below the average payment rate (chart 2-9). For 1997, the
lowest rates in the country were $221 in two rural Nebraska
counties (Arthur and Banner). The highest rates in 1997 were
$767 and $748, respectively, in Richmond County, New York
(Staten Island), and Dade County, Florida (Miami). In 1998 the
floor rate brings the national minimum rate (excluding
territories) up to $367, while the highest rate (Richmond
County) rises to $783. Despite these extreme values, about half
of all beneficiaries live in counties with 1998 rates between
about $400 and $540.
CHART 2-9. MEAN, MINIMUM, AND MAXIMUM COUNTY PAYMENT RATES, BY
LOCATION, 1997-98
Note: The tick mark on each bar indicates the mean county
payment rate (weighted by the number of beneficiaries in each
county). The length of each bar represents the range of payment
rates.
Source: Physician Payment Review Commission (now Medicare
Payment Advisory Commission) analysis of payment rates under
the Balanced Budget Act of 1997.
Regionally, payment varies considerably, with higher
payments generally in more urbanized areas (chart 2-9). The
1998 floor mostly affects rural counties, but it raises rates
for some urban counties as well. Since all counties not
affected by the floor get the same increase for 1998 (that is,
2 percent), payment rates will continue to be higher in urban
areas and lowest in the most rural areas. The average payment
in central urban counties is more than $100 above that for
other urban counties and nearly $160 above that for rural
counties. The range within each of the urban-rural categories
remains substantial as well.
Payment rates range widely across markets as well as
across counties. For example, plans serving southern Florida
will be paid an average of $675 per month in 1998, compared
with $409 in Minneapolis-St. Paul (table 2-33). Moreover,
within some markets that encompass more than one county, the
range of monthly payment rates across counties is $200 or
greater. Plans competing in the same market may receive
substantially different payments for beneficiaries who live on
opposite sides of a county boundary. These differing payment
levels appear to affect plan participation and enrollment. The
Balanced Budget Act will eventually reduce some of this
variation, but generally not until increases are high enough to
support blended rates. Among the largest markets, the only
significant compression of variation for 1998 occurs in
Minneapolis-St. Paul, where many suburban counties have rates
raised to the $367 floor.
TABLE 2-33.--MONTHLY PAYMENT RATES FOR AGED ENROLLEES IN SELECTED AREAS,
1998
------------------------------------------------------------------------
Payment
County rate
------------------------------------------------------------------------
Washington, DC-Maryland-Virginia:
Prince George's County, MD............................... $614
Washington, DC........................................... 596
Montgomery County, MD.................................... 501
Arlington County, VA..................................... 460
Falls Church City, VA.................................... 456
Alexandria City, VA...................................... 456
Fairfax City, VA......................................... 425
Loudoun, VA.............................................. 422
Fairfax County, VA....................................... 409
Minneapolis-St. Paul, MN metro area:
Ramsay (St. Paul)........................................ 431
Hennepin (Minneapolis)................................... 414
Anoka.................................................... 403
Dakota................................................... 387
Washington............................................... 373
Carver................................................... 367
Scott.................................................... 367
Southern Florida:
Dade (Miami)............................................. 763
Broward (Ft. Lauderdale)................................. 663
Palm Beach............................................... 577
Southern California:
Los Angeles.............................................. 635
Orange................................................... 584
San Bernardino........................................... 544
Riverside................................................ 526
------------------------------------------------------------------------
Source: Health Care Financing Administration.
Impact of reforms beyond 1998
This section uses the results of simulations conducted by
MedPAC to assess the impact of the new payment rules
established by the Balanced Budget Act. These simulations
incorporate the published 1998 rates and simulated rates from
1999 to 2003, using CBO's assumptions about spending growth to
set the annual national growth percentage. Dynamic assumptions
about enrollment growth are incorporated into these
simulations, that is, it is assumed that enrollment will
respond to changes in payment rates leading to a different
distribution of plan enrollment across the United States
(regardless of how much the level of enrollment changes).
Source of payment rate determination.--Based on
projections by MedPAC, it appears that there may be no counties
with rates set by the blended rate rule in 1999, the same
result as in 1998. This result assumes that the projected
national growth percentage for 1999 will be too low to achieve
budget neutrality and that at least some enrollment is shifting
to counties affected by the floor rate or the minimum increase.
Starting in 2000, the national growth percentage is
projected to be high enough to pay for increased enrollment in
counties where rates have been raised to the floor or minimum
increase and still support some higher blended rates. By 2003,
when all transitions are complete, over 80 percent of all
counties are projected to be at their blended rates, with 2
percent raised to the minimum increase and 16 percent raised to
the floor rate (chart 2-8).
Once the various phased-in changes (blended percentages
and phasing out of GME payments) are complete in 2003, the
projection is that 16 percent of counties will remain at floor
rates unless the Congress makes further changes in the payment
methodology. This result occurs because floor rates and blended
rates grow each year by the same amount.
The small number of counties that are still affected by
the minimum increase in 2003 (2 percent of all counties) should
in the future receive blended rates, given no further shift in
the blend proportions. As long as the national growth
percentage is greater than 2 percent, blended rates for these
counties will eventually rise above the minimum increase.
Reducing volatility in payments.--The Balanced Budget Act
effectively eliminates the year-to-year volatility inherent in
county payment rates under the old rules. In 1998, the $367
floor rate caused volatility in the sense that rates for many
counties rose dramatically to achieve that floor. But, from
1999 to 2003, as various changes are phased in, county rates
generally will increase by a minimum of 2 percent each year and
a maximum of about 2 percentage points above the national
growth percentage that year. The differences among counties
reflect the relative magnitudes of such factors as the amount
of GME payments being excluded and the input-price adjustments
(for example, hospital wages). After 2003, all county rates
will increase uniformly by the national growth percentage
(except for those few counties still affected by the minimum-
increase rule).
Reducing variation in payments.--The rate system in the
Balanced Budget Act will reduce the amount of variation
occurring under current law (chart 2-10). Although central
urban counties remain on average substantially above the
national average and all other types of counties remain below,
the range is reduced over the first 5 years of new rates. In
the first year, the only source for reducing variation is the
use of the floor rate, since all other county rates are
increased by a uniform 2 percent. Floor rates apply to about
half of the most rural counties and to decreasing proportions
of counties in the more urban categories.
CHART 2-10. EFFECT OF NEW RATES ON REGIONAL VARIATION, USING DYNAMIC
ENROLLMENT GROWTH ASSUMPTIONS, 1997-2003
Note: Analysis based on actual rates for 1998 and simulated
rates for 1999-2003.
Source: Medicare Payment Advisory Commission simulations of
payment rates under the Balanced Budget Act of 1997.
At the individual county level, changes can be more
dramatic (chart 2-11). As a proportion of the national average
rate, those rural counties paid at very low rates (for example,
Arthur County, Nebraska) will get a big increase the first
year, then stay at just under 80 percent of the national
average. Counties with historically high rates (for example,
Richmond County, New York) will get only a 2-percent increase
each year and thus fall from nearly two-thirds above the
national rate to only 50 percent above it. Other counties
converge toward rates driven by local input-price variations.
The degree to which variation is reduced is influenced by
at least two factors. First, the low national growth
percentages projected for Medicare+Choice combined with the
guaranteed 2-percent increase limit the influence of the
blended rates. Second, stopping the blended rates at a 50-50
blend, together with the appropriate application of input-price
adjustments, limits the potential for convergence toward a
national rate.
CHART 2-11. EFFECT OF NEW RATES ON COUNTY VARIATION, 1997-2003, USING
DYNAMIC ENROLLMENT GROWTH ASSUMPTIONS
Note: Analysis based on actual rates for 1998 and simulated
rates for 1999-2003.
Source: Medicare Payment Advisory Commission simulations of
payment rates under the Balanced Budget Act of 1997.
Adjusted Community Rate (ACR)
The adjusted community rate mechanism is a process through
which health plans determine the minimum amount of Medicare
noncovered benefits they are required to provide to Medicare
enrollees and the premiums they are permitted to charge for
those benefits. This system, which has been in place for the
Risk Contract Program, will continue with only a few changes
under Medicare+Choice. HCFA, however, is considering
administrative changes to this system.
No later than May 1 of each year, each Medicare+Choice
organization is required to submit to the Secretary for each of
its Medicare+Choice plans specific information about premiums,
cost sharing, and additional benefits (if any). Under
Medicare's rules, a plan may not earn a higher return from its
Medicare business than it does in the commercial market. The
Secretary will be required to review this information and
approve or disapprove the premiums, cost-sharing amounts, and
benefits. The Secretary will not have the authority to review
the premiums for either MSA plans or private fee-for-service
plans.
Beneficiaries are expected to share in any projected cost
savings between Medicare's capitation payment to a plan and
what it would cost the plan to provide Medicare benefits to its
commercial enrollees. To accomplish this, a plan must provide
additional benefits and reduced cost sharing to its enrollees.
A plan is also permitted to offer extra benefits, known as
supplemental benefits, beyond those required by the ACR
mechanism.
The ACR process requires a plan to use its costs and
revenues from its commercial business to estimate the cost of
providing services to Medicare enrollees. These costs are
adjusted to reflect differences between Medicare and commercial
enrollees with regard to both utilization of services and the
range of covered benefits. The plan's commercial revenues are
used to calculate an allowance for administrative costs and
profits.
As with medical costs, the allowance for administrative
costs and profits for Medicare-covered services provided to
Medicare enrollees is calculated by applying the ratio of
administrative to direct patient care expenses for commercial
enrollees. This provides plans with expected profits on
Medicare enrollees that probably are comparable in percentage
terms to profits on commercial members, but substantially
larger in terms of dollars per member.
In the first year of Medicare participation, plans may use
utilization factors provided by HCFA or obtained from other
sources. In subsequent years, plans are supposed to use factors
based on their own utilization data. Because the Balanced
Budget Act drops the existing requirement that at least half of
a plan's enrollment be commercial (the 50-50 rule), procedures
will be created to calculate the ACR for plans without such
enrollment.
Required Noncovered Services
Plans must provide additional benefits or reduced premiums
to Medicare enrollees valued at the difference between the
projected cost of providing Medicare services and expected
revenue for Medicare enrollees. HCFA calls this difference
between expected Medicare costs and revenues ``savings.'' These
savings are distributed to Medicare enrollees in the form of
additional benefits either as services or as reduced cost
sharing (table 2-34).
Plans calculate the cost of providing Medicare noncovered
services to make up this difference between their expected
revenues and costs in the same way they determine their costs
of providing Medicare covered services. They choose which
additional benefits to offer. The total cost of these
additional benefits must at least equal the ``savings'' on
Medicare-covered services (table 2-34).
Allowable cost sharing
Plans are permitted to charge Medicare enrollees the
expected cost of additional benefits (that is, Medicare
noncovered services beyond the amount required to spend the
savings) plus the national average amount of beneficiary cost
sharing for Medicare-covered services. Plans can collect these
payments through a combination of copayments and premiums.
Premiums cannot exceed the difference between total allowable
beneficiary cost sharing and expected copayments. Plans may
choose to waive part or all of this allowable premium for all
enrollees. Thus, plans report on the ACR proposal the maximum
premium that will be charged to any Medicare enrollee (table 2-
34).
TABLE 2-34.--CALCULATION OF ADJUSTED COMMUNITY RATE AND MAXIMUM MONTHLY
PREMIUM USING NATIONAL AVERAGE AMOUNTS, 1995
------------------------------------------------------------------------
Weighted
Component average
------------------------------------------------------------------------
Cost of covered benefits and administrative overhead........ $433.14
Less average fee-for-service cost sharing............... -65.08
-----------
Adjusted community rate (ACR)....................... 368.06
===========
Average Medicare payment rate............................... 409.97
Less ACR................................................ -368.06
-----------
``Savings''......................................... 41.91
===========
Additional benefits......................................... 35.02
Net waived cost sharing..................................... +51.59
Less ``savings''........................................ -41.91
-----------
Maximum monthly premium............................. 44.70
===========
Monthly premium to be charged............................... 17.65
Waived monthly premium...................................... 27.05
------------------------------------------------------------------------
Note.--Weighted averages are based on the number of enrollees in each
risk plan.
Source: Physician Payment Review Commission (now Medicare Payment
Advisory Commission) analysis of adjusted community rate proposal data
from the Health Care Financing Administration.
Differences for private fee-for-service and MSA plans
For private fee-for-service plans, most of the same rules
apply as for other Medicare+Choice plans. For example, they
must provide additional benefits to beneficiaries in the amount
of the savings calculated through the ACR. Allowable cost
sharing (not including premiums) cannot exceed the comparable
cost sharing in traditional Medicare. But there is no limit on
the additional premium charged by these plans. For MSA plans,
there are no restrictions provided through the ACR process.
These plans must submit information on premiums charged, but no
review or approval by the Secretary is required.
Additional Benefits and Premiums in the Medicare Risk Program
Although plans may charge premiums to enrollees, about
two-thirds of plans do not do so for their basic package (chart
2-12). These are commonly referred to as zero-premium plans.
The proportion of zero-premium plans increased by about one-
third in the past 2 years. One in nine plans charges a monthly
premium of over $40 for their basic package. (Plans may charge
higher premiums for high-option packages that include more
extensive benefits.)
CHART 2-12. DISTRIBUTION OF MEDICARE RISK PLANS BY PREMIUMS CHARGED,
1995 AND 1997
Source: Physician Payment Review Commission (now Medicare
Payment Advisory Commission) analysis of Medicare Managed Care
Contract Reports.
At least two reasons explain why a risk plan may offer a
zero-premium plan. The first is that Medicare's capitation
payment to a plan exceeds its costs (a ``savings'' in the terms
of the ACR) and the plan chooses to add only enough benefits to
match the savings. In this case, no premium would be allowable
under the ACR rules. The second is that a plan is allowed to
charge a premium to cover the cost of the total benefits
offered, but the plan waives its premium to stay competitive in
its local market. In the latter case, the plan may not be at
risk of taking a loss on its Medicare business because profits
and overhead based on commercial rates are included in its
allowed costs under the ACR calculation.
Nearly all plans offer some additional benefits to
enrollees beyond those in traditional Medicare (chart 2-13).
These include both required benefits offered to meet ACR rules
and optional benefits the plan chooses to offer. Benefits
widely available include routine physicals, eye exams, and
immunizations. Two-thirds of plans offer some outpatient drug
coverage as an additional benefit in their basic package. In
addition, about half of plans offer a high-option package that
may include more extensive benefits.
The ACR data allow analysis of patterns in the
availability of additional benefits. Risk plans with the most
generous packages in 1996 served areas having above-average
payment rates. They also expected to incur below-average costs
in providing Medicare benefits (table 2-35). For example, plans
that offered the richest packages served counties where payment
rates were 17 percent above average, and they projected costs 7
percent below average. By contrast, plans offering the fewest
extra benefits anticipated below-average payment rates and
projected costs 3 percent above average.
CHART 2-13. PERCENTAGE OF MEDICARE RISK PLANS OFFERING ADDITIONAL
BENEFITS IN THEIR BASIC OPTION PACKAGE, JUNE 1995 AND JUNE 1997
Source: Physician Payment Review Commission (now Medicare
Payment Advisory Commission) analysis of Medicare Managed Care
Contract Reports, June 1995 and June 1997.
At the market level, similar patterns appear. In Miami,
which has one of the highest payment rates in the country,
plans had an average Medicare savings of over $100 per month
for 1995, meaning that they were required to provide this
amount to beneficiaries in benefits (table 2-36). Including
optional benefits, they provided a total of over $125 in
benefits for no premium. Where Medicare payment rates were
lower, plans typically provided fewer benefits.
TABLE 2-35.--CHARACTERISTICS OF MEDICARE RISK PLANS RANKED BY VALUE OF
EXTRA BENEFITS, 1996
------------------------------------------------------------------------
Average
--------------------------------------
Decile Plan
Standardized payment Cost
extra benefits index index
------------------------------------------------------------------------
All.............................. $ 77 1.00 1.00
10 (highest)..................... 148 1.17 0.93
9............................... 111 1.06 0.96
8............................... 99 1.03 0.99
7............................... 90 1.03 0.96
6............................... 82 1.02 1.01
5............................... 73 1.06 1.09
4............................... 60 0.92 1.04
3............................... 51 0.92 1.02
2............................... 39 0.91 0.97
1 (lowest)...................... 15 0.87 1.03
------------------------------------------------------------------------
Note.--Extra benefits are the sum of any savings and the amount of
waived premium, standardized by the Medicare hospital wage index for
the risk plan's service area. They are expressed as per member per
month values. The decile averages are for 10 equal-sized groups of
plans, ranked by the value of extra benefits.
Source: Prospective Payment Assessment Commission (now Medicare Payment
Advisory Commission) analysis of adjusted community rate proposal data
from the Health Care Financing Administration.
TABLE 2-36.--RISK-PLAN BENEFITS AND MONTHLY PREMIUMS BASED ON ADJUSTED COMMUNITY RATE PROPOSALS BY MARKET, 1995
[Dollars per month]
----------------------------------------------------------------------------------------------------------------
Number Medicare Required Optional Premium
Primary metropolitan statistical area of payment benefit benefit charged
plans value value
----------------------------------------------------------------------------------------------------------------
United States.................................................. 174 $382.27 $25.17 $56.67 $22.04
Boston......................................................... 8 360.06 4.09 71.56 47.84
Chicago........................................................ 3 418.79 24.45 38.31 0.00
Los Angeles.................................................... 13 462.88 68.83 37.18 6.08
Miami.......................................................... 8 488.65 106.27 20.75 0.00
Minneapolis.................................................... 3 333.93 0.00 75.89 60.97
New York....................................................... 5 465.95 53.37 46.77 8.80
Philadelphia................................................... 6 434.12 19.30 66.85 10.00
Portland, OR................................................... 7 315.07 9.38 64.52 46.00
San Francisco.................................................. 8 390.51 21.50 56.96 20.25
Nonmetropolitan California..................................... 6 369.00 14.43 60.19 31.08
Nonmetropolitan Florida........................................ 5 353.36 12.46 73.61 9.80
Nonmetropolitan Pennsylvania................................... 3 402.32 6.70 62.18 18.14
----------------------------------------------------------------------------------------------------------------
Note.--Required benefit value is equal to Medicare savings in the adjusted community rate proposal; optional
benefit value is equal to the maximum monthly premium. Values are unweighted averages of all Medicare risk
plans.
Source: Physician Payment Review Commission (now Medicare Payment Advisory Commission) analysis of 1995 adjusted
community rate proposal data from the Health Care Financing Administration.
In Minneapolis, for example, plans' revenues matched their
adjusted costs, so that beneficiaries received no required
additional benefits in 1995. Plans offered $76 in optional
benefits, but charged a $61 premium.
Beneficiary Protections
Risk contract plans currently operating under section 1876
of the Social Security Act must comply with requirements
designed to limit beneficiaries' financial liability and to
assure beneficiaries of certain rights and remedies. Most of
these requirements have been included and expanded in the new
Medicare+Choice Program. A few of the areas in which there are
significant differences between the risk plan requirements and
those for Medicare+Choice relate to beneficiary liability,
access to emergency medical services, and quality assurance. In
addition, the Medicare+Choice requirements largely incorporate
procedures for expedited review of coverage denials that were
issued by HCFA in final regulations on April 30, 1997.
Beneficiary financial liability
Enrollees currently in risk plans pay the part B premium
and have the same balance billing protections as beneficiaries
under traditional Medicare, so long as they do not obtain
unauthorized services from a provider that is not part of the
plan's network. Under traditional (fee-for-service) Medicare,
for example, hospitals must accept Medicare's payment as
payment in full for inpatient services except for required
beneficiary cost sharing. Similarly, participating physicians
agree to accept Medicare's payment amount as payment in full.
They can only bill patients for the coinsurance and any unmet
deductible. Physicians who are not ``participating'' physicians
in the Medicare Program, and who do not accept Medicare's
payment as payment in full, can bill beneficiaries only 15
percent above Medicare's recognized payment amount. (Medicare's
recognized payment for these physicians is actually 95 percent
of the fee schedule amount for the service.) The amount in
excess of Medicare's recognized payment amount is known as
``balance billing.'' Balance billing limits do not apply to
certain services (for example, durable medical equipment).
In the new program, all Medicare+Choice enrollees will
continue to pay the part B premium. Additional beneficiary out-
of-pocket liabilities will differ depending on the type of
Medicare+Choice plan the individual elects (table 2-37). The
rules for beneficiary financial liability apply to the basic
benefit package and required additional benefits. The basic
benefit package includes benefits required under traditional
Medicare. Medicare+Choice plans might also have to cover
additional benefits as part of the basic package if their
capitation payment exceeds the estimate of the amount it would
cost them to cover Medicare's benefits for a commercial
population (as described in the section on the adjusted
community rate).
TABLE 2-37.--BENEFICIARY COST SHARING AND PROVIDER REIMBURSEMENT UNDER MEDICARE+CHOICE PLANS FOR BASIC BENEFIT PACKAGE
--------------------------------------------------------------------------------------------------------------------------------------------------------
Item Coordinated care plan Private fee-for-service plan MSA plan
--------------------------------------------------------------------------------------------------------------------------------------------------------
Beneficiary out-of-pocket costs Premium and actuarial value of other cost The actuarial value of the cost sharing A deductible of no more than
(premium plus any deductibles, sharing (for example, coinsurance) on (not including the premium) on average $6,000 (indexed for
coinsurance, and copayments). average cannot exceed the actuarial cannot exceed the actuarial value of inflation). Amounts above
value of the cost sharing applicable on cost sharing on average under traditional Medicare
average under traditional Medicare. traditional Medicare. payments (including
coinsurance) do not have to
be counted toward
satisfying the deductible.
Beneficiary liability for balance Beneficiaries are not liable for any Contract providers can bill 15 percent
billing. balance billing amounts. above the private fee schedule (or other
provider reimbursement amount).
Balance billing is allowed
Medicare+Choice plan payment Contract providers are paid fees or rates
obligation to physicians, that are privately negotiated by the
hospitals, and other providers. plan with them.
Contract providers are paid private fees
Above the deductible, plan
Medicare+Choice payments received by Contract providers receive payments based
physicians, hospitals, and other on a privately negotiated fee schedule.
providers.
Contract providers receive payments based
Providers receive payments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Congressional Research Service and Medicare Payment Advisory Commission analysis of provisions in the Balanced Budget Act of 1997.
Enrollees in Medicare+Choice coordinated care plans are
likely to experience the least amount of out-of-pocket costs
(compared to other Medicare+Choice options). For them, the
amount of cost sharing per enrollee (including premium) for
covered services can be no more than the actuarial value of the
deductibles, coinsurance, and copayments under traditional
Medicare. Neither a contracting nor a noncontracting physician,
hospital, or other provider can impose balance billing charges
on coordinated care enrollees. Coordinated care plans will have
to pay noncontracting providers at least the same amount they
would have received if the enrollee was in traditional
Medicare, including allowed balance billing amounts.
The rules for private fee-for-service plans and MSA plans
are different (table 2-37). Generally, contract providers will
be allowed to bill enrollees in private fee-for-service plans
up to 15 percent above the fee schedule the plan uses. In
contrast to traditional Medicare, this privilege extends to all
categories of providers, including hospitals. The term
``contract provider'' refers to providers who have entered into
an explicit agreement with a plan establishing payment amounts
for services rendered to the plan's enrollees. A provider can
be deemed to have a contract with a Medicare+Choice private
fee-for-service plan if, before furnishing services to the
enrollee of such a plan, the provider: (1) received a notice of
the individual's enrollment in a private fee-for-service plan
and had been informed of the terms and conditions of the plan's
payment or (2) if the provider was given reasonable opportunity
to obtain such information. For MSA plans, unlimited balance
billing is allowed, regardless of whether the deductible has
been met. Plans could determine whether they count these
amounts toward the deductible.
Access to emergency services
Each Medicare+Choice plan must ensure access to emergency
services for emergency medical conditions. The so-called
prudent layperson definition will apply. This definition states
that an emergency medical condition is one manifesting itself
by acute symptoms of sufficient severity (including severe
pain) that a prudent layperson, who possesses an average
knowledge of health and medicine, could reasonably expect the
absence of immediate medical attention to result in: (1)
placing the health of the individual in serious jeopardy (and
in case of a pregnant women, her health or that of her unborn
child); (2) serious impairment to bodily functions, or (3)
serious dysfunction of any bodily organ or part.
Quality standards
In the current risk program, a risk plan is required to
have arrangements for an ongoing quality assurance program that
stresses health outcomes and provides review by physicians and
other health care professionals of the process followed in
providing health services. External review is conducted by a
peer review organization (PRO) or similar organization that
contracts with the Secretary to do review of specified Medicare
services. Such reviews cover both inpatient and outpatient
care. The Secretary also has the right to inspect or otherwise
evaluate the quality, appropriateness, and timeliness of
services provided and the facilities of the organization when
there is reasonable evidence of some need for inspection.
In the new program, Medicare+Choice organizations and
plans must have a quality assurance program that: (1) stresses
health outcomes and provides data permitting measurement of
outcomes and other indices of quality; (2) monitors and
evaluates high volume and high risk services and the care of
acute and chronic conditions; (3) evaluates the continuity and
coordination of care that enrollees receive; (4) is evaluated
on an ongoing basis as to its effectiveness; (5) includes
measures of consumer satisfaction, and (6) provides the
Secretary with certain information to monitor and evaluate the
plan's quality. Only coordinated care plans (and not private
fee-for-service and nonnetwork MSA plans) will have to comply
with other quality assurance requirements, such as providing
for internal peer review, establishing written protocols for
utilization review, and establishing mechanisms to detect under
and over utilization.
Most Medicare+Choice organizations must obtain external
review of the quality of their inpatient and outpatient
services and of their response to written complaints about poor
quality of care from an independent quality review and
improvement organization (such as a PRO). In addition, the
external review requirement does not apply to private fee-for-
service plans and nonnetwork MSA plans that do not have
utilization review programs. However, the Secretary is required
to ensure that the external review activities do not duplicate
the review activities conducted as part of the accreditation
process. Also, the Secretary may waive the external review
requirement if she determines that the organization has
consistently maintained an excellent record of quality
assurance and compliance with other Medicare+Choice
requirements. Plans may be deemed to have met all these
requirements if they are accredited by an organization whose
accreditations are no less stringent than Medicare's.
Grievances and appeals
A Medicare+Choice organization must have meaningful
procedures for hearing and resolving grievances between the
organization and enrollees. It also must maintain a process for
determining whether an individual enrolled within the plan is
entitled to receive a health service and the amount (if any)
that the individual must pay for the service. These
determinations must be made on a timely basis, appropriate to
the urgency of the situation. The explanation of the
determination must be in understandable language and state the
reasons for the denial. A description of the reconsideration
and appeals processes must be provided.
Upon request by the enrollee, the organization generally
will have to provide for reconsideration of a determination.
The reconsideration must occur within a time period specified
by the Secretary, but (except where an expedited process is
appropriate) no longer than 60 days after receipt of the
request. A reconsideration of a denial of coverage based on
lack of medical necessity must be made by a physician with
appropriate expertise who was not involved in the initial
determination.
An enrollee in a Medicare+Choice plan or a physician will
be able to request an expedited determination or
reconsideration. If the request is made by a physician, a
Medicare+Choice organization is required to expedite the
determination or reconsideration if the request indicates that
the normal time frame for making the determination or
reconsideration could seriously jeopardize the life or health
of the enrollee or the enrollee's ability to regain maximum
function. The time limits for the organization to respond to
the request will be established by the Secretary but must be
within 72 hours of receipt of the request.
Plan Standards
Current program standards and contractor requirements
Under the existing program, managed care organizations
seeking to enroll Medicare beneficiaries must meet standards
that are specified under section 1876 of the Social Security
Act. These include minimum enrollment requirements (they
generally must have at least 5,000 members; those serving
primarily rural areas may have 1,500 members). In addition, the
entity seeking the Medicare contract must be organized under
State law and be a federally qualified HMO or a CMP. The entity
must provide physicians' services primarily through physicians
who are either employees or partners of the organization or
through contracts with individual physicians or physician
groups. The entity also has to assume full financial risk on a
prospective basis for Medicare services, except that it may
obtain stop-loss coverage and other insurance for catastrophic
and other specified costs. Finally, it has to make provision
for protection against the risk of insolvency. Provider-
sponsored organizations (PSOs) that are not organized under the
laws of a State and are neither a federally qualified HMO or
CMP are not eligible to contract with Medicare under the Risk
Contract Program.
Current contracts with risk plans are for 1 year, and may
be made automatically renewable. However, the contract may be
terminated by the Secretary at any time (after reasonable
notice and opportunity for a hearing) if the organization fails
substantially to carry out the contract, carries out the
contract in a manner inconsistent with the efficient and
effective administration of Medicare HMO law, or no longer
meets the requirements specified for Medicare HMOs. The
Secretary also has authority to impose lesser sanctions.
Medicare+Choice standards
The Medicare+Choice standards and requirements draw
extensively from those under current law. Contracts with
Medicare+Choice organizations will be made for at least 1 year
and will be automatically renewable in the absence of notice by
either party of intention to terminate. Organizations must have
at least 5,000 individuals (or 1,500 in the case of a PSO) who
are receiving health benefits through the organization or at
least 1,500 individuals (or 500 in the case of a PSO) who are
receiving health benefits if the organization primarily serves
individuals residing outside of urbanized areas.
The Secretary is required to establish by regulation
standards for Medicare+Choice organizations and plans. By June
1, 1998, the Secretary must issue interim standards based on
currently applicable standards for Medicare risk plans (except
for Federal solvency standards that apply to PSOs, as described
below). In certain areas, these Federal standards will preempt
any State law or regulation with respect to Medicare+Choice
plans to the extent such law or regulation is inconsistent with
the Federal standards. State standards that are preempted are:
(1) benefit requirements, (2) requirements relating to
inclusion or treatment by providers, and (3) coverage
determinations (including related appeals and grievance
processes).
Organizational and financial requirements.--In general, a
Medicare+Choice organization must be organized and licensed
under State law as a risk-bearing entity eligible to offer
health insurance or health benefits coverage in each State in
which it offers a Medicare+Choice plan. A Medicare+Choice
organization must assume full risk for Medicare benefits on a
prospective basis. However, an organization may obtain
insurance or make other arrangements to cover: (1) aggregate
costs in excess of a level specified by the Secretary; (2)
medically necessary services provided by nonnetwork providers;
and (3) no more than 90 percent of the amount by which its
costs exceed 155 percent of its income. The organization also
may make arrangements with physicians or other health care
professionals and health care institutions to assume all or
part of the financial risk on a prospective basis for the
provision of Medicare benefits by these individuals and
entities.
Provider-sponsored organizations.--Special rules apply to
PSOs. A PSO is defined as a public or private entity that is
established or organized and operated by a health care provider
or group of affiliated providers. A PSO must provide a
substantial proportion of health care under a Medicare+Choice
contract directly through the provider or affiliated group of
providers. The affiliated providers must share, directly or
indirectly, substantial financial risk with respect to Medicare
benefits and have at least a majority financial interest in the
entity.
A PSO may seek a waiver of State law by filing an
application with the Secretary by no later than November 1,
2002. The waiver will be effective for 3 years and is not
renewable. The Secretary will have to approve the waiver
application if the State denied the PSO's licensing application
based on its failure to meet solvency requirements that are the
same as the Federal ones or that the State imposed as a
condition of approval procedures or standards regarding
solvency that were different from those applied under Federal
law. Waivers are also available if the State fails to act on a
substantially complete license application within 90 days.
A waiver granted to a PSO will depend on the
organization's compliance with all State consumer protection
and quality standards insofar as such standards: (1) would
apply to the organization if it were licensed under State law;
(2) are generally applicable to other Medicare+Choice
organizations and plans in the State; and (3) are consistent
with the Federal standards established under the act. Certain
State standards will be preempted as they apply to PSOs and
Medicare+Choice plans more generally (as described above). The
Secretary is required to report by December 31, 2001 on whether
the waiver process should be continued after December 31, 2002.
The report must consider the impact of the waiver process on
beneficiaries and the long-term solvency of Medicare.
The Secretary is required to establish, on an expedited
basis and using a negotiated rulemaking process, final
standards related to financial solvency and capital adequacy of
organizations seeking to qualify as PSOs. The target date for
publication of the resulting rule is April 1, 1998. The
negotiated rulemaking committee was appointed by the Secretary
in October 1997. In establishing the standards for PSO
solvency, the Secretary is required to take into consideration
any standards developed by the National Association of
Insurance Commissioners specifically for risk-based health care
delivery organizations.
Provider protections and requirements.--Each
Medicare+Choice organization is required to establish
reasonable procedures relating to the participation of
physicians in any Medicare+Choice plan it offers. The
procedures include: (1) providing notice of the rules regarding
participation; (2) providing written notice of adverse
participation decisions; and (3) providing a process for
appealing adverse decisions. The organization must consult with
contracting physicians regarding the organization's medical
policy, quality, and medical management procedures. The use of
gag clauses (restricting communications between providers and
their patients) is prohibited. The use of physician financial
incentive plans is also limited. (A financial incentive plan is
any compensation arrangement between the organization and a
physician or physician group that may directly or indirectly
have the effect of reducing or limiting services provided to
enrollees.)
Protections against fraud.--Like the current program,
Medicare+Choice requires contractors to comply with various
disclosure and notification requirements. Medicare+Choice
organizations are required to report financial information to
the Secretary, including information demonstrating that the
organization is fiscally sound, a copy of the financial report
filed with HCFA containing information on ownership, and a
description of transactions between the organization and
parties in interest.
The Secretary is also required to audit annually the
financial records of at least one-third of the Medicare+Choice
organizations (including data relating to utilization, costs,
and computation of the adjusted community rate). In addition,
the Secretary has the right to inspect or otherwise evaluate
the quality, appropriateness, and timeliness of services, as
well as the organization's facilities, if there is reasonable
evidence of need for such inspection. Also, the Secretary has
the right to audit and inspect any books and records that
pertain either to the ability of the organization to bear the
risk of potential financial loss or pertain to services
performed or determinations of amounts payable under the
contract. Medicare+Choice contracts must require the
organization to provide and pay for advance written notice to
each enrollee of a plan termination, along with a description
of alternatives for obtaining benefits. They must also require
that organizations notify the Secretary of loans and other
special financial arrangements made with subcontractors,
affiliates, and related parties.
Sanctions and termination of contracts.--The Secretary is
authorized to carry out specific remedies in the event that a
Medicare+Choice organization: (1) fails substantially to
provide medically necessary items and services required to be
provided, if the failure adversely affects the individual; (2)
imposes premiums on individuals that are in excess of those
allowed; (3) acts to expel or refuses to reenroll an individual
in violation of Federal requirements; (4) engages in any
practice that would have the effect of denying or discouraging
enrollment (except as permitted by law) of eligible individuals
whose medical condition or history indicates a need for
substantial future medical services; (5) misrepresents or
falsifies information to the Secretary or others; (6) fails to
comply with rules regarding physician participation; or (7)
employs or contracts with any individual or entity that has
been excluded from participation in Medicare. The remedies
include civil money penalties, and suspension of enrollment
until the Secretary is satisfied the deficiency has been
corrected and is not likely to recur. A noncomplying plan can
also be terminated from participation in Medicare+Choice if the
Secretary determines that the organization: (1) fails
substantially to carry out the contract; (2) is carrying it out
in a manner substantially inconsistent with the efficient and
effective administration of Medicare+Choice; or (3) no longer
substantially meets Medicare+Choice conditions.
Demonstrations Authorized by the Balanced Budget Act
The Balanced Budget Act authorizes several demonstrations
in conjunction with the Medicare+Choice Program. The most
important of these are a medical savings account option for
Medicare beneficiaries, a test of whether savings can be
achieved by setting payments to plans through competitive
pricing of plan premiums, and a test of the feasibility of
using enrollment brokers for Medicare+Choice.
Medical savings account (MSA) demonstration
The Balanced Budget Act authorizes a demonstration to test
the feasibility of medical savings accounts for the Medicare
Program. Although this is the first use of this system in
Medicare, the Health Insurance Portability and Accountability
Act of 1996 (Public Law 104-1) authorized an MSA demonstration
for employed individuals who are not yet eligible for Medicare.
The Medicare+Choice option is a combination of an MSA plan
providing health insurance with an annual deductible initially
limited to $6,000 and a Medicare+Choice MSA. Initial enrollment
for MSA plans will take place in November 1998 for the 1999
plan year. Under the terms of the demonstration, new
enrollments will not be allowed after 2002 or after the number
of enrollees reaches 390,000.
MSA plans will not be available to certain low-income or
disabled individuals, among others. When enrolled in an MSA
plan, individuals will not be able to have other health
insurance (including Medigap policies), with some exceptions,
and they must reside in the United States for at least half the
year. Individuals will be able to disenroll from an MSA plan
only during an annual election period or under special
circumstances.
An MSA plan will provide reimbursement for items and
services covered under parts A and B of Medicare, though only
after the enrollee incurs countable expenses equal to the
annual deductible (limited to $6,000, indexed for inflation).
Countable expenses include at least those payable by Medicare
under parts A and B as well as the deductibles, coinsurance,
and copayments the enrollee would have paid under those parts.
At a plan's option, other expenses (such as prescription drugs
or charges that exceed what Medicare would have paid) may also
be counted.
After the deductible is met, the plan will have to
reimburse at least 100 percent of parts A and B expenses (the
provider charges) or 100 percent of what Medicare would have
paid for these expenses without regard to deductibles or
coinsurance, whichever is less. Providers delivering services
to those with MSA plans will not be subject to balance billing
limitations, and the plans will not be required to pay any
balance billing charges, though some might do so (see table 2-
37).
Contributions to a Medicare+Choice MSA will be made
annually from the enrollee's capitation rate after the MSA plan
insurance premium has been paid. Contributions to accounts will
be exempt from taxes, as will account earnings. Withdrawals
will likewise not be taxed nor be subject to penalties if they
are used to pay unreimbursed enrollee medical expenses that are
deductible under the Internal Revenue Code. However, qualified
withdrawals cannot be made to pay insurance premiums other than
for long-term care insurance, continuation coverage (such as
COBRA), or coverage while an individual is receiving
unemployment compensation.
Nonqualified withdrawals will be included in the
individual's gross income for tax purposes. Withdrawals would
also be subject to an additional 50-percent penalty to the
extent they exceed the amount by which the account balance on
December 31 of the prior year is greater than 60 percent of the
MSA plan deductible for the year of withdrawal. For example, if
the account balance on December 31 were $3,500 and the plan
deductible the next year were $5,000, the amount that could be
withdrawn for nonqualified purposes without the penalty is $500
(that is, $3,500 minus 60 percent of $5,000). The 50-percent
penalty will not apply in cases of death or disability. Account
balances at death will be subject to various tax treatments
depending on their disposition.
If MSA plan enrollees switch to another Medicare+Choice
option or traditional Medicare, they will be able to maintain
their account and use it to pay qualified medical expenses. No
additional contributions will be allowable unless enrollees
elect an MSA plan again.
Medicare competitive pricing demonstration
Under its demonstration authority, HCFA attempted to
initiate a project in 1996 and 1997 to determine whether
changes in methods for paying health plans, specifically a
shift to some form of negotiated rates, would have the effect
of increasing the efficiency and economy of providing Medicare
services. HCFA's plan called for the application of competitive
bidding as a method for establishing payments for risk contract
HMOs in either the Baltimore or the Denver area. Through a
combination of court and legislative decisions, these
demonstrations have been terminated.
The Balanced Budget Act of 1997 requires the Secretary of
DHHS to establish a demonstration project under which payments
to Medicare+Choice organizations in certain areas are
determined in accordance with a competitive pricing
methodology.
The Secretary is required to designate, in accordance with
recommendations of the newly created Competitive Pricing
Advisory Committee (CPAC), up to seven Medicare payment areas
in which the project would be conducted. The Balanced Budget
Act spells out the composition and responsibilities of the
CPAC. The CPAC is required to recommend to the Secretary four
specific areas to be included. Demonstrations in two areas
should begin January 1, 1999, and in two other areas on January
1, 2000. Of the four areas recommended, three must be in urban
areas and one in a rural area. By December 31, 2001, the
committee could recommend to the Secretary the designation of
up to three additional payment areas to be included in the
project. The CPAC will terminate on December 31, 2004.
For each Medicare payment area in the project, the
Secretary will (in accordance with recommendations of the
CPAC), establish the benefit design among plans, structure the
method for selecting plans, establish methods for setting the
price to be paid to plans, and provide for the collection and
dissemination of plan information. In doing this, the Secretary
will have to consult an area advisory committee created for
that payment area. The Secretary is required to monitor the
project and report to Congress on its impact by the end of
2002.
Medicare+Choice enrollment demonstration
Under both the risk program and the Medicare+Choice
Program, plans with Medicare contracts may directly market to
and enroll Medicare beneficiaries. The Balanced Budget Act
authorizes the Secretary to conduct a 3-year demonstration
using a third-party contractor (sometimes called a broker) to
conduct Medicare+Choice plan enrollment and disenrollment
functions in an area. The demonstration must be conducted
separately from the Medicare competitive pricing
demonstrations. Before implementing the project, the Secretary
must consult with affected parties on the design of the
project, the selection criteria, and the establishment of
performance standards. The Secretary is required to establish
performance standards for accuracy and timeliness of enrollment
and disenrollment. In the event that the third-party contractor
fails to comply substantially with the performance standards,
the enrollment and disenrollment functions will be performed by
Medicare+Choice organizations until a new contractor is
appointed by the Secretary.
SELECTED ISSUES
Utilization and Quality Control Peer Review Organizations
The Medicare Utilization and Quality Control Peer Review
Organization Program was established by Congress under the Tax
Equity and Fiscal Responsibility Act of 1982 (TEFRA, Public Law
97-35). Building on the former professional standards review
organizations, the new peer review organizations (PROs) were
charged by the 1982 law with reviewing services furnished to
Medicare beneficiaries to determine if the services met
professionally recognized standards of care and were medically
necessary and delivered in the most appropriate setting. Major
changes were made to the PRO Program by the Social Security Act
Amendments of 1983 (Public Law 98-21) and subsequent budget
reconciliation acts. Most PRO review is focused on inpatient
hospital care. However, there is limited PRO review of
ambulatory surgery, postacute care, and services received from
Medicare HMOs.
There are currently 53 PRO areas, incorporating the 50
States and the territories. Organizations eligible to become
PROs include physician-sponsored and physician-access
organizations. In limited circumstances, Medicare fiscal
intermediaries may also be eligible. Physician-sponsored
organizations are composed of a substantial number of licensed
physicians practicing in the PRO review area (for example, a
medical society); physician access organizations are those
which have available to them sufficient numbers of licensed
physicians so that adequate review of medical services can be
assured. Such organizations obtain PRO contracts from the
Secretary of DHHS through a competitive proposal process. Each
organization's proposal is evaluated by HCFA for technical
merit using specific criteria that are quantitatively valued.
Priority is given to physician-sponsored organizations in the
evaluation process. Effective October 1, 1996, all 53 PROs are
operating under the fifth round of contracts (also referred to
as the ``fifth scope of work'').
In general, each PRO has a medical director and a staff of
nurse reviewers (usually registered nurses), data technicians,
and other support staff. In addition, each PRO has a board of
directors, comprised of physicians and, generally,
representatives from the State medical society, hospital
association, and State medical specialty societies. The Omnibus
Budget Reconciliation Act of 1986 (Public Law 99-509) requires
each board to have a consumer representative. Because the board
is usually consulted before a case is referred by the PRO to
the DHHS inspector general for sanction, it assumes a major
role in the PRO review process. Each PRO also has physician
advisors who are consulted on cases in which there is a
question regarding the nurse reviewer's referral. Only
physician advisors can make initial determinations about
services furnished or proposed to be furnished by another
physician.
PROs are paid by Medicare on a cost basis for their review
work. Spending for the PROs in fiscal year 1996 totaled $191
million; in fiscal years 1997 and 1998, spending was expected
to be $269 million and $279 million, respectively. Spending
varies considerably from year to year depending on where the
PROs are in their contract cycles. HCFA has indicated that
actual spending for 1997 and 1998 may be considerably lower
than these figures. Funds for the PRO Program are apportioned
each year from the Medicare HI and SMI Trust Funds in an amount
that is supposed to be sufficient to finance PRO Program
requirements. This is the same procedure as that followed for
payment of Medicare services provided directly to
beneficiaries. HCFA is bound by law to follow the
apportionments in the running of the PRO Program; as such, the
apportionments determine contract specifications and serve as a
device to control spending.
The PRO review process combines both utilization and
quality review. In conducting utilization review, the PRO
determines whether the services provided to a Medicare patient
were necessary, reasonable, and appropriate to the setting in
which they were provided. Although some utilization review is
done on a prospective basis, the bulk of the reviews are done
retrospectively. When a PRO determines that the services
provided were unnecessary or inappropriate (or both), it issues
a payment denial notice. The providers, the physicians, and the
patient are given an opportunity to request reconsideration of
the determination.
The PRO checks for indications of poor quality of care as
it is conducting utilization review. If a PRO reviewer detects
a possible problem, further inquiry is made into the case. If
it is determined that the care was of poor quality, the PRO
must take steps to correct the problem. Specific sanctions are
required if the PRO determines that the care was grossly
substandard or if the PRO has found that the provider or the
physician has a pattern of substandard care. In addition, under
section 9403 of COBRA (Public Law 99-272), as amended by Public
Law 101-239, authority exists for the PROs to deny payments for
substandard quality care. This provision, however, has never
been used.
Each of the contracts between DHHS and the PROs must
contain certain similar elements outlined in a document known
as the Scope of Work. Under the third and previous scopes of
work, PRO review was centered on case-by-case examinations of
individual medical records, selected primarily on a sample
basis. This approach to medical review was criticized by the
Institute of Medicine and others as being costly,
confrontational, and ineffective. The fourth scope of work
incorporated a new review strategy called the Health Care
Quality Improvement Initiative. PROs were required to use
explicit, more nationally uniform criteria to examine patterns
of care and outcomes using detailed clinical information on
providers and patients. Instead of focusing on unusual
deficiencies in care, the PROs were instructed to focus on
persistent differences between actual indications of care and
outcomes from those patterns of care and outcomes considered
achievable. HCFA believed that this approach would encourage a
continual improvement of medical practice in a way that would
be viewed by physicians and providers as educational and not
adversarial.
The fifth scope of work similarly emphasizes continuous
quality improvement. Sample case reviews, other than those
mandated by law (such as those relating to hospital notices of
noncoverage and to beneficiary complaints) are no longer
required. Instead, each PRO is required to conduct 4-18 quality
improvement projects each year, depending on the size of their
beneficiary populations.
Secondary Payer
Generally, Medicare is the ``primary payer,'' that is, it
pays health claims first, with an individual's private or other
public health insurance filling in some or all of Medicare's
coverage gaps. However, in certain cases, the individual's
other coverage pays first, while Medicare is the secondary
payer. This phenomenon is referred to as the Medicare Secondary
Payer (MSP) Program.
An employer (with 20 or more employees) is required to
offer workers age 65 and over (and workers' spouses age 65 and
over) the same group health insurance coverage as is made
available to other employees. Workers have the option of
accepting or rejecting the employer's coverage. If the worker
accepts the coverage, the employer's plan is primary for the
worker and/or spouse who is over age 65; Medicare becomes the
secondary payer. Employers may not offer a plan that
circumvents this provision.
Similarly, a group health plan, offered by a large employer
with 100 or more employees, is the primary payer for employees
or their dependents who are on the Medicare Disability Program.
The provision applies only to persons covered under the group
health plan because the employee (generally the spouse of the
disabled person) is in ``current employment status'' (that is,
is an employee or is treated as an employee by the employer).
Secondary payer provisions also apply to ESRD individuals
with employer group health plans (regardless of employer size).
Prior to enactment of the Balanced Budget Act of 1997, the
group health plan was the primary payer for 18 months for
persons who became eligible for Medicare ESRD benefits. The
employer's role as primary payer was limited to a maximum of 21
months (18 months plus the usual 3-month waiting period for
Medicare ESRD coverage). The Balanced Budget Act extends the
application of the secondary payer provisions for the ESRD
population from 18 to 30 months. This applies to items and
services furnished on or after August 5, 1997 for periods
beginning on or after February 5, 1997.
Medicare is also the secondary payer when payment has been
made, or can reasonably be expected to be made, under workers'
compensation, automobile medical liability, all forms of no-
fault insurance, and all forms of liability insurance.
The law authorizes a data match program which is intended
to identify potential secondary payer situations. Medicare
beneficiaries are matched against data contained in Social
Security Administration and Internal Revenue Service files to
identify cases in which a working beneficiary (or working
spouse) may have employer-based health insurance coverage.
Cases of previous incorrect Medicare payments are identified
and recoveries are attempted. The Balanced Budget Act clarifies
that recoveries can be initiated up to 3 years after the date
the service was furnished. Further, recoveries may be made from
third-party administrators except where such administrators
cannot recover amounts from the employer or group health plan.
Table 2-38 shows savings attributable to these Medicare
secondary payer provisions. In fiscal year 1996, combined
Medicare part A and B savings are estimated at $2.9 billion.
TABLE 2-38.--MEDICARE SAVINGS ATTRIBUTABLE TO SECONDARY PAYER PROVISIONS BY TYPE OF PROVISION, FISCAL YEARS 1988-
96
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
End-stage
Year and Medicare part Workers' Working renal Automobile Disability Total
compensation aged disease
----------------------------------------------------------------------------------------------------------------
1988:
Part A................................... $110.1 $786.7 $88.4 $149.6 $275.5 $1,410.3
Part B................................... 18.1 313.8 20.2 22.3 93.5 467.9
--------------------------------------------------------------------
Total.................................. 128.2 1,100.5 108.6 171.9 369.0 1,878.2
====================================================================
1989:
Part A................................... 99.4 867.7 75.0 179.6 399.3 1,621.0
Part B................................... 27.5 337.1 25.1 28.2 137.0 554.9
--------------------------------------------------------------------
Total.................................. 126.9 1,204.8 100.1 207.8 536.3 2,175.9
====================================================================
1990:
Part A................................... 120.9 981.6 144.1 220.1 498.4 1,965.1
Part B................................... 21.6 325.8 21.5 26.4 123.2 518.5
--------------------------------------------------------------------
Total.................................. 142.5 1,307.4 165.6 246.5 621.6 2,483.6
====================================================================
1991:
Part A................................... 107.4 932.7 144.9 235.6 526.6 1,947.2
Part B................................... 21.2 417.5 40.2 26.6 186.2 691.7
--------------------------------------------------------------------
Total.................................. 128.6 1,350.2 185.1 262.2 712.8 2,638.9
====================================================================
1992:
Part A................................... 118.9 1,044.9 140.8 233.9 600.9 2,139.4
Part B................................... 17.3 398.3 37.4 34.5 182.9 670.4
--------------------------------------------------------------------
Total.................................. 136.2 1,443.2 178.2 268.4 783.8 2,809.8
====================================================================
1993:
Part A................................... 100.4 1,073.1 133.6 239.6 657.8 2,204.5
Part B................................... 11.3 392.2 32.8 28.9 192.3 657.5
--------------------------------------------------------------------
Total.................................. 111.7 1,465.3 166.4 268.5 850.1 2,862.0
====================================================================
1994:
Part A................................... 96.5 1,101.1 130.2 265.9 682.3 2,276.0
Part B................................... 13.0 398.1 31.8 32.7 211.8 687.4
--------------------------------------------------------------------
Total.................................. 109.5 1,499.2 162.0 298.6 894.1 2,963.4
====================================================================
1995:
Part A................................... 107.0 1,068.0 142.0 295.5 728.9 2,341.4
Part B................................... 10.5 360.3 39.0 40.2 215.5 665.5
--------------------------------------------------------------------
Total.................................. 117.5 1,428.3 181.0 335.7 944.4 3,006.9
====================================================================
1996:
Part A................................... 93.6 1,062.5 133.4 335.0 728.5 2,353.0
Part B................................... 11.1 295.1 34.3 50.1 196.4 586.9
--------------------------------------------------------------------
Total.................................. 104.7 1,357.6 167.6 385.0 924.9 2,939.9
----------------------------------------------------------------------------------------------------------------
Source: Health Care Financing Administration, Bureau of Program Operations.
Supplementing Medicare Coverage
In 1995, 7.7 percent of the total Medicare population were
enrolled in Medicare managed care plans. Approximately 87
percent of persons not enrolled in Medicare managed care plans
had some form of supplementary coverage. Of these, 33 percent
had individually purchased coverage, known as Medigap; 31
percent had employer-provided coverage; 6 percent had both
Medigap and employer-provided coverage; 15 percent had
Medicaid; and 2 percent had other supplemental coverage such as
the military or veterans benefits. Approximately 13 percent of
the fee-for-service population had Medicare coverage only (see
table 2-39).
TABLE 2-39.--SUPPLEMENTAL INSURANCE STATUS OF BENEFICIARIES IN MEDICARE
FEE-FOR-SERVICE, 1995
------------------------------------------------------------------------
Persons
Type of coverage (in
percent)
------------------------------------------------------------------------
Medigap..................................................... 33
Employer provided........................................... 31
Medigap and employer provided................................ 6
Medicaid..................................................... 15
Other supplemental........................................... 2
Medicare only................................................ 13
----------
Total................................................... 100
------------------------------------------------------------------------
Source: Physician Payment Review Commission, 1997.
Medigap
Medigap policies offer coverage for Medicare's deductibles
and coinsurance and for some services not covered by Medicare.
The typical premium for a community-rated plan is estimated to
be $1,300 in 1997 (Physician Payment Review Commission, 1997).
The Omnibus Budget Reconciliation Act of 1990 provided for a
standardization of Medigap policies; the intention was to
enable consumers to better understand policy choices and to
prevent marketing abuses. Implementing regulations generally
limit the number of different types of Medigap plans that can
be sold in a State to no more than 10 standard benefit plans,
known as ``plan A'' to ``plan J.'' The standardized plan A
covers a core benefits package. Each of the other nine includes
the core package plus a different combination of additional
benefits. Four plans make up an estimated three-quarters of
plan sales: plan A, 7 percent; plan B, 16 percent; plan C, 22
percent; and plan F (the most frequently sold policy), 33
percent. Only plan H, plan I, and plan J offer some drug
coverage; together they account for 14 percent of plan sales.
Beneficiaries who purchased policies prior to the
standardization requirement may renew these policies; however,
policies issued after July 1992 must be one of the 10 standard
plans. Approximately half of the beneficiaries with Medigap
policies have nonstandardized plans.
The Balanced Budget Act of 1997significantly changed
certain Medigap enrollment requirements, effective July 1,
1998. Prior to that date, the following rules apply. All
insurers offering Medigap policies are required to offer a 6-
month open enrollment period for persons turning age 65. This
is known as guaranteed open enrollment. There is no guaranteed
open enrollment for the under-65 disabled population. At the
time insurers sell a Medigap policy, whether or not during an
open enrollment period, they are permitted to limit or exclude
coverage for services related to a preexisting health
condition; such exclusions cannot be imposed for more than 6
months. An individual who has met the preexisting condition
limitation in one Medigap policy does not have to meet the
requirement under a new policy for previously covered benefits.
However, an insurer could impose exclusions for newly covered
benefits.
The Balanced Budget Act also expands the guaranteed issue
requirements, effective July 1, 1998. Specifically, the law
guarantees issuance of specified Medigap policies without a
preexisting condition exclusion for certain continuously
enrolled individuals. The insurer is prohibited from
discriminating in the pricing of such policy on the basis of
the individual's health status, claims experience, receipt of
health care, or medical condition.
The guaranteed issuance is extended to the following
persons provided they enroll within 63 days of termination of
other enrollment:
1. An individual enrolled under an employee welfare benefit
plan that provides benefits supplementing Medicare and
the plan terminates or ceases to provide such benefits.
2. A person enrolled with a Medicare+Choice organization who
discontinues enrollment under circumstances permitting
disenrollment other than during an annual election
period. (These include: (1) the termination of the
entity's certification, (2) the individual moves
outside of the entity's service area; or (3) the
individual elects termination due to cause.)
3. An individual enrolled with an HMO and enrollment ceases
for the reasons noted above.
4. An individual enrolled under a Medigap policy and
enrollment ceases because: (1) of the bankruptcy or
insolvency of the issuer, or because of other
involuntary termination of coverage and there is no
provision under applicable State law for the
continuation of such coverage, (2) the issuer
substantially violates a material provision; or (3) the
issuer misrepresented the policy's provisions.
5. An individual who: (1) was enrolled under a Medigap policy;
(2) subsequently terminates such enrollment and enrolls
with a Medicare+Choice organization, a risk or cost
contract HMO, a similar organization operating under a
demonstration project authority, or a Medicare Select
policy; and (3) terminates such enrollment during any
period within the first 12 months during which the
individual is permitted to terminate enrollment, but
only if the individual was never previously enrolled
with such an entity.
6. An individual who upon first becoming eligible for Medicare
at age 65, enrolls in a Medicare+Choice plan, and
disenrolls from such plan within 12 months.
The guaranteed issue is generally for plan A, B, C or F.
However: (1) for persons described in (5) it refers to the same
policy in which the person was previously enrolled; and (2) for
persons described in (6) it is for any Medigap policy. At the
time of the event which resulted in the cessation of enrollment
or loss of coverage, the organization, insurer, or plan
administrator (whichever was appropriate) would have to notify
the individual of his or her rights and the obligations of
issuers of Medigap policies.
The Balanced Budget Act prohibits the imposition of a
preexisting exclusion period for persons who on the date of
application, have at least 6 months of creditable coverage.
Specifically, such an exclusion can not be imposed on an
individual who, on the date of application, has a continuous
period of at least 6 months of health insurance coverage
defined as ``creditable coverage'' under the Health Insurance
Portability and Accountability Act (HIPAA). If the individual
has less than 6 months coverage, the policy would have to
reduce the period of any preexisting exclusion by the aggregate
of periods of ``creditable coverage'' applicable to the
individual as of the enrollment date. The rules used to
determine the reduction would be based on rules used under
HIPAA.
The Balanced Budget Act provides for high deductible
Medigap plans. Specifically, it adds 2 plan types to the
current list of 10 standard Medigap plans. These will offer the
benefit package of either plan F or plan J, except for the high
deductible feature. The high deductible is $1,500 in 1998 and
1999, increased by the CPI in subsequent years. The beneficiary
would be responsible for expenses up to this amount.
Medicare Select
OBRA 1990 established a demonstration project under which
insurers could market a product known as Medicare Select.
Select policies are the same as other Medigap policies except
that they will only pay in full for supplemental benefits if
covered services are provided through designated health
professionals and facilities known as preferred providers. OBRA
1990 limited the demonstration project to 3 years (1992-94) and
to 15 States. The Social Security Amendments of 1994 (Public
Law 103-432) extended Select for 6 months. Public Law 104-18
extended the program for 3 years (to June 30, 1998) and to all
States. A permanent extension beyond the 3 year period is
authorized unless the Secretary determines that the Select
Program significantly increased Medicare expenditures,
significantly diminished access to and quality of care, or did
not result in lower Medigap premiums for beneficiaries. This
determination must be made by December 31, 1997, based on a
study completed by June 30, 1997.
Public Law 104-18 also required the General Accounting
Office (GAO) to determine the extent to which individuals who
are continuously covered under a Medigap policy are subject to
medical underwriting if they change the policy under which they
are covered. Further, GAO was required to identify options, if
necessary, for modifying the Medigap market to make sure that
continuously insured beneficiaries are able to switch plans
without medical underwriting. Many of the issues identified in
the GAO report were addressed in the Balanced Budget Act of
1997.
Employer-based policies
In 1995, employer-based policies covered 37 percent of
Medicare beneficiaries. Employer-based plans are typically more
comprehensive than Medigap plans. Generally they are defined
benefit plans which may overlap significantly with Medicare
benefits. As a result, employers use a variety of approaches to
coordinate their plans with Medicare (which is the primary
payer for retirees). The costs of coverage are generally shared
by the employer and retiree. In 1996, large firms (over 500
employees) shared the costs for 43 percent of individual
retiree plans, and paid in full for an additional 29 percent of
plans. In 1996, retirees on average spent $948 for their
employer-sponsored coverage (Foster Higgins, 1996).
In recent years, the percentage of employers offering
retiree health coverage for their Medicare retirees has
dropped. Between 1994 and 1996, the number of large firms
offering such coverage dropped from 40 percent to 33 percent
(Foster Higgins, 1996).
In addition, many other employers are pursuing strategies
to lower their liabilities for retiree health costs. Some
employers are moving toward a defined contribution model for
retiree health benefits. Others are using Medicare risk plans
and other managed care organizations to deliver services to
their retirees. A number of large employers (accounting for
over 2 million Medicare-eligible retirees) have joined the
National Medicare HMO initiative to negotiate contracts with
Medicare risk plans for the provision of benefits in excess of
those otherwise offered by the plans (Physician Payment Review
Commission, 1997).
Impact of supplemental insurance on Medicare spending
Medicare cost-sharing requirements are intended, in part,
to encourage cost-conscious utilization. Insurance that
supplements Medicare by covering deductibles and coinsurance
removes these incentives. Many analyses have addressed how
supplemental insurance affects beneficiaries' use of Medicare-
covered services and the cost of those services to Medicare.
Typically, these studies have estimated that Medicare spending
for beneficiaries with supplemental coverage are one-quarter to
one-third higher, on average, than expenditures for
beneficiaries without such coverage.
A Physician Payment Review Commission analysis (Physician
Payment Review Commission, 1997) of the Medicare Current
Beneficiary Survey (MCBS) found a similar effect: Medicare
expenditures for beneficiaries covered by supplemental
insurance were about 30 percent higher than they were for those
without such coverage. Subsequent analysis showed that the
effect of secondary coverage on Medicare expenditures differs,
depending on the source of coverage. Expenditures for
beneficiaries having Medicare only are less than 75 percent of
those for beneficiaries with Medigap. Spending for
beneficiaries with employer-provided benefits average only
about 10 percent less (chart 2-14).
CHART 2-14. COMPARISON OF PROJECTED PER CAPITA SPENDING FOR AVERAGE
BENEFICIARIES, BY TYPE OF SUPPLEMENTAL INSURANCE AND YEAR
Note._These spending levels represent the expected
differences in outlays after other factors have been taken into
account.
Source: Physician Payment Review Commission analysis of
data from the 1993 and 1995 Medicare Current Beneficiary
Survey. The sample size for 1993 was 11,285 and the sample size
for 1995 was 13,261.
Higher utilization among beneficiaries with supplemental
insurance translates into increased Medicare costs because
Medicare is the primary payer for those services. The MCBS
analysis found that per capita expenditures for Medicare
beneficiaries with Medigap insurance were from $1,000 to $1,400
higher than those for beneficiaries with Medicare only. Per
capita spending for beneficiaries with employer-provided
supplements were from $700 to $900 higher than those for
beneficiaries with no supplemental coverage.
These results reflect the difference in spending by source
of insurance, once other factors have been considered. High
service use among beneficiaries with secondary insurance
appears to be a consequence of having such insurance,
presumably reflecting the reduced financial burden associated
with using additional services.
Qualified Medicare Beneficiaries (QMBs)
Medicare beneficiaries are liable for specified cost-
sharing charges; namely, premiums, deductibles, and
coinsurance. Such charges could pose a potential hardship for
some persons, especially those who do not have supplementary
protection, either through an individually-purchased
``Medigap'' policy or employer-based coverage. Certain low-
income persons are entitled to have their Medicare cost-sharing
charges paid by the Federal-State Medicaid Program. More
limited coverage is available for two other population groups:
(1) persons who meet the QMB criteria (see below) except that
their income is slightly in excess of the poverty line; and (2)
qualified disabled and working individuals. Persons meeting the
qualifications for coverage under one of these categories, but
not otherwise eligible for Medicaid, are not entitled to the
regular Medicaid benefits package. Instead, they are entitled
to have Medicaid make specified payments in their behalf.
QMB eligibility
State Medicaid Programs are required to make Medicare cost-
sharing assistance available to QMBs. A QMB is an aged or
disabled Medicare beneficiary who has: (1) income at or below
the Federal poverty line ($7,890 for a single, $10,610 for a
couple in 1997); and (2) resources below 200 percent of the
resources limit set for the Supplemental Security Income (SSI)
Program (the QMB resource limits are $4,000 for an individual
and $6,000 for a couple). Certain items, such as an
individual's home and household goods, are excluded from the
calculation.
Persons meeting the QMB definition are entitled to Medicare
part A. Included is the relatively small group of aged persons
who are not automatically entitled to part A coverage, but who
have bought part A protection by paying a monthly premium. Not
included are working disabled persons who have exhausted
Medicare part A entitlement but who have extended their
coverage by payment of a monthly premium.
QMB benefits
Medicaid is required to pay Medicare premiums and cost-
sharing charges for the QMB population as follows: (1) part B
monthly premiums; (2) part A monthly premiums paid by the
limited number of persons not automatically entitled to part A
protection; (3) coinsurance and deductibles under part A and
part B including the Medicare hospital deductible, the part B
deductible, and the part B coinsurance; and (4) coinsurance and
deductibles that health maintenance organizations (HMOs) and
competitive medical plans charge their enrollees.
Medicaid coverage is limited to payment of these charges
unless the individual is otherwise eligible for Medicaid. A
person eligible for regular Medicaid benefits as well as QMB
assistance is entitled to Medicaid payment for Medicare
premiums and cost-sharing charges as well as to the full range
of Medicaid services otherwise available to them.
Payment of QMB benefits
States are required to pay part A and part B premiums in
full for the QMB population. They are also required to pay the
requisite deductibles and coinsurance, though the actual amount
of the payment may vary. State Medicaid Programs frequently
have lower payment rates for services than those applicable
under Medicare. Federal program guidelines permit States to
either: (1) pay the full Medicare deductible and coinsurance
amounts; or (2) only pay those amounts to the extent that the
Medicare provider or supplier has not received the full
Medicaid rate for the service. If the Medicare service is not
covered under the State Medicaid Program, the State may either
pay the full Medicare deductibles and coinsurance amounts or
alternatively provide for reasonable payments (subject to
approval by DHHS).
Twenty-nine States instituted policies which used payment
rates below those applicable under Medicare. However, the U.S.
Court of Appeals for four judicial circuits issued decisions
which required States in their jurisdictions to pay the full
Medicare cost-sharing expenses for QMBs. As a result, 8 of the
29 States were required to change their policies. However, in
May 1997, another judicial circuit found that California could
cap payments to Medicare providers at Medicaid payment rates.
This issue was subsequently addressed by the Balanced Budget
Act of 1997 which permits States to limit total payments to the
amount which would otherwise be paid by Medicaid. The provision
is effective on enactment, except that it also applies to
services furnished before that date if payment for such
services is subject of a pending lawsuit.
Buy-in
All States have buy-in agreements with the Secretary that
allow them to enroll their QMB population in part B. Some
States have also elected to include payment of part A premiums
under their buy-in agreements. Payment of premiums under a buy-
in agreement is advantageous to the State because premiums paid
through this method are not subject to delayed enrollment
penalties which might otherwise be applicable in the case of
delayed enrollment or reenrollment.
The buy-in agreements for the QMB population are in
addition to the traditional buy-in agreements that States have
for other population groups. Under these traditional buy-in
agreements, States enroll in Medicare part B persons who are
eligible for both Medicare and Medicaid. As a minimum, States
may limit buy-in coverage to persons receiving cash assistance;
alternatively, they may add some or all categories of other
persons who are eligible for both programs.
Specified low-income Medicare beneficiaries (SLMBs)
States are also required to pay Medicare part B premiums
for SLMBs. These are persons meeting the QMB criteria except
that their income is slightly over the QMB limit. In 1997, the
SLMB income limit is 120 percent of the Federal poverty line.
Medicaid protection is limited to payment of the Medicare part
B premiums, unless the beneficiary is otherwise eligible for
Medicaid.
The Balanced Budget Act of 1997 requires State Medicaid
Programs, effective January 1, 1998 through December 31, 2002,
to pay part B premiums for beneficiaries with incomes up to 135
percent of poverty. For Medicare beneficiaries with incomes
between 135 and 175 percent of poverty, State Medicaid Programs
are required to cover that portion of the Medicare part B
premium attributable to the transfer of home health visits from
part A to part B.
The Federal Government will pay 100 percent of the costs
associated with expanding Medicare part B premium assistance
from 120 percent to 135 percent, as well as the extra premium
cost attributable to the home health transfer for persons
between 135 and 175 percent. To cover these costs, the
Secretary will be required to provide for allocations to States
based on the sum of: (1) a State's number of Medicare
beneficiaries with incomes between 135 and 175 percent of
poverty, and (2) twice the number of Medicare beneficiaries
with incomes between 120 and 135 percent of poverty, relative
to the sum for all eligible States. Total amounts available for
allocations are $200 million for fiscal year 1998, $250 million
for fiscal year 1999, $300 million for fiscal year 2000, $350
million for fiscal year 2001, and $400 million for fiscal year
2002. The Federal matching rate for each participating State
will be 100 percent up to the State's allocation. If a State
exceeds its allocation, the matching rate on the excess is
zero. Payments are to be made from Medicare part B for the
costs of this program.
Qualified disabled and working individuals (QDWIs)
Medicaid is authorized to provide partial protection
against Medicare part A premiums for QDWIs. QDWIs are persons
who were previously entitled to Medicare on the basis of a
disability, who lost their entitlement based on earnings from
work, but who continue to have the disabling condition.
Medicaid is required to pay the Medicare part A premium for
such persons if their incomes are below 200 percent of the
Federal poverty line, their resources are below 200 percent of
the SSI limit, and they are not otherwise eligible for
Medicaid. States are permitted to impose a premium, based on a
sliding scale, for individuals between 150 and 200 percent of
poverty.
Data
As of May 1997, Medicare reported that there were 317,753
Medicare part A beneficiaries for whom QMB payments for part A
premiums were being made. As of the same date, States reported
a total of 4,987,918 part B buy-ins of which 2,429,792 were
separately identified as QMBs and 242,749 were separately
identified as SLMBs (see table 2-40). However, these numbers
are low due to reporting problems. The QMB and SLMB numbers
include persons who were eligible for the full Medicaid benefit
package. No QMB-only or SLMB-only number is available.
Nationwide there were 18 QDWIs in May 1997; this information is
not broken down by State.
TABLE 2-40.--NUMBER OF QUALIFIED MEDICARE BENEFICIARIES AND PART B BUY-
INS BY STATE, MAY 1997
------------------------------------------------------------------------
Part B buy-
ins
State Part A QMBs Part B buy- identified
ins as QMBs by
State
------------------------------------------------------------------------
Alabama.......................... 3,444 122,455 30,441
Alaska........................... 630 6,821 15
Arizona.......................... 433 48,777 31,519
Arkansas......................... 4,027 79,371 21,534
California....................... 78,784 767,174 403,732
Colorado......................... 512 50,574 12,589
Connecticut...................... 2,453 50,639 41,009
Delaware......................... 468 8,293 1,900
District of Columbia............. 1,264 14,374 269
Florida.......................... 40,583 303,138 214,388
Georgia.......................... 7,017 167,895 46,156
Hawaii........................... 4,855 18,597 3,779
Idaho............................ 264 14,099 8,121
Illinois......................... 3,686 144,828 112,728
Indiana.......................... 1,841 76,479 49,777
Iowa............................. 1,326 49,865 35,551
Kansas........................... 602 37,243 13,216
Kentucky......................... 3,230 104,766 30,041
Louisiana........................ 5,570 115,045 26,254
Maine............................ 10 31,861 13,748
Maryland......................... 6,256 59,858 46,670
Massachusetts.................... 14,814 131,730 104,371
Michigan......................... 5,748 130,454 38,093
Minnesota........................ 3,118 56,216 17,444
Mississippi...................... 7,269 106,647 74,407
Missouri......................... 662 79,264 58,821
Montana.......................... 455 11,798 9,602
Nebraska......................... 1 17,356 652
Nevada........................... 983 16,374 12,057
New Hampshire.................... 28 6,041 1,425
New Jersey....................... 7,188 134,114 87,141
New Mexico....................... 535 33,599 7,441
New York......................... 190 349,797 168,195
North Carolina................... 11,522 203,477 32,471
North Dakota..................... 8 5,683 1,363
Ohio............................. 6,643 176,472 79,081
Oklahoma......................... 4,722 62,727 56,416
Oregon........................... 37 49,120 26,801
Pennsylvania..................... 15,609 172,703 114,830
Puerto Rico...................... 0 0 0
Rhode Island..................... 840 17,213 1,812
South Carolina................... 1,904 100,941 84,818
South Dakota..................... 779 12,766 4,560
Tennessee........................ 8,316 161,479 66,794
Texas............................ 43,166 334,970 94,082
Utah............................. 158 14,523 9,804
Vermont.......................... 241 12,996 3,228
Virgin Islands................... 0 210 0
Virginia......................... 2,961 109,046 42,105
Washington....................... 4,548 81,054 29,654
West Virginia.................... 3,714 43,386 39,095
Wisconsin........................ 4,114 76,831 17,871
Wyoming.......................... 225 5,778 1,936
Northern Marianas................ 0 311 0
Guam............................. 0 690 0
--------------------------------------
Total...................... 317,753 4,987,918 2,429,792
------------------------------------------------------------------------
Note.--See text for data limitations; QMB = qualified Medicare
beneficiary.
Source: Health Care Financing Administration.
LEGISLATIVE HISTORY, 1980-97
This section summarizes major Medicare legislation enacted
into law, beginning with the Social Security Disability
Amendments of 1980 and continuing chronologically through the
Balanced Budget Act of 1997. Previous editions of the Green
Book review legislation enacted before 1980. Since only
technical changes were included in the Social Security
Amendments of 1994, this act is not discussed here.
The summary highlights major provisions; it is not a
comprehensive list of all Medicare amendments. Included are
provisions which had a significant budget impact, changed
program benefits, modified beneficiary cost sharing, or
involved major program reforms. Provisions involving policy
changes are mentioned the first time they are incorporated in
legislation, but not necessarily every time a modification is
made. For example, the enactment of the initial secondary payer
provisions are noted in 1980, 1981, and 1982. Subsequent
clarifying amendments to these provisions are not mentioned.
The descriptions include either the initial effective date of
the provision or, in the case of budget savings provisions, the
fiscal years for which cuts were specified.
Social Security Disability Amendments of 1980, Public Law 96-265
Established a voluntary certification program for Medicare
supplemental policies in States that failed to establish
equivalent or more stringent standards. (Federal program put in
place July 1, 1982.)
Omnibus Reconciliation Act of 1980, Public Law 96-499
Home health services
Liberalized home health benefits by eliminating the number
of visits limits, the prior hospitalization requirement, and
the deductible for any benefits provided under part B.
(Effective July 1, 1981.)
Ambulatory surgical services
Required the Secretary to develop a list of surgical
procedures that could appropriately be performed on an
outpatient basis in an ambulatory surgical center and provided
that payments would be made for facility services on the basis
of prospectively determined rates. (Effective on enactment.)
Secondary payer
Provided that Medicare would be the secondary payer where
payment could be made under liability or no-fault insurance.
(Effective on enactment.)
Public Law 96-611 (an Amendment to the Social Security Act)
Authorized coverage for pneumococcal vaccines. (Effective
July 1, 1981.)
Omnibus Budget Reconciliation Act of 1981 (OBRA 1981), Public Law 97-35
Part A deductible
Increased the multiplier for computing the inpatient
hospital deductible by 12.5 percent. (Effective January 1,
1982.)
Part B deductible
Eliminated the use of medical expenses incurred during the
last 3 months of the preceding calendar year for determining
whether an individual had met the part B deductible for the
current calendar year. The part B deductible was also increased
from $60 to $75. (Effective January 1, 1982.)
Medicare secondary payer
Modified the existing Medicare benefit payment coordination
rules for persons with end-stage renal disease (ESRD), making
the individual's private employer group health plan the primary
payer and Medicare the secondary payer for the first 12 months
after an individual was determined to be eligible for Medicare
under the ESRD provisions. (Effective October 1, 1981.)
Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Public Law
97-248
Part A provider payments
Expanded prospective limits on hospital costs reimbursed
under Medicare originally enacted in the Social Security
Amendments of 1972 (Public Law 92-603), to include, in addition
to routine costs, all other inpatient hospital operating costs,
such as ancillary costs (for example, laboratory, operating
room, pharmacy, and so forth) and costs of special care units
(for example, intensive care units). Established a 3-year
Medicare ceiling (or target rate) on the allowable annual rate
of increase in operating costs per case for inpatient hospital
services. Required the Secretary to develop proposals for the
prospective payment of hospitals under Medicare by the end of
1982. (Effective for hospital cost-reporting periods beginning
on or after October 1, 1982.)
Part B premium
Increased the part B premium to cover 25 percent of program
costs for the aged for 1-year periods beginning July 1, 1983
and July 1, 1984. This provision was subsequently extended
through 1990. (Effective July 1, 1983.)
Reimbursement for inpatient radiology and pathology services
Eliminated the special 100-percent reimbursement rate for
radiologist and pathologist services furnished directly to
hospital inpatients, and the exemption of such services from
being subject to the part B deductible and coinsurance.
(Effective for items or services furnished on or after October
1, 1982.)
Medicare secondary payer for older workers
Amended the existing benefit payment coordination rules
making Medicare secondary payer for older workers with private
employer group health insurance coverage. Required private
employers with 20 or more full-time workers to provide older
workers with the same coverage provided for workers under age
65. Subsequently extended to spouses. (Effective January 1,
1983.)
Hospice care
Authorized 210 days of hospice care for terminally ill
Medicare beneficiaries with a life expectancy of 6 months or
less. (Effective for the period from November 1, 1983 to
October 1, 1986, with benefit becoming permanent and day limit
repealed at a later date.)
Health maintenance organizations (HMOs) and competitive medical plans
(CMPs)
Provided for contracts with HMOs or CMPs on a risk sharing
(prospective) basis. Individuals eligible to receive benefits
under Medicare would be eligible to enroll with any HMO or CMP
that had a Medicare contract and served the geographic area in
which the individual resided. Medicare's payment to the entity
with a risk-sharing contract would be made on a per capita
basis for each class of beneficiary enrolled in the plan,
adjusted for factors such as age, disability status, and other
factors. (Effective when the Secretary certified to Congress
that the payment methodology was adequate.)
Peer review organizations (PROs)
Established the PROs to review the medical necessity and
reasonableness of care, quality of care, and the
appropriateness of the setting in which the care was delivered
for Medicare services furnished primarily in hospitals.
Repealed authorization for the Professional Standards Review
Organizations (PSROs), which had been charged since 1972 with
reviewing both Medicare and Medicaid services. (Effective on
enactment.)
Hospital insurance (HI) tax for Federal employees
Required Federal employees to begin paying the Medicare HI
tax and to earn eligibility for HI coverage under Medicare.
(Effective January 1, 1983.)
Social Security Amendments of 1983, Public Law 98-21
Part A hospital reimbursement
Established a new method of Medicare reimbursement for
hospital inpatient care, called the prospective payment system
(PPS). Under this system, payment for each patient would be
made at predetermined, specific rates based on the average cost
of treating similar patients. Categories of patients would be
defined by the diagnosis-related groups (DRGs) patient
classification system which assigned each inpatient to a DRG
based on the diagnosis and other factors. (Effective for
hospital cost-reporting periods beginning on or after October
1, 1983.)
PROs
Authorized PROs to deny payment to a hospital for
unnecessary or inappropriate services. (Effective on
enactment.)
Deficit Reduction Act of 1984 (DEFRA), Public Law 98-369
Physicians' services
Froze physicians fees for 15 months, established the
Participating Physicians' Program, and froze billed charges of
nonparticipating physicians. (Freeze effective July 1, 1984
through September 30, 1985.)
Laboratory services
Established two fee schedules for clinical laboratory
services, one for independent laboratories and physicians and
one for services provided by hospital outpatient labs. Required
independent laboratories to accept assignment on claims and
waived patient cost-sharing charges on such claims, and
permitted physicians to bill for lab services only when they
personally performed or supervised the performance of the test.
(Fee schedules effective July 1, 1984, with schedule for
outpatient hospital services initially limited to 3 years and
made permanent in subsequent legislation.)
Hepatitis B vaccine
Authorized coverage for hepatitis B vaccine and its
administration when furnished to a high risk individual.
(Effective September 1, 1984.)
Emergency Extension Act of 1985, Public Law 99-107
Froze PPS payment rates for inpatient hospital services at
fiscal year 1985 levels and continued physician payment freeze
through November 14, 1985. Subsequent acts (Public Law 99-155,
Public Law 99-181, Public Law 99-189, and Public Law 99-201)
extended the freezes through March 14, 1986. (See below for
further extension through April 30, 1986.)
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), Public
Law 99-272
Hospital patient protection
Established requirements for hospitals participating in
Medicare to examine and treat patients in active labor or with
emergency medical conditions (also known as ``antidumping''
provisions). (Effective on first day of first month beginning
at least 90 days after enactment.)
Hospital payment freeze
Extended freeze on payments through April 30, 1986 and
reduced PPS updates for the remainder of fiscal year 1986.
(Effective on enactment.)
Indirect medical education
Began phased reduction of payments for indirect costs of
medical education. (Applied to cost-reporting periods beginning
on or after May 1, 1986.)
Direct graduate medical education
Replaced cost-based hospital reimbursement for direct costs
of medical education with a hospital-specific cost amount per
approved full-time equivalent resident. Limited the period of
residency training for which payments would be made. (Applied
to cost-reporting periods beginning on or after July 1, 1985.)
Disproportionate-share hospitals
Codified payment adjustments for hospitals serving a
disproportionate share of low-income patients. (Effective May
1, 1986.)
Physician fee freeze
Extended fee freeze from March 14, 1986 through April 30,
1986 for participating physicians and through December 1, 1986
for nonparticipating physicians. Required the Secretary in
consultation with the newly established Physician Payment
Review Commission to develop a relative value scale for
payments for physician services. (Fee freeze extension was
effective on enactment; other changes became effective later in
1986.)
Return on equity
Began phase-out of return on equity capital for for-profit
hospital services and reduced return on equity for other
services. (Effective for hospitals for cost-reporting periods
beginning on or after October 1, 1986; for other providers, on
or after October 1, 1985.)
Coverage of new State and local employees
Extended Medicare HI tax to State and local government
employees hired on or after April 1, 1986 and established
Medicare part A entitlement for these employees. (Effective
beginning after March 31, 1986 for both tax and entitlement to
coverage.)
Omnibus Budget Reconciliation Act of 1986 (OBRA 1986), Public Law 99-
509
Part A deductible
Changed the annual indexing of the part A (hospital)
deductible from an amount based on the average cost of 1 day of
inpatient hospital care to an amount based on the applicable
percentage increase used for prospective payment rates,
adjusted to reflect changes in real case mix. (Effective for
services provided on or after January 1, 1987.)
Payments for physicians' services
Provided for higher recognized payment screens for
participating physicians beginning January 1, 1987. Imposed
limits on balance billing for nonparticipating physicians known
as the maximum allowable actual charge (MAACs). (Effective
January 1, 1987 with MAAC limits effective for 4 years.)
Secondary payer for the disabled
Made Medicare the second payer for disabled Medicare
beneficiaries who elected to be covered under employer plans as
a current employee (or family member of such employee) of an
employer with at least 100 employees. (Effective January 1,
1987 through December 31, 1992. Subsequently modified and
extended.)
Payment for cataract surgical procedures
Reduced the prevailing charges of participating and
nonparticipating physicians for certain cataract surgical
procedures. (Effective for services furnished on or after
January 1, 1987 until the earlier of December 31, 1990 or 1
year after the Secretary reported to Congress on the relative
value scale.)
Ambulatory surgery
Revised payment methodology for ambulatory surgery provided
in hospital outpatient departments to be the lesser of costs or
charges or a blend of hospital costs and ASC rates (reaching
50/50 in fiscal year 1988). Required the Secretary to develop a
prospective payment system for ambulatory surgery performed in
outpatient departments. (Applied to payment rates for cost-
reporting periods beginning on or after October 1, 1987.)
Vision care
Provided for payment for vision care services furnished by
optometrists if the services were among those covered by
Medicare and the optometrist was legally authorized to perform
that service. (Prior to this change, Medicare only covered
optometrist services related to the treatment of aphakia.)
(Effective April 1, 1987.)
Physician assistants
Provided for coverage of and separate payment for services
performed by a physician assistant if the service would be
covered when performed by a physician. (Effective January 1,
1987.)
Medicare and Medicaid Patient and Program Protection Act of 1987,
Public Law 100-93
Fraud and abuse
Amended titles XI, XVIII, and XIX of the Social Security
Act to improve antifraud provisions. Established civil
penalties and sanction authority, including mandatory exclusion
from Medicare, Medicaid, and other programs under the Social
Security Act for specific acts of fraud or abuse. (Effective on
the 15th day after enactment.)
Beneficiary protections and information clearinghouse
Improved program protections for beneficiaries and created
an information-reporting system concerning sanctions taken by
State entities to prevent sanctioned providers in one State
from setting up practices anew in another. (Generally effective
on the 15th day after enactment.)
Balanced Budget and Emergency Deficit Control Reaffirmation Act of
1987, Public Law 100-119
Froze payment rates at fiscal year 1987 levels through
November 20, 1987, and mandated a sequester order that resulted
in Medicare payment reductions of 2.324 percent effective
November 21, 1987. (Effective as specified.)
Omnibus Budget Reconciliation Act of 1987 (OBRA 1987), Public Law 100-
203
Part A and B reductions under sequester order
Extended payment reductions under the sequester order for
all inpatient hospital services (including capital and direct
medical education) until March 31, 1988, and for other part A
services until December 31, 1987. Froze part B prevailing
charges and the customary charges for physicians' services for
the period January 1 through March 31, 1988 at 1987 levels, and
extended the sequester order for part B services through March
31, 1988. (Effective on enactment.)
Hospital inpatient payment rates
Reduced the update factors for PPS hospitals for fiscal
year 1988 and fiscal year 1989. Established separate updates
for large urban, ``other urban,'' and rural areas. (Effective
for discharges occurring on or after April 1, 1988, for fiscal
year 1988 update factors.)
Hospital capital payments
Reduced hospital capital-related payments by 7 percent
between October 1 and December 31, 1987; by 12 percent for the
remainder of fiscal year 1988, beginning January 1, 1988; and
by 15 percent for fiscal year 1989. Required Secretary to
establish a prospective payment system for capital to begin
with cost-reporting periods beginning on or after October 1,
1991. (Effective as specified.)
Physician payments
Reduced payment update for 1988 and 1989 for participating
physicians for nonprimary care services, beginning on April 1,
1988. Reduced nonparticipating physician payments to 95.5
percent of prevailing charges for participating physicians for
services furnished from April 1 to December 31, 1988; for
fiscal year 1989, further reduced payments to 95 percent of the
prevailing charges of participating physicians. Added a 5-
percent bonus payment for services provided in underserved
areas, effective January 1, 1989 in rural areas and January 1,
1991 in urban areas. (Effective as specified.)
Reductions in overpriced procedures
Expanded list of overpriced procedures (previously limited
to cataract surgery) and reduced prevailing charges for them.
Reduced prevailing charges by 2 percent from the 1987 level,
and further reduced prevailing charges by specified amounts if
the prevailing charge was above 85 percent of the national
average level. (Effective for items and services provided on or
after April 1, 1988.)
Durable medical equipment (DME) fee schedule
Froze payment screens for DME for 1 year from January 1
through December 31, 1988. Required the Secretary to establish
a fee schedule for the fee screen year beginning January 1,
1989, for each of 6 categories of DME services. (Effective date
of fee schedule for items furnished on or after January 1,
1989.)
Ambulatory surgery copayment
Required that the deductible and coinsurance requirements
be imposed for assigned physicians' services provided in ASCs
and hospital outpatient departments. (Effective for services
furnished on or after April 1, 1988.)
Flu vaccine
Provided coverage of influenza vaccine and its
administration if a demonstration conducted by the Secretary
found it to be cost effective. (Effective date of 24-month
demonstration October 1, 1988; Secretary authorized coverage
effective May 1, 1993.)
Therapeutic shoes for diabetics
Provided coverage for therapeutic shoes for diabetics
contingent on the demonstration of their cost effectiveness by
the Secretary. (Effective date of 24-month demonstration
October 1, 1988; Secretary authorized coverage effective May 1,
1993.)
Coverage of mental health services
Increased the limit on recognized charges for the
outpatient treatment of mental disorders beginning in calendar
year 1988. Beginning calendar year 1989, the payment limit
would not include brief office visits to prescribe or monitor
prescription drugs used as treatment. (Effective January 1,
1988.)
Medicare Catastrophic Coverage Act of 1988 (MCCA), Public Law 100-360
Part A benefits
Modified hospital coverage by specifying a maximum of one
hospital deductible per year and eliminating the day limits,
coinsurance charges, and spell of illness provisions. Modified
skilled nursing facility (SNF) benefit by requiring coinsurance
for the first 8 days of care; eliminating coinsurance for days
21-100; covering up to 150 days per year; and eliminating the
prior hospitalization requirement. Modified home health benefit
by expanding definition of intermittent care and permitting
extension of hospice benefit beyond 210 days. (Hospital and SNF
benefits effective January 1, 1989; home health and hospice
benefits effective January 1, 1990.)
Part B benefits
Established a maximum out-of-pocket limit (``catastrophic
cap'') on beneficiary liability for part B cost-sharing
charges, and set cap at level to cover 7 percent of
beneficiaries. Added coverage for routine mammography screening
and home intravenous drug therapy services. Provided respite
coverage for up to 80 hours per year for chronically dependent
individuals who had met the catastrophic or prescription drug
cap. (Effective January 1, 1990.)
Catastrophic drug benefits
Established, effective January 1, 1990, a limited
prescription drug benefit for two categories of drugs (home
intravenous (IV) drugs and immunosuppressive drugs) once the
beneficiary met a $550 deductible. Extended, beginning January
1, 1991, catastrophic coverage for all outpatient prescription
drugs once the beneficiary met a $600 deductible (indexed to
cover 16.8 percent of beneficiaries in future years). Set the
coinsurance at 50 percent, dropping to 20 percent by 1993.
(Limited coverage effective beginning in 1990; coverage for all
drugs beginning in 1991, with full implementation in 1993.)
Financing
Added an additional amount to the monthly part B premium.
Added a supplemental premium (a surtax collected in conjunction
with the Federal income tax) for persons with income tax
liability above $150. (Effective for part B premiums beginning
January 1, 1989; supplemental premiums effective for tax years
beginning after 1988.)
Qualified Medicare beneficiaries (QMBs)
Required Medicaid to pay Medicare premiums and cost-sharing
charges for Medicare beneficiaries below poverty. (Coverage
phased in beginning January 1, 1989)
Medicare Catastrophic Coverage Repeal Act of 1989, Public Law 101-234
Repealed the Medicare and financing provisions included in
the 1988 law. Generally the repeal restored prior law
provisions as if the catastrophic act had not been passed. For
hospital and SNF benefits which had gone into effect in 1989,
prior law provisions were restored, effective January 1, 1990
with transition provisions included for persons in a hospital
or SNF on that date. The additional part B premium was
repealed, effective January 1, 1990. The QMB provision was not
repealed.
Omnibus Budget Reconciliation Act of 1989 (OBRA 1989), Public Law 101-
239
Sequester
Extended sequester affecting part A and HMO payments (a
reduction of 2.1 percent) through December 31, 1989, and
extended sequester for part B payments (a 2.1-percent
reduction) through March 31, 1990. (Effective on enactment.)
Hospital capital payments
Extended the 15-percent reduction in hospital capital
payments for discharges occurring during the period January 1
through September 30, 1990. (Effective on enactment.)
DRG weighting factors
Reduced the weighting factors for each diagnosis-related
group (DRG) by 1.22 percent for hospital discharges occurring
in fiscal year 1990 and revised the update factors for fiscal
year 1990. (Effective on enactment.)
Disproportionate-share adjustment for hospitals
Increased the adjustment for certain hospitals that served
a disproportionate share of low-income patients. (Effective for
discharges occurring on or after April 1, 1990.)
Additional payments for rural hospitals
Extended rural referral centers designations for 3 years;
expanded the Sole Community Hospital Program; established new
criteria for Medicare-dependent small rural hospitals; and
established the Essential Access Community Hospital Program.
(Effective for varying periods after enactment.)
Physician payment reform
Established a fee schedule for payment of physician
services based on a resource-based relative scale, to be phased
in over a 5-year period beginning January 1, 1992.
Physician payments
Delayed the inflation update from January 1 until April 1,
1990 and reduced the 1990 update for certain physician
services; reduced payments for certain overvalued procedures;
and reduced payments under the radiology fee schedule.
(Effective for the 9-month period beginning on April 1, 1990.)
Clinical lab fee schedule
Established a ceiling on lab fee schedule payments at 93
percent of the national median for the particular test.
(Effective for lab tests performed on or after January 1,
1990.)
Durable medical equipment update
Eliminated the inflation update in the fee schedules for
durable medical equipment. (Effective for equipment provided
during calendar year 1990.)
Mental health services
Eliminated the dollar limit on payments for mental health
services, and expanded settings in which services of clinical
psychologists and clinical social workers could be covered.
(Dollar limit elimination effective January 1, 1990; expanded
settings provision effective July 1, 1990. )
Pap smear coverage
Authorized coverage of pap smears, once every 3 years, more
often for women at high risk of developing cervical cancer.
(Effective July 1, 1990.)
Agency for Health Care Policy and Research (AHCPR)
Created the AHCPR and authorized the agency to undertake
research on the effectiveness, efficiency, quality, and
outcomes of health care services, assuring that the needs and
priorities of Medicare were reflected in such research.
(Effective on enactment.)
Self-referral
Prohibited physician referral to clinical laboratories with
which the referring physician has a financial relationship.
(Effective January 1, 1992.)
Omnibus Budget Reconciliation Act of 1990 (OBRA 1990), Public Law 101-
508
General payment freeze
Froze payments for part A services at fiscal year 1990
levels for the period October 21 through December 31, 1990.
Reduced part B payments by 2 percent for November 1980 and
December 1990. (Effective as specified.)
Hospital inpatient payment rates
Reduced update factors for PPS hospitals for fiscal years
1991-93. Set update factors for rural hospitals such that rural
payment rates would equal those for ``other urban'' hospitals
by fiscal year 1995. Increased and made permanent payment
adjustments to disproportionate-share hospitals. (Effective for
fiscal years 1991-95.)
Hospital capital payments
Reduced capital payments by 15 percent for fiscal year
1991; for fiscal years 1992-95, required reductions in hospital
payments equal to 10 percent of what would have been paid for
capital costs on a reasonable cost basis. (Effective for fiscal
years 1991-95.)
Physician payments
Reduced the 1991 inflation update for primary care services
and froze rates for other services; reduced 1992 increases for
nonprimary care services. Continued payment reductions for
overpriced procedures and added to the list of such procedures.
Established new limits on balance billing charges to be phased
in over the 1991-93 period. (Payment limits effective for
calendar years 1991 and 1992; balance billing limits effective
beginning in 1991.)
Hospital outpatient payments
Reduced by 5.8 percent payments for services paid on a
reasonable cost basis. (Effective for fiscal years 1991-95.)
Durable medical equipment (DME)
Replaced regional limits on DME fees with phased-in
national upper and lower limits and reduced DME update. (Update
reductions effective for calendar years 1991 and 1992; national
limits effective for 1991 and later years.)
Clinical laboratory services
Limited the update for clinical laboratory services to 2
percent per year for 1991-93 and reduced the national limits on
laboratory fee schedules. (Update reductions effective for
calendar years 1991-93; national limit reductions effective
January 1, 1991.)
Injectable drugs for osteoporosis
Added coverage of injectable drugs for treatment of bone
fractures of homebound individuals with osteoporosis who were
unable to self-administer the drug. (Effective January 1, 1991
through December 31, 1995.)
Mammography
Added coverage of mammography screenings at specified
intervals. (Effective January 1, 1991.)
Part B deductible
Increased the part B deductible from $75 to $100.
(Effective January 1, 1991.)
Part B premium
Set part B premiums at fixed dollar amounts projected to
equal 25 percent of program costs. (Effective for fiscal years
1991-95.)
Medigap
Established mandatory standards for Medigap policies,
including uniform benefit packages, to replace the previous
voluntary certification system. (Generally effective no later
than 1 year after promulgation of model regulation by National
Association of Insurance Commissioners.)
Federally qualified health centers (FQHCs)
Established cost-based reimbursement for services furnished
by FQHCs, including federally funded community and migrant
health centers and similar facilities. (Effective October 1,
1991.)
HI tax
Raised the income level subject to the HI tax. (Effective
January 1, 1991.)
Omnibus Budget Reconciliation Act of 1993 (OBRA 1993), Public Law 103-
66
Payment for part A services
Reduced update factors for inpatient hospital and hospice
services for fiscal years 1994-97; reduced hospital capital
payment rates for fiscal years 1996-98; froze cost limits for
SNFs for fiscal years 1994-95; eliminated return on equity
payments for SNFs. (Payment reductions effective as specified;
elimination of return on equity effective October 1, 1993.)
Payment for physician services
Reduced updates for services other than primary care.
Reduced Medicare volume performance standards (MVPS) for 1994
and subsequent years and increased the potential reductions in
fee updates for failure to meet the MVPS for 1995 and
subsequent years. (Update reductions effective for calendar
years 1994 and 1995.)
Payment for other part B services
Froze payment rates for certain DME services, clinical
laboratory services, ASC services, and home health agencies.
Extended existing reductions in payments for hospital
outpatient services for fiscal years 1996-98. (Payment freezes
generally effective for 1994 and 1995.)
Graduate medical education
Froze per resident payment amounts for nonprimary care
residents. (Effective for fiscal years 1994 and 1995.)
Part B premium
Extended policy of setting part B premium at 25 percent of
program costs. (Effective for calendar years 1996-98.)
Oral cancer drugs
Added coverage of certain self-administered anticancer
drugs. (Effective January 1, 1994.)
Physician ownership and referral
Extended self-referral prohibition to additional services,
including DME, physical therapy, home health, prescription
drugs, and hospital services. (Effective for referrals made
after December 31, 1994.)
Part A revenue provisions
Eliminated upper limit on earnings subject to HI payroll
tax. Also transferred into part A trust fund new revenues from
increased taxation of Social Security benefits. (Effective
January 1, 1994.)
Health Insurance Portability and Accountability Act of 1996, Public Law
104-1
Added new criminal health care fraud provisions,
strengthened existing civil and criminal fraud and abuse
provisions and provided funding for new antifraud programs
(generally effective on enactment or January 1, 1997).
Balanced Budget Act of 1997, Public Law 105-33
Hospitals
Froze PPS hospital and PPS-exempt hospitals and units and
limited updates for fiscal years 1999-2002. Established a
prospective payment system for inpatient rehabilitation
hospitals, effective beginning in fiscal year 2001. Rebased
capital payment rates and provided for additional reductions
over the fiscal year 1997-2002 period. Reduced the IME payment
from the current 7.7 percent to 5.5 percent by fiscal year 2001
and reformed direct GME payments (generally effective on
enactment or October 1, 1997).
Skilled nursing facilities
Provided for a phase in of a prospective payment system
that will pay a Federal per diem rate for covered SNF services
(generally effective July 1, 1998).
Home health
Provided for the establishment of a prospective payment
system for home health services. Provided for a reduction in
per visit cost limits prior to the implementation of the
prospective payment system, clarified the definitions of part-
time and intermittent care, and provided for a study of the
definition of homebound. Provided for the transfer of some home
health costs from part A to part B (prospective payment
effective October 1, 1999, reduction in cost-limits effective
on enactment, definition clarification effective October 1,
1997, and transfer of costs effective January 1, 1998).
Hospice
Reduced the hospice payment update for each of fiscal year
1998 through fiscal year 2002, and clarified the definition of
hospice care (generally effective on enactment).
Physicians
Provided for use of a single conversion factor; replaced
the volume performance standard with the sustainable growth
rate; provided for phased-in implementation of resource-based
practice expenses; and permitted use of private contracts under
specified conditions (generally effective January 1, 1998).
Hospital outpatient departments
Extended reductions in payments for outpatient hospital
services paid on the basis of costs through December 1999 and
established a prospective payment system for hospital
outpatient departments for covered services beginning in 1999
(generally effective on enactment).
Other providers
Froze payments for laboratory services for fiscal years
1998-2002; provided for establishment of a fee schedule in 2000
for payment for ambulance services (generally effective on
enactment).
Beneficiary payments
Permanently set the part B premium at 25 percent of
program costs and expanded the premium assistance beginning in
1998 available under the Specified Low-Income Medicare
Beneficiary (SLMB) Program (effective on enactment).
Prevention initiatives
Authorized coverage for annual mammograms for all women
over 40. Added coverage for screening pelvic exams, prostate
cancer screening tests, colorectal cancer screening tests,
diabetes self-management training services, and bone mass
measurements for certain high-risk persons (generally effective
in 1998, except prostate cancer screening effective 2000).
Supplementary coverage
Provided for guaranteed issuance of specified Medigap
policies without a preexisting condition exclusion for certain
continuously enrolled aged individuals (effective July 1,
1998).
Competitive bidding
Provided for competitive bidding demonstrations for
furnishing part B services (not including physicians services)
(effective on enactment).
Commissions
Established a 17-member National Advisory Commission on
the Future of Medicare (with appointments to be made by
December 1, 1997). Established the Medicare Payment Advisory
Commission replacing the Prospective Payment Assessment
Commission and the Physician Payment Review Commission (with
appointments to be made by September 30, 1997).
Medicare+Choice
Established a new part C of Medicare called
Medicare+Choice. This program is built on the existing Medicare
Risk Contract Program which enabled beneficiaries to enroll,
where available, in health maintenance organizations (HMOs)
that contracted with the Medicare Program. The Medicare+Choice
Program expands, beginning in 1999, the private plan options
that could contract with Medicare to other types of managed
care organizations (for example, preferred provider
organizations and provider-sponsored organizations), private
fee-for-service plans, and, on a limited demonstration basis,
high deductible plans (called medical savings account plans)
offered in conjunction with medical savings accounts (effective
on enactment).
CBO SAVINGS AND REVENUE ESTIMATES FOR BUDGET RECONCILIATION ACTS, 1981-
93
Table 2-41 shows estimates of savings and revenue increases
for budget reconciliation legislation enacted from 1981 to
1993. These estimates were made at the time of enactment by the
Congressional Budget Office (CBO). It should be noted that the
estimates are compared with the CBO budget baseline in effect
at the time. The savings from the various reconciliation bills
cannot be added together.
TABLE 2-41.--MEDICARE SAVINGS ESTIMATES, 1981-93
[In billions of dollars]
------------------------------------------------------------------------
Legislative act Savings
------------------------------------------------------------------------
Omnibus Budget Reconciliation Act of 1981:
Spending reductions for fiscal years 1982-84............. $4.3
Tax Equity and Fiscal Responsibility Act of 1982:
Spending reductions for fiscal years 1983-87............. 23.1
Social Security Amendments of 1983:
Spending reductions for fiscal years 1983-88............. 0.2
Revenue increases for fiscal years 1983-88............... 11.5
Deficit Reduction Act of 1984:
Spending reductions for fiscal years 1984-87............. 6.1
Consolidated Omnibus Budget Reconciliation Act of 1985:
Spending reductions for fiscal years 1986-81............. 12.6
Omnibus Budget Reconciliation Act of 1986:
Spending reductions for fiscal years 1987-89............. 1.0
Omnibus Budget Reconciliation Act of 1987:
Spending reductions for fiscal years 1988-90............. 9.8
Omnibus Budget Reconciliation Act of 1989:
Spending reductions for fiscal years 1990-94............. 10.9
Omnibus Budget Reconciliation Act of 1990:
Spending reductions for fiscal years 1991-95............. 43.1
Revenue increases for fiscal years 1991-95............... 26.9
Omnibus Budget Reconciliation Act of 1993:
Spending reductions for fiscal years 1994-98............. 55.8
Revenue increases for fiscal years 1994-98............... 53.8
Health Insurance Portability and Accountability Act of 1996:
Spending reductions for fiscal years 1996-2002........... 3.0
Balanced Budget Act of 1997:
Spending reductions for fiscal years 1998-2002........... 116.4
Spending reductions for fiscal years 1998-2007........... 393.8
------------------------------------------------------------------------
Note.--Savings relative to baseline at time of enactment. Figures cannot
be summed.
Source: Committee on Ways and Means, (1988, 1989, 1991); Congressional
Budget Office.
MEDICARE HISTORICAL DATA
Tables 2-42 through 2-52 present detailed historical data
on the Medicare Program. Tables 2-42, 2-43, and 2-44 present
detailed enrollment data. Table 2-45 describes the percentage
of enrollees participating in a State buy-in agreement. Tables
2-46 and 2-47 show the distribution of Medicare payments by
type of coverage and by type of service. Tables 2-48 and 2-49
show the number of persons served and the average reimbursement
per person served and per enrollee. Table 2-50 shows the
utilization of hospital services. Table 2-51 presents Medicare
utilization and reimbursement by State. Table 2-52 shows the
number of participating institutions and organizations.
TABLE 2-42.--NUMBER OF MEDICARE ENROLLEES BY TYPE OF COVERAGE AND TYPE OF ENTITLEMENT, SELECTED YEARS 1968-95
[In thousands]
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Year Average annual rate of
--------------------------------------------------------------------------------------------------------------------------------------------------- growth (percent)
Type of entitlement and coverage --------------------------
1968 1975 1980 1982 1984 1986 1988 1989 1990 1991 1992 1993 1994 1995 1968-75 1975-83 1984-95
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total:
HI \1\ and/or SMI \2\................................... 19,821 24,959 28,478 29,494 30,456 31,750 32,980 33,579 34,203 34,870 35,579 36,306 36,935 37,535 3.3 2.3 2.1
Total HI: 19,770 24,640 28,067 29,069 29,996 31,216 32,413 33,040 33,719 34,429 35,153 35,904 36,543 37,135 3.2 2.3 2.2
HI only................................................. 1,016 1,054 1,079 1,082 1,040 1,160 1,363 1,481 1,574 1,633 1,645 1,694 1,768 1,850 0.5 0.0 5.9
Total SMI............................................... 18,805 23,905 27,400 28,412 29,416 30,590 31,617 32,099 32,629 33,237 33,933 34,612 35,167 35,685 3.5 2.4 2.0
SMI only................................................ 51 318 411 425 460 534 567 539 484 441 425 425 392 400 29.9 4.1 -1.4
Aged:
HI and/or SMI........................................... 19,821 22,790 25,515 26,540 27,571 28,791 29,879 30,409 30,948 31,485 32,010 32,462 32,801 33,142 2.0 2.2 1.9
Total HI................................................ 19,770 22,472 25,104 26,115 27,112 28,257 29,312 29,869 30,464 31,043 31,584 32,060 32,409 32,742 1.8 2.2 1.9
HI only................................................. 1,016 845 835 833 807 928 1,098 1,192 1,263 1,300 1,297 1,315 1,353 1,000 -2.6 -0.4 2.2
Total SMI............................................... 18,805 21,945 24,680 25,707 26,765 27,863 28,780 29,216 29,686 30,185 30,712 31,147 31,447 31,742 2.2 2.3 1.7
SMI only................................................ 51 318 411 425 459 534 567 539 484 441 425 401 392 400 29.9 4.1 -1.4
All disabled:
HI and/or SMI........................................... (\4\) 2,168 2,963 2,954 2,884 2,959 3,102 3,171 3,255 3,385 3,568 3,844 4,135 4,393 NA 3.8 4.3
Total HI................................................ (\4\) 2,168 2,963 2,954 2,884 2,959 3,101 3,171 3,255 3,385 3,568 3,844 4,135 4,393 NA 3.8 4.3
HI only................................................. (\4\) 209 244 249 233 232 265 288 311 333 348 378 807 451 NA 1.5 6.8
Total SMI............................................... (\4\) 1,959 2,719 2,759 2,682 2,727 2,837 2,883 2,943 3,052 3,220 3,466 3,720 3,942 NA 4.0 4.0
SMI only \3\............................................ (\4\) ......... ........ ......... ........ ......... ........ ......... ........ ......... ........ ......... ........ ......... ....... ....... .......
ESRD \5\ only:
HI and/or SMI........................................... (\4\) 13 28 27 30 39 53 58 65 69 72 226 235 71 NA 10.1 9.0
Total HI................................................ (\4\) 13 28 27 30 39 53 58 65 69 72 224 233 71 NA 10.1 9.0
HI only................................................. (\4\) 1 1 2 2 3 4 5 6 6 7 11 10 8 NA 9.1 14.9
Total SMI............................................... (\4\) 12 27 26 28 36 49 54 59 62 65 215 225 63 NA 10.1 8.4
SMI only \3\............................................ (\4\) ......... ........ ......... ........ ......... ........ ......... ........ ......... ........ ......... ........ ......... ....... ....... .......
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Hospital insurance. \2\ Supplementary medical insurance. \3\ Disabled and end-stage renal disease only must have HI to be eligible for SMI coverage. \4\ Medicare disability entitlement began in 1973. \5\ End-stage
renal disease.
NA--Not available.
Source: Health Care Financing Administration, Bureau of Data Management and Strategy.
TABLE 2-43.--GROWTH IN NUMBER OF AGED MEDICARE ENROLLEES BY SEX AND AGE, SELECTED YEARS 1968-95
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Year Average annual growth Enrollees
------------------------------------------------------------------------------------------ rate (percent) as percent
--------------------------- Total aged of total
Sex and age population aged
1968 1975 1980 1984 1986 1990 1991 1992 1993 1995 1968-75 1975-84 1986-95 1995 \1\ population
1995
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
All persons........................................ 19,496 22,548 25,515 27,571 28,791 30,948 31,485 32,011 32,462 33,142 2.1 2.3 1.6 33,530 97.8
65-69............................................ 6,551 7,642 8,459 8,784 9,163 9,695 9,690 9,692 9,683 9,517 2.2 1.6 0.4 9,928 96.6
70-74............................................ 5,458 5,950 6,756 7,300 7,564 7,951 8,163 8,373 8,509 8,756 1.2 2.3 1.6 8,830 98.6
75-79............................................ 3,935 4,313 4,809 5,327 5,573 6,058 6,175 6,261 6,369 6,563 1.3 2.4 1.8 6,681 95.8
80-84............................................ 2,249 2,793 3,081 3,382 3,559 3,957 4,065 4,166 4,257 4,470 3.1 2.2 2.6 4,463 97.8
85 and over...................................... 1,303 1,850 2,410 2,778 2,932 3,286 3,393 3,519 3,643 3,837 5.1 4.6 3.0 3,628 102.9
Males.............................................. 8,177 9,201 10,268 11,044 11,525 12,416 12,650 12,886 13,095 13,434 1.7 2.0 1.7 13,688 96.9
65-69............................................ 2,944 3,420 3,788 3,942 4,109 4,352 4,358 4,374 4,386 4,348 2.2 1.6 0.6 4,506 96.8
70-74............................................ 2,322 2,504 2,841 3,088 3,214 3,406 3,505 3,604 3,670 3,791 1.1 2.4 1.9 3,836 98.1
75-79............................................ 1,596 1,669 1,854 2,061 2,160 2,382 2,441 2,485 2,542 2,642 0.6 2.4 2.3 2,720 94.3
80-84............................................ 864 1,005 1,062 1,161 1,221 1,369 1,411 1,454 1,495 1,593 2.2 1.6 3.0 1,609 96.0
85 and over...................................... 450 604 722 793 822 906 934 968 1,003 1,060 4.3 3.1 2.9 1,017 101.2
Females............................................ 11,319 13,347 15,247 16,526 17,266 18,532 18,835 19,125 19,367 19,708 2.4 2.4 1.5 19,842 98.5
65-69............................................ 3,606 4,222 4,671 4,842 5,054 5,343 5,332 5,317 5,298 5,169 2.3 1.5 0.3 5,422 96.5
70-74............................................ 3,136 3,446 3,914 4,212 4,350 4,545 4,657 4,769 4,839 4,964 1.4 2.3 1.5 4,994 99.0
75-79............................................ 2,338 2,644 2,954 3,266 3,414 3,676 3,734 3,776 3,827 3,921 1.8 2.4 1.6 3,961 96.8
75-84............................................ 1,386 1,788 2,019 2,222 2,339 2,588 2,653 2,713 2,762 2,877 3.7 2.4 2.3 2,854 98.9
85 and over...................................... 853 1,246 1,689 1,985 2,110 2,380 2,459 2,551 2,640 2,777 5.6 5.3 3.1 2,611 103.6
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ U.S. residents only.
Source: Health Care Financing Administration, Bureau of Data Management and Strategy; and U.S. Department of Commerce, Bureau of the Census.
TABLE 2-44.--GROWTH IN NUMBER OF DISABLED MEDICARE ENROLLEES WITH HOSPITAL INSURANCE COVERAGE BY TYPE OF ENTITLEMENT AND AGE, SELECTED YEARS 1975-95
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Year Average annual percent
------------------------------------------------------------------------------------------------------------ growth rate
Type of entitlement and age --------------------------
1975 1980 1984 1988 1990 1992 1993 1994 1995 1975-82 1982-88 1982-95
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
All disabled persons..................................... 2,058,424 2,425,231 2,884,410 3,101,482 3,254,983 3,568,625 3,844,178 4,134,604 4,393,287 2.3 4.3 4.7
Under age 35......................................... 238,070 193,392 388,240 471,129 483,262 512,495 545,644 574,003 587,709 -2.7 15.7 8.8
35-44................................................ 251,142 258,374 422,207 572,408 654,953 762,759 834,426 908,076 973,328 1.0 13.4 10.4
45-54................................................ 508,345 572,823 584,214 670,131 741,193 874,797 974,589 1,083,945 1,187,993 0.7 3.9 6.4
55-64................................................ 1,060,967 1,400,642 1,489,749 1,397,814 1,375,575 1,418,574 1,489,519 1,568,580 1,644,257 4.2 -0.2 1.1
All disabled workers..................................... 1,638,662 2,396,897 2,309,866 2,456,135 2,579,097 2,856,517 3,100,532 3,367,187 3,602,559 5.5 0.5 3.2
Under age 35......................................... 100,439 184,619 193,094 249,291 257,760 286,486 317,876 345,322 357,794 9.3 4.9 5.1
35-44................................................ 164,439 253,186 290,395 414,749 482,071 576,549 642,386 710,431 769,071 7.0 7.8 8.6
45-54................................................ 426,451 565,846 485,378 552,442 612,692 731,713 823,552 926,390 1,023,616 3.0 0.8 5.3
55-64................................................ 947,333 1,393,246 1,340,999 1,239,653 1,226,574 1,261,769 1,316,718 1,385,044 1,452,078 5.9 -2.1 -0.2
Adults disabled as children.............................. 324,864 409,072 459,620 519,009 542,416 566,336 580,439 595,750 609,081 4.4 2.8 2.5
Under age 35......................................... 151,708 173,684 186,003 207,311 208,901 208,710 210,760 212,944 213,973 2.4 2.2 1.3
35-44................................................ 84,508 105,092 126,252 146,460 158,725 170,363 176,182 182,861 189,108 4.8 3.8 3.8
45-54................................................ 71,484 80,381 87,380 99,444 107,092 117,333 122,435 127,622 132,484 2.4 2.8 3.5
55-64................................................ 45,164 49,910 59,985 65,774 67,698 69,930 71,062 72,323 73,516 3.2 2.7 2.1
Widows and widowers...................................... 83,771 110,785 85,227 73,101 68,793 74,157 91,643 101,247 111,121 2.5 -5.0 0.9
Under 55............................................. 7,446 7,577 4,608 5,685 5,615 7,399 9,811 11,458 12,420 -3.5 -0.4 6.0
55-64................................................ 76,325 103,208 80,618 67,416 63,178 66,758 81,832 91,789 98,701 2.9 -5.3 -0.4
End-stage renal disease only............................. 11,127 28,334 29,697 53,237 64,677 71,615 71,564 68,420 70,526 13.7 11.7 7.6
Under age 35......................................... 3,729 8,773 9,143 14,507 16,601 17,299 17,008 15,737 15,942 12.3 9.5 5.0
35-44................................................ 2,187 5,188 5,559 11,199 14,157 15,847 15,858 14,784 15,149 12.3 14.7 9.0
45-54................................................ 2,966 6,977 6,848 12,560 15,794 18,352 18,791 18,475 19,473 12.2 11.2 8.6
55-64................................................ 2,245 7,396 8,147 14,971 18,125 20,117 19,907 19,424 19,962 18.6 12.5 7.9
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Health Care Financing Administration, Bureau of Data Management and Strategy.
TABLE 2-45.--NUMBER AND PERCENTAGE OF INDIVIDUALS ENROLLED IN SUPPLEMENTARY MEDICAL INSURANCE UNDER STATE BUY-IN
AGREEMENTS BY TYPE OF BENEFICIARY AND BY YEAR OR 1995 AREA OF RESIDENCE, SELECTED YEARS 1968-95
----------------------------------------------------------------------------------------------------------------
All persons Aged Disabled
--------------------------------------------------------------
Year or area of residence \1\ Percent Percent Percent
Number in of SMI Number in of SMI Number in of SMI
thousands enrolled thousands enrolled thousands enrolled
----------------------------------------------------------------------------------------------------------------
Year:
1968......................................... 1,648 8.8 1,648 8.8 NA NA
1975......................................... 2,846 12.0 2,483 11.4 363 18.7
1980......................................... 2,954 10.9 2,449 10.0 504 18.9
1981......................................... 3,257 11.7 2,659 10.6 598 21.7
1982......................................... 2,791 9.8 2,288 8.9 503 18.6
1983......................................... 2,654 9.3 2,177 8.4 477 18.1
1984......................................... 2,601 8.9 2,127 8.0 474 18.2
1985......................................... 2,670 9.0 2,164 8.0 505 19.2
1986......................................... 2,776 9.2 2,222 8.0 554 20.9
1987......................................... 2,985 9.6 2,337 8.2 648 23.2
1988......................................... 3,033 9.6 2,341 8.1 691 24.4
1989......................................... 3,351 10.4 2,549 8.7 802 27.8
1990......................................... 3,604 11.0 2,714 9.1 890 30.2
1991......................................... 3,768 10.4 2,817 8.7 949 27.8
1992......................................... 4,066 12.0 2,972 9.7 1,083 33.6
1993......................................... 4,353 12.6 3,122 10.0 1,231 35.5
1994......................................... 4,625 13.2 3,243 10.3 1,382 37.2
1995......................................... 4,895 13.7 3,369 10.6 1,526 38.7
Area of residence: \1\
Alabama...................................... 124 20.1 86 16.4 34 41.5
Alaska....................................... 6 19.4 4 14.8 2 50.0
Arizona...................................... 46 8.0 31 6.0 15 30.0
Arkansas..................................... 83 20.3 58 16.7 22 41.5
California................................... 783 22.4 561 17.9 204 63.6
Colorado..................................... 49 12.2 32 9.0 17 42.5
Connecticut.................................. 45 9.4 31 7.1 19 51.4
Delaware..................................... 6 6.2 4 4.6 3 33.3
District of Columbia......................... 15 21.4 11 17.5 4 57.1
Florida...................................... 284 11.1 211 9.0 77 42.3
Georgia...................................... 170 21.1 119 17.5 48 45.3
Hawaii....................................... 18 12.9 14 10.8 4 44.4
Idaho........................................ 14 9.7 8 6.2 5 41.7
Illinois..................................... 144 9.3 89 6.4 54 37.8
Indiana...................................... 84 10.6 53 7.5 29 34.9
Iowa......................................... 53 11.5 33 7.8 18 48.6
Kansas....................................... 36 9.7 24 7.1 12 41.4
Kentucky..................................... 101 17.8 67 14.3 35 42.2
Louisiana.................................... 114 20.5 80 17.1 35 44.9
Maine........................................ 29 14.9 18 10.6 12 57.1
Maryland..................................... 64 11.2 44 8.5 19 38.8
Massachusetts................................ 122 13.9 83 10.6 49 59.0
Michigan..................................... 145 11.2 75 6.5 53 37.6
Minnesota.................................... 57 9.4 35 6.3 26 53.1
Mississippi.................................. 111 28.9 77 24.4 30 51.7
Missouri..................................... 77 9.6 48 6.7 28 34.1
Montana...................................... 11 8.7 7 6.3 5 38.5
Nebraska..................................... 17 7.1 9 4.1 8 44.4
Nevada....................................... 15 8.2 10 6.1 5 33.3
New Hampshire................................ 6 4.1 3 2.2 3 23.1
New Jersey................................... 127 11.3 92 9.0 39 42.4
New Mexico................................... 31 16.1 22 12.6 9 40.9
New York..................................... 313 12.6 232 10.5 105 42.7
North Carolina............................... 177 17.8 138 16.1 56 47.9
North Dakota................................. 6 6.0 4 4.3 2 25.0
Ohio......................................... 173 10.8 119 8.3 54 32.5
Oklahoma..................................... 65 13.8 45 10.8 17 38.6
Oregon....................................... 45 10.0 29 7.1 16 42.1
Pennsylvania................................. 166 8.3 105 5.8 64 38.8
Rhode Island................................. 15 9.6 10 7.0 6 40.0
South Carolina............................... 103 20.9 69 16.6 31 48.4
South Dakota................................. 13 11.6 9 8.8 4 44.4
Tennessee.................................... 150 20.2 104 16.4 52 55.3
Texas........................................ 322 16.1 252 14.1 75 41.4
Utah......................................... 15 8.4 8 5.0 6 40.0
Vermont...................................... 12 15.2 8 11.4 5 62.5
Virginia..................................... 110 14.0 74 10.8 34 40.5
Washington................................... 76 11.5 46 7.8 29 49.2
West Virginia................................ 40 12.5 26 9.7 16 34.0
Wisconsin.................................... 86 11.7 45 6.8 31 45.6
Wyoming...................................... 5 8.6 3 5.8 2 40.0
Puerto Rico.................................. 0 0.0 0 0.0 0 0.0
Guam and Virgin Islands \2\.................. 1 8.9 1 9.1 0 6.3
--------------------------------------------------------------
United States............................ 4,892 13.9 3,367 10.7 1,525 41.7
All areas................................ 4,895 13.7 3,369 10.6 1,526 41.0
----------------------------------------------------------------------------------------------------------------
\1\ State of residence is not necessarily State that bought coverage.
\2\ Data for these areas combined to prevent disclosure of confidential information.
NA--Not available.
Source: Health Care Financing Administration, Bureau of Data Management and Strategy.
TABLE 2-46.--DISTRIBUTION OF MEDICARE BENEFIT PAYMENTS BY TYPE OF COVERAGE AND TYPE OF SERVICE, SELECTED YEARS 1975-95
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Type of coverage and type of 1975 1980 1985 1990 1992 1993 1994 1995
service amount Percent amount Percent amount Percent amount Percent amount Percent amount Percent amount Percent amount Percent
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Hospital insurance.............. $11,315 72.6 $25,051 70.2 $47,444 67.4 $66,050 60.9 $83,691 62.9 $93,290 63.3 $103,093 63.8 116,176 64.1
Inpatient..................... 10,877 69.8 24,116 67.6 44,940 63.8 59,383 54.7 71,000 53.4 76,182 51.7 81,517 50.4 89,127 49.2
Skilled nursing facility...... 254 1.6 395 1.1 548 0.8 2,620 2.4 4,051 3.0 5,797 3.9 7,596 4.7 9,595 5.3
Home health agency............ 104 0.7 540 1.5 1,913 2.7 3,689 3.4 7,760 5.8 10,252 7.0 12,559 7.8 15,571 8.6
Hospice....................... ......... ....... ......... ....... 43 0.1 358 0.3 880 0.7 1,059 0.7 1,421 0.9 1,883 1.0
Supplementary medical insurance. 4,273 27.4 10,635 29.8 22,947 32.6 42,468 39.1 49,260 37.1 53,979 36.7 58,618 36.2 64,973 35.9
Physicians \1\................ 3,416 21.9 8,187 22.9 17,312 24.6 29,609 27.3 32,394 24.4 35,282 24.0 37,435 23.1 40,435 22.3
Outpatient hospital........... 643 4.1 1,897 5.3 4,319 6.1 8,482 7.8 10,990 8.3 11,539 7.8 13,497 8.3 15,394 8.5
Home health agency............ 95 0.6 234 0.7 38 0.1 74 0.1 71 0.1 112 0.1 144 0.1 194 0.1
Group practice plan........... 80 0.5 203 0.6 720 1.0 2,827 2.6 3,933 3.0 5,002 3.4 5,465 3.4 6,883 3.8
Independent laboratory........ 39 0.3 114 0.3 558 0.8 1,476 1.4 1,872 1.4 2,044 1.4 2,077 1.3 2,067 1.1
---------------------------------------------------------------------------------------------------------------------------------------------------------------
Total payment............... 15,588 100.0 35,686 100.0 70,391 100.0 108,518 100.0 132,951 100.0 147,269 100.0 161,711 100.0 181,149 100.0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Includes other services.
Note.--Amounts in millions.
Source: Health Care Financing Administration, Bureau of Data Management and Strategy.
TABLE 2-47.--DISTRIBUTION OF MEDICARE BENEFIT PAYMENTS BY TYPE OF COVERAGE, TYPE OF SERVICE, AND TYPE OF
ENROLLEE, 1995
----------------------------------------------------------------------------------------------------------------
Type of enrollee
--------------------------------------------------------------------------
All enrollees Aged Disabled
Type of coverage and service --------------------------------------------------------------------------
Amount Amount Amount
(in Percentage (in Percentage (in Percentage
millions) distribution millions) distribution millions) distribution
----------------------------------------------------------------------------------------------------------------
Hospital insurance................... $116,176 78.9 $102,889 64.8 $13,287 59.3
Inpatient.......................... 89,127 60.5 77,607 48.9 11,520 51.4
Skilled nursing facility........... 9,595 6.5 9,176 5.8 419 1.9
Home health agency................. 15,571 10.6 14,317 9.0 1,254 5.6
Hospice............................ 1,883 1.3 1,789 1.1 94 0.4
Supplementary medical insurance...... 64,973 44.1 55,844 35.2 9,129 40.7
Physicians \1\..................... 40,435 27.5 35,813 22.6 4,622 20.6
Outpatient hospital................ 15,394 10.5 11,955 7.5 3,439 15.3
Home health agency................. 194 0.1 194 0.1 0 0.0
Group practice plan................ 6,883 4.7 6,096 3.8 787 3.5
Independent laboratory............. 2,067 1.4 1,786 1.1 281 1.3
--------------------------------------------------------------------------
Total payments................... 181,149 100.0 158,733 100.0 22,416 100.0
----------------------------------------------------------------------------------------------------------------
\1\ Includes other services.
Source: Health Care Financing Administration, Bureau of Data Management and Strategy.
TABLE 2-48.--PERSONS SERVED AND REIMBURSEMENTS FOR AGED MEDICARE ENROLLEES BY TYPE OF COVERAGE AND BY 1994 DEMOGRAPHIC CHARACTERISTICS, SELECTED YEARS
1968-95
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hospital insurance and/or Hospital insurance Supplementary medical insurance
supplementary medical insurance ------------------------------------------------------------------
----------------------------------- Reimbursements Reimbursements
Reimbursements Persons ----------------------- Persons ---------------------
Year, period, and 1994 characteristic Persons ------------------------ served served
served Per per 1,000 Per person Per per 1,000 Per Per
per 1,000 person Per enrollees served enrollee enrollees person enrollee
enrollees served enrollee served
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year:
1968............................................ 397.8 $670.08 $266.56 204.0 $934.42 $190.67 394.8 $203.94 $80.51
1975............................................ 527.9 1,054.63 556.78 220.9 1,855.38 409.78 536.0 295.91 158.60
1980............................................ 637.7 1,790.51 1,141.84 240.0 3,378.53 810.77 652.3 545.42 355.77
1981............................................ 655.0 2,024.49 1,325.97 243.4 3,877.39 943.84 669.5 613.13 410.47
1982............................................ 641.4 2,439.38 1,564.65 250.7 4,461.53 1,118.69 653.8 732.53 478.92
1983............................................ 660.2 2,610.80 1,723.69 250.9 4,803.71 1,205.13 672.2 825.26 554.77
1984............................................ 685.7 NA NA 239.6 NA NA 698.9 NA NA
1985............................................ 722.1 2,762.06 1,994.59 218.8 6,167.28 1,349.60 739.1 933.25 689.79
1986............................................ 731.7 2,870.05 2,099.93 213.0 6,528.36 1,390.28 750.8 1,012.17 759.95
1987............................................ 754.1 3,025.22 2,281.19 209.8 6,902.60 1,448.33 775.9 1,147.95 890.64
1988............................................ 767.8 3,177.60 2,439.87 207.5 7,514.76 1,559.23 792.5 1,192.41 944.96
1989............................................ 784.9 3,444.86 2,703.90 206.1 8,196.19 1,688.96 812.8 1,338.10 1,087.56
1990............................................ 801.6 3,578.43 2,868.57 209.0 8,519.97 1,780.60 831.6 1,398.86 1,163.29
1991............................................ 800.1 3,905.65 3,124.82 211.8 9,348.53 1,980.26 830.0 1,473.27 1,222.80
1992............................................ 794.4 4,193.90 3,331.60 213.0 10,126.30 2,157.20 823.4 1,522.90 1,254.00
1993............................................ 825.4 4,263.99 3,519.44 215.6 10,555.75 2,275.67 855.9 1,548.86 1,325.63
1994............................................ 830.0 4,739.79 3,933.86 217.3 11,794.20 2,563.28 861.0 1,699.26 1,461.54
1995............................................ 826.1 5,074.92 4,192.53 218.3 12,541.50 2,737.52 858.0 1,392.49 1,553.67
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annual percentage change in period:
1968-75......................................... 4.1 6.7 11.1 1.1 10.3 11.5 4.5 5.5 10.2
1975-85......................................... 3.2 10.1 13.6 -0.1 12.8 12.7 3.3 12.2 15.8
1985-95......................................... 1.4 6.3 7.7 0.0 7.4 7.3 1.5 4.1 8.5
========================================================================================================================================================
Age:
65 and 66 years................................. 809.3 $3,014.06 $2,467.31 130.4 $11,146.10 $1,493.82 888.4 $1,216.70 $1,087.20
67 and 68 years................................. 746.2 3,735.35 2,798.73 140.8 11,820.17 1,674.16 790.3 1,532.80 1,214.86
69 and 70 years................................. 772.6 3,929.28 3,038.79 156.7 11,784.69 1,852.45 808.1 1,568.08 1,269.35
71 and 72 years................................. 790.2 4,280.82 3,429.51 171.2 12,135.43 2,135.10 818.8 1,655.06 1,370.48
73 and 74 years................................. 816.6 4,628.87 3,746.84 194.8 12,232.54 2,348.54 838.0 1,770.49 1,467.95
75-79 years..................................... 844.8 5,173.87 4,434.61 232.3 12,242.76 2,875.92 858.2 1,868.11 1,624.22
80-84 years..................................... 889.6 5,823.22 5,183.68 304.5 11,795.31 3,546.93 900.3 1,904.48 1,716.14
85 years and over............................... 910.6 6,416.43 5,840.81 383.1 11,196.61 4,214.11 947.5 1,860.01 1,762.06
Sex:
Male............................................ 784.4 5,125.14 4,046.50 212.7 12,354.05 2,640.54 824.6 1,823.24 1,510.64
Female.......................................... 854.6 4,498.92 3,857.40 222.1 11,422.80 2,510.57 880.2 1,619.11 1,428.92
Race:
White........................................... 835.8 4,611.30 3,862.70 217.2 11,558.04 2,496.00 865.0 1,659.52 1,437.14
All other....................................... 754.9 6,094.26 4,628.90 233.0 13,829.43 3,204.08 803.1 2,040.84 1,645.54
Census region:
Northeast....................................... 864.5 5,502.98 4,757.37 223.8 13,838.84 3,097.66 896.8 1,982.43 1,777.95
North central................................... 891.8 4,554.89 4,062.05 227.8 11,577.00 2,636.84 914.1 1,623.12 1,483.71
South........................................... 869.4 5,263.13 4,575.79 245.8 12,264.78 3,014.69 891.7 1,828.78 1,630.75
West............................................ 663.3 5,035.56 3,339.89 159.0 13,732.15 2,183.41 681.8 1,845.51 1,258.24
--------------------------------------------------------------------------------------------------------------------------------------------------------
NA--Not available.
Note.--Data for 1995 are preliminary.
Source: Health Care Financing Administration, Bureau of Data Management and Strategy.
TABLE 2-49.--PERSONS SERVED AND REIMBURSEMENTS FOR DISABLED MEDICARE ENROLLEES BY TYPE OF COVERAGE AND BY 1995 DEMOGRAPHIC CHARACTERISTICS, SELECTED
YEARS 1968-95
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hospital insurance and/or Hospital insurance Supplementary medical insurance
supplementary medical insurance ------------------------------------------------------------------------------
--------------------------------------- Reimbursements Reimbursements
Year, period, and 1994 Persons Reimbursements Persons -------------------------- Persons -------------------------
characteristic served per -------------------------- served per served per
1,000 Per person Per 1,000 Per person Per 1,000 Per person Per
enrollees served enrollee enrollees served enrollee enrollees served enrollee
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year:
1968............................ NA NA NA NA NA NA NA NA NA
1975............................ 449.5 $1,548.09 $695.83 219.2 $2,076.58 $455.20 471.4 $564.95 $266.32
1980............................ 594.1 2,544.04 1,511.34 245.7 3,798.09 933.16 633.8 994.18 630.06
1981............................ 615.2 2,880.99 1,772.39 251.4 4,400.27 1,106.16 655.9 1,103.92 724.04
1982............................ 608.9 3,431.26 2,089.35 256.9 5,109.65 1,312.85 650.5 1,303.37 847.90
1983............................ 628.8 3,658.08 2,300.24 257.7 5,549.82 1,430.30 670.1 1,412.07 946.23
1984............................ 639.5 NA NA 242.6 NA NA 683.5 NA NA
1985............................ 668.8 3,855.22 2,578.24 227.9 7,223.96 1,646.25 715.5 1,414.04 1,011.70
1986............................ 681.0 4,032.05 2,745.64 226.3 7,622.94 1,724.99 729.0 1,518.86 1,107.32
1987............................ 695.7 3,993.70 2,778.14 219.4 7,610.01 1,669.66 747.8 1,611.42 1,205.10
1988............................ 703.7 4,114.84 2,895.52 209.3 8,372.64 1,752.76 760.0 1,643.77 1,249.35
1989............................ 721.3 4,530.89 3,268.36 208.0 9,481.76 1,971.89 785.0 1,816.65 1,426.08
1990............................ 734.3 4,702.65 3,452.97 208.9 9,846.77 2,056.60 803.5 1,921.76 1,544.18
1991............................ 728.5 5,069.61 3,693.15 208.7 10,634.43 2,218.91 799.0 2,046.50 1,635.16
1992............................ 729.3 5,351.81 3,903.33 208.9 11,278.42 2,355.73 799.4 2,145.26 1,714.91
1993............................ 751.3 5,487.71 4,123.00 211.1 11,678.14 2,465.72 824.7 2,229.08 1,838.22
1994............................ 755.9 6,020.83 4,551.42 212.6 13,082.43 2,781.71 831.7 2,365.02 1,966.96
1995............................ 758.6 6,308.12 4,785.54 212.4 13,666.40 2,902.71 836.9 2,507.18 2,098.15
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annual percentage change in
period:
1968-1975....................... NA NA NA NA NA NA NA NA NA
1975-1985....................... 4.05 9.55 13.99 0.39 13.28 13.72 4.26 9.61 14.28
1985-1994....................... 1.27 5.05 6.38 -0.70 6.58 5.84 1.58 5.89 7.57
========================================================================================================================================================
Age:
Under 35 years.................. 740.6 $6,165.57 $4,566.25 200.5 $13,654.42 $2,736.12 806.2 $2,494.30 $2,010.93
35-44 years..................... 731.1 6,099.46 4,459.24 197.8 13,460.28 2,661.94 809.8 2,483.45 2,011.13
45-54 years..................... 729.1 6,252.92 4,559.26 199.4 13,635.98 2,718.60 816.7 2,550.75 2,083.13
55-59 years..................... 765.1 6,573.88 5,029.76 220.2 13,959.38 3,074.09 842.7 2,581.74 2,175.65
60-64 years..................... 831.9 6,453.85 5,368.65 246.0 13,679.54 3,364.86 904.9 2,434.15 2,202.71
Sex:
Male............................ 713.5 6,286.21 4,485.01 199.9 13,913.10 2,780.83 789.6 2,416.56 1,908.13
Female.......................... 825.9 6,336.28 5,232.85 231.0 13,348.74 3,084.11 906.4 2,623.31 2,377.66
Race:
White........................... 760.4 5,684.71 4,322.77 204.5 12,978.13 2,654.26 840.2 2,215.36 1,861.44
All other....................... 762.9 8,127.10 6,200.45 239.8 15,347.97 3,679.88 833.8 3,341.78 2,786.50
Census region:
Northeast....................... 781.0 6,914.23 5,399.69 212.5 15,713.52 3,339.57 866.6 2,668.28 2,312.38
North central................... 778.3 5,709.39 4,443.64 211.2 12,903.54 2,725.33 859.6 2,229.50 1,916.47
South........................... 792.3 6,269.54 4,967.55 235.7 12,806.23 3,017.91 849.4 2,482.44 2,108.58
West............................ 686.6 6,868.41 4,715.68 179.2 15,615.82 2,798.55 752.6 2,818.33 2,121.17
--------------------------------------------------------------------------------------------------------------------------------------------------------
NA--Not available.
Note.--Data for 1995 are preliminary.
Source: Health Care Financing Administration, Bureau of Data Management and Strategy.
TABLE 2-50.--USE OF SHORT-STAY HOSPITAL SERVICES BY MEDICARE EMPLOYEES BY YEAR AND 1994 DEMOGRAPHIC CHARACTERISTICS, SELECTED YEARS 1975-95
--------------------------------------------------------------------------------------------------------------------------------------------------------
Discharges Total days of care Program payments
Hospital -----------------------------------------------------------------------------------------------------
Calendar year, period, and 1994 insurance Per
characteristic enrollees Number in Per 1,000 Number in Per Per 1,000 Amount in Per covered Per
in thousands enrollees thousands discharge enrollees millions discharge day of enrollee
thousands care
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year:
1975.............................. 24,640 8,001 325 89,275 11.2 3,623 $9,748 $1,218 $109 $396
1980.............................. 28,067 10,279 366 109,175 10.6 3,890 22,099 2,150 202 787
1982.............................. 29,069 11,109 382 113,047 10.0 3,889 30,601 2,755 271 1,053
1984.............................. 29,996 10,896 363 96,485 8.9 3,217 38,500 3,533 399 1,284
1985.............................. 30,589 10,027 328 86,339 8.6 2,823 40,200 4,009 466 1,314
1986.............................. 31,216 10,044 322 86,910 8.7 2,784 41,781 4,160 481 1,338
1987.............................. 31,853 10,110 317 89,651 8.9 2,815 44,068 4,359 492 1,383
1988.............................. 32,483 10,256 316 90,873 8.9 2,798 46,879 4,571 516 1,443
1989.............................. 33,040 10,148 307 89,902 8.9 2,721 49,091 4,838 546 1,486
1990.............................. 33,719 10,522 312 92,735 8.8 2,750 53,708 5,104 579 1,593
1991.............................. 34,428 10,896 316 93,936 8.6 2,728 58,901 5,406 627 1,711
1992.............................. 35,154 11,111 316 92,900 8.4 2,643 64,976 5,848 699 1,848
1993.............................. 35,904 11,158 311 88,871 8.0 2,475 67,439 6,044 759 1,878
1994.............................. 36,543 11,471 314 85,734 7.5 2,346 70,623 6,157 824 1,933
1995.............................. 37,135 11,681 315 81,282 7.0 2,189 74,836 6,407 921 2,015
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annual percentage change in period:
1975-1984 \1\..................... 2.2 4.8 2.4 1.0 -2.8 -1.5 18.7 14.2 17.6 15.8
1984-1994 \1\..................... 2.0 -1.3 -3.1 -1.2 -1.7 -3.1 6.3 5.7 7.5 4.2
1975-1994 \1\..................... 2.1 1.9 -0.2 -0.5 -2.3 -2.5 10.7 8.7 11.3 8.5
========================================================================================================================================================
Age:
Less than 65 years................ 4,393 1,570 357 11,277 7.2 2,567 9,845 6,271 873 2,241
65-69 years....................... 9,411 2,060 219 13,355 6.5 1,419 14,142 6,865 1,059 1,503
70-74 years....................... 8,652 2,260 261 15,122 6.7 1,748 15,346 6,790 1,015 1,774
75-79 years....................... 6,483 2,151 332 15,067 7.0 2,324 14,121 6,565 937 2,178
80-84 years....................... 4,409 1,806 410 13,057 7.2 2,961 11,048 6,117 846 2,506
85 years or over.................. 3,787 1,834 484 13,404 7.3 3,539 10,334 5,635 771 2,729
Sex:
Male.............................. 15,938 5,148 323 35,430 6.9 2,223 34,767 6,753 961 2,181
Female............................ 21,197 6,533 308 45,851 7.0 2,163 40,068 6,133 874 1,890
Race: \2\
White............................. 32,038 9,946 310 67,808 6.8 2,116 62,737 6,308 925 1,958
All other......................... 4,113 1,625 395 12,706 7.8 3,089 11,413 7,023 898 2,775
Census region:
Northeast......................... 7,808 2,565 329 21,858 8.5 2,799 19,127 7,457 875 2,450
North central..................... 8,954 2,962 331 19,414 6.6 2,168 18,362 6,199 946 2,051
South............................. 12,815 4,371 341 29,657 6.8 2,314 26,159 5,985 882 2,041
West.............................. 6,765 1,664 246 9,477 5.7 1,401 10,863 6,528 1,146 1,606
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Does not reflect discharges for beneficiaries who received covered services but for whom program payments were reported during the year; for
example, beneficiaries who received inpatient services in health maintenance organizations were not included in the denominator used to calculate the
average program payments per discharge.
\2\ Excludes unknown race.
Source: Health Care Financing Administration, Bureau of Data Management and Strategy.
TABLE 2-51.--NUMBER OF AGED PERSONS SERVED UNDER HOSPITAL INSURANCE AND SUPPLEMENTARY MEDICAL INSURANCE PER 1,000 ENROLLED AND REIMBURSEMENT PER PERSON SERVED BY CENSUS DIVISION AND STATE,
SELECTED CALENDAR YEARS 1967-94
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Year and persons served per 1,000 Annual percent change Year and reimbursement per person served Annual percent change
enrolled -------------------------------------------------------------------------------------------------------------------
Census division and State ----------------------------------------
1967 1985 1990 1994 1995 1967-85 1985-90 1990-93 1993-95 1967 1985 1990 1994 1995 1967-85 1985-90 1990-93 1993-95
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
New England......................... 380.4 767.4 829.0 871.7 871.1 4.0 1.6 1.4 0.4 680 2,708 3,573 5,018 5,546 8.0 5.7 8.2 10.7
Maine............................. 330.1 756.1 868.8 920.0 924.5 4.7 2.8 1.8 0.4 586 2,369 2,744 3,704 3,906 8.1 3.0 6.4 8.7
New Hampshire..................... 391.6 739.7 810.5 874.3 888.1 3.6 1.8 2.4 0.6 467 2,374 2,974 3,820 4,043 9.5 4.6 5.8 7.1
Vermont........................... 411.7 742.8 841.0 888.8 907.5 3.3 2.5 1.3 1.8 515 1,990 2,569 3,494 4,067 7.8 5.2 7.6 12.7
Massachusetts..................... 394.2 766.5 813.6 851.8 840.6 3.8 1.2 1.4 -0.4 708 2,971 4,029 5,891 6,504 8.3 6.3 8.8 12.0
Rhode Island...................... 375.4 829.6 853.6 849.2 841.6 4.5 0.6 -0.5 0.0 625 2,619 3,236 4,563 5,139 8.3 4.3 11.2 7.5
Connecticut....................... 390.9 764.1 838.1 893.1 906.8 3.8 1.9 1.6 1.6 711 2,570 3,511 4,759 5,380 7.4 6.4 7.7 10.7
Middle Atlantic..................... 388.1 768.2 834.7 864.3 862.2 3.9 1.7 0.9 0.3 578 2,771 3,933 5,384 5,488 9.1 7.3 6.5 7.5
New York.......................... 406.9 765.7 830.4 841.3 839.7 3.6 1.6 0.2 0.2 610 2,533 4,119 5,347 5,751 8.2 10.2 5.2 9.5
New Jersey........................ 399.0 759.8 826.7 879.4 885.2 3.6 1.7 1.3 1.5 526 2,650 3,483 4,973 5,235 9.4 5.6 10.6 5.4
Pennsylvania...................... 365.0 776.4 844.7 884.2 877.1 4.3 1.7 1.5 -0.3 533 3,147 3,948 5,657 5,320 10.4 4.6 6.1 6.3
East North Central.................. 350.2 725.9 834.4 888.3 895.3 4.1 2.8 1.6 1.2 614 2,906 3,595 4,414 4,786 9.0 4.3 4.2 8.4
Ohio.............................. 353.6 718.4 846.3 897.4 904.8 4.0 3.3 1.3 1.4 585 2,792 3,824 4,078 4,692 9.1 6.5 2.2 7.3
Indiana........................... 343.7 672.2 837.0 885.5 891.7 3.8 4.5 1.4 1.1 545 2,510 3,234 4,314 4,665 8.9 5.2 6.5 9.3
Ilinois........................... 339.2 693.4 788.1 840.1 849.3 4.1 2.6 1.6 1.4 703 3,313 3,760 4,750 5,112 9.0 2.6 5.3 7.9
Michigan.......................... 379.5 804.3 871.4 929.3 933.2 4.3 1.6 1.6 1.0 532 2,991 3,749 4,675 5,173 10.1 4.6 4.3 10.2
Wisconsin......................... 354.7 736.9 843.2 903.6 910.4 4.1 2.7 2.1 0.8 639 2,527 2,877 3,487 3,790 7.9 2.6 4.4 7.7
West North Central.................. 363.2 693.4 979.7 871.9 884.2 3.7 7.2 -4.3 1.5 558 2,627 3,108 3,876 4,041 9.0 3.4 3.7 8.0
Minnesota......................... 389.0 624.8 682.5 796.3 816.1 2.7 1.8 4.5 2.4 601 2,447 3,101 3,341 3,624 8.1 4.9 1.6 5.5
Iowa.............................. 365.9 715.3 850.6 918.8 936.6 3.8 3.5 2.5 1.2 505 2,282 2,753 3,121 3,435 8.7 3.8 4.3 4.9
Missouri.......................... 364.8 712.0 816.6 871.8 876.6 3.8 2.8 1.6 1.1 544 3,118 3,514 4,523 4,773 10.2 2.4 4.2 9.5
North Dakota...................... 441.2 730.7 853.4 917.7 921.5 2.8 3.2 2.1 0.8 492 2,466 2,949 3,514 3,725 9.4 3.6 1.7 9.6
South Dakota...................... 358.0 694.2 815.1 877.6 886.4 3.7 3.3 2.1 1.1 514 2,281 2,714 6,296 3,805 8.6 3.5 3.7 12.1
Nebraska.......................... 352.5 634.2 808.8 886.3 901.7 3.3 5.0 2.3 2.0 540 2,449 2,719 3,181 3,543 8.8 2.1 2.6 9.8
Kansas............................ 365.3 765.4 850.0 914.0 924.6 4.2 2.1 2.0 1.3 540 2,553 3,144 3,987 4,420 9.0 4.3 5.7 9.2
South Atlantic...................... 350.5 740.4 827.7 862.3 863.2 4.2 2.3 1.2 0.4 554 2,531 3,438 4,705 5,031 8.8 6.3 7.3 8.8
Delaware.......................... 368.2 770.9 843.6 935.3 940.6 4.2 1.8 2.5 1.8 552 2,612 3,526 4,878 4,395 9.0 6.2 4.8 4.0
Maryland.......................... 349.4 757.6 838.3 875.6 880.8 4.4 2.0 1.2 0.7 564 2,975 4,190 5,498 5,771 9.7 7.1 6.6 6.6
District of Columbia.............. 452.8 739.4 772.7 784.5 789.0 2.8 0.9 0.1 0.9 570 3,774 5,019 6,553 6,650 11.1 5.9 6.4 4.8
Virginia.......................... 317.3 729.7 848.5 891.0 899.0 4.7 3.1 1.3 1.0 516 1,976 3,127 4,054 4,322 7.7 9.6 5.2 9.0
West Virginia..................... 342.2 692.0 828.6 890.7 904.7 4.0 3.7 1.9 1.6 489 2,575 3,197 4,064 4,477 9.7 4.4 4.6 10.6
North Carolina.................... 324.0 727.9 852.3 908.1 924.1 4.6 3.2 1.8 1.4 515 1,982 2,799 3,691 4,201 7.8 7.1 7.5 9.9
South Carolina.................... 296.2 680.6 832.2 896.8 914.3 4.7 4.1 2.3 1.3 523 2,340 2,689 4,137 4,276 8.7 2.8 9.6 9.9
Georgia........................... 320.2 743.5 843.8 899.5 911.7 4.8 2.6 1.8 1.2 474 2,479 3,456 4,848 5,148 9.6 6.9 8.6 7.8
Florida........................... 420.9 759.1 805.8 813.5 797.4 3.3 1.2 0.3 -1.0 588 2,773 3,709 5,223 5,606 9.0 6.0 7.9 9.6
East South Central.................. 332.1 698.1 846.9 901.7 908.5 4.2 3.9 1.6 1.1 489 2,570 3,413 4,758 5,177 9.7 5.8 7.6 10.3
Kentucky.......................... 365.9 671.9 837.3 901.1 906.9 3.4 4.5 1.7 1.5 458 2,395 3,424 4,273 4,615 9.6 7.4 3.8 9.7
Tennessee......................... 354.8 678.7 853.4 897.7 905.6 3.7 4.7 1.5 0.8 502 2,816 3,402 4,974 5,389 10.1 3.9 9.7 9.5
Alabama........................... 322.7 743.8 848.9 906.6 912.6 4.7 2.7 1.6 1.2 490 2,502 3,596 4,959 5,359 9.5 7.5 6.8 10.6
Mississippi....................... 283.2 699.9 845.1 902.6 909.6 5.2 3.8 1.6 1.3 471 2,480 3,122 4,711 5,278 9.7 4.7 10.3 12.3
West South Central.................. 374.8 687.4 825.0 863.7 856.5 3.4 3.7 1.1 0.3 504 2,811 3,624 5,163 5,778 10.0 5.2 7.0 14.2
Arkansas.......................... 319.3 715.4 862.9 897.2 908.7 4.6 3.8 0.8 1.4 466 2,550 3,155 4,211 4,538 9.9 4.3 5.3 11.0
Louisiana......................... 343.4 653.5 821.1 877.1 861.7 3.6 4.7 1.5 0.2 446 3,167 4,368 6,208 6,872 11.5 6.6 6.2 14.6
Oklahoma.......................... 416.1 677.8 878.3 877.5 885.0 2.7 5.3 -0.4 1.0 486 2,482 3,127 4,507 5,068 9.5 4.7 8.2 13.2
Texas............................. 393.7 693.2 805.1 850.2 838.4 3.2 3.0 1.5 -0.1 522 2,860 2,652 5,232 5,916 9.9 5.0 7.1 14.8
Mountain............................ 417.1 716.6 772.7 760.7 749.2 3.1 1.5 -0.1 -1.3 560 2,637 3,992 4,188 4,347 9.0 8.6 -2.4 8.2
Montana........................... 416.5 679.7 823.5 895.1 905.6 2.8 3.9 2.1 1.7 505 2,348 3,000 4,122 3,990 8.9 5.0 3.7 9.2
Idaho............................. 408.8 714.5 862.5 905.2 920.5 3.2 3.8 1.7 0.8 467 2,384 2,556 3,320 3,616 9.5 1.4 6.7 7.9
Wyoming........................... 395.0 681.7 782.7 877.7 892.1 3.1 2.8 2.7 2.6 432 2,804 3,182 3,932 4,311 11.0 2.6 7.4 4.6
Colorado.......................... 475.4 704.0 740.8 778.0 760.1 2.2 1.0 1.5 -1.0 578 2,521 3,223 4,167 4,514 8.5 5.0 6.0 8.5
New Mexico........................ 377.6 689.8 736.4 735.1 728.5 3.4 1.3 1.4 -2.5 513 2,462 3,154 3,552 4,056 9.1 5.1 -0.4 14.1
Arizona........................... 431.7 758.1 774.3 670.5 644.2 3.2 0.4 -3.5 -3.8 612 2,896 3,692 4,781 4,541 9.0 5.0 2.8 6.5
Utah.............................. 346.0 713.1 808.2 865.8 875.1 4.1 2.5 1.6 1.7 580 2,225 2,799 3,556 4,150 7.8 4.7 8.2 8.1
Nevada............................ 414.9 688.9 721.2 687.2 670.3 2.9 0.9 -0.7 -2.6 532 3,243 3,903 5,023 5,072 10.6 3.8 3.3 8.6
Pacific............................. 468.9 739.7 713.8 665.4 629.9 2.6 -0.7 -1.2 -4.3 630 6,153 3,853 4,864 5,354 13.5 -8.9 5.6 8.6
Washington........................ 433.0 731.1 760.8 875.4 770.1 3.0 0.8 1.4 -1.5 507 2,522 3,218 3,738 4,117 9.3 5.0 3.4 7.6
Oregon............................ 392.6 716.2 707.8 701.7 694.9 3.4 -0.2 0.2 -1.3 583 2,459 2,833 3,288 3,587 8.3 2.9 3.7 6.5
California........................ 490.7 745.7 710.3 640.0 594.8 2.4 -1.0 -2.1 -5.6 653 3,379 4,138 5,416 5,987 9.6 4.1 6.5 9.4
Alaska............................ 307.2 678.4 759.0 818.2 828.3 4.5 2.3 2.1 1.3 376 3,554 4,007 4,463 6,021 13.3 2.4 0.9 21.0
Hawaii............................ 407.4 709.3 589.9 585.7 590.0 3.1 -3.6 0.7 -1.1 572 2,334 3,095 3,321 3,718 8.1 5.8 3.5 4.1
-----------------------------------------------------------------------------------------------------------------------------------------------------------
Total, all areas \1\............ 366.5 722.1 801.6 830.0 826.1 3.8 2.1 1.0 0.0 592 2,762 3,578 4,740 5,075 8.9 5.3 6.0 9.1
United States \2\............... 370.9 731.2 810.5 838.7 834.6 3.8 2.1 1.0 0.0 593 2,772 3,592 4,750 5,096 8.9 5.3 6.0 9.1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Consists of United States, Puerto Rico, Virgin Islands, and other outlying areas.
\2\ Consists of 50 States, District of Columbia, and residence unknown.
Source: Health Care Financing Administration, Bureau of Data Management and Strategy.
TABLE 2-52.--MEDICARE PARTICIPATING INSTITUTIONS AND ORGANIZATIONS, 1984
AND 1996
------------------------------------------------------------------------
Year
Institution or organization -------------------------
1984 1996
------------------------------------------------------------------------
Hospitals..................................... 6,675 6,273
Short stay.................................. 6,038 5,185
Long stay................................... 637 1,088
Skilled nursing facilities.................... 5,952 14,177
Home health agencies.......................... 4,684 8,860
Independent laboratories...................... 3,801 5,769
Laboratories registered under the Clinical
Laboratory Improvement Act (CLIA)............ NA 157,335
Outpatient physical therapy providers......... 791 2,432
Portable x-ray suppliers...................... 269 609
Rural health clinics.......................... 420 2,217
Comprehensive outpatient rehabilitation
facilities................................... 48 403
Ambulatory surgical centers................... 155 2,265
Hospices...................................... 108 2,161
Facilities providing services to renal disease
benefit...................................... 1,335 3,082
Hospital certified as both renal transplant
and renal dialysis center.................. 147 156
Hospital certified as renal transplant
centers.................................... 16 81
Hospital dialysis facilities................ 117 256
Nonhospital renal dialysis facilities....... 645 2,212
Dialysis centers only....................... 359 334
Inpatient care.............................. 51 43
Hospital and skilled nursing facility beds:
Hospitals................................... 1,144,142 1,038,105
Short stay................................ 1,023,465 912,054
Long stay................................. 120,677 126,051
Skilled nursing facilities.................. 530,403 671,839
------------------------------------------------------------------------
NA--Not available.
Source: Health Care Financing Administration, Bureau of Data Management
and Strategy.
REFERENCES
Board of Trustees, Federal Supplementary Medical Insurance
Trust Fund. (1997, April 24). The 1997 Annual Report of
the Board of Trustees of the Federal Supplementary
Medical Insurance Trust Fund (U.S. House of
Representatives Document 105-74). Washington, DC: U.S.
Government Printing Office.
Board of Trustees, Federal Hospital Insurance Trust Fund.
(1997, April 24). The 1997 Annual Report of the Board
of Trustees of the Federal Hospital Insurance Trust
Fund (U.S. House of Representatives Document 105-73).
Washington, DC: U.S. Government Printing Office.
Committee on Ways and Means. (1988). 1988 Green book: Overview
of Entitlement Programs (WMCP 100-29). Washington, DC:
U.S. Government Printing Office.
Committee on Ways and Means. (1989). 1989 Green book: Overview
of Entitlement Programs (WMCP 101-4). Washington, DC:
U.S. Government Printing Office.
Committee on Ways and Means. (1991). 1991 Green book: Overview
of Entitlement Programs (WMCP 102-9). Washington, DC:
U.S. Government Printing Office.
Federal Register v. 56, n. 251, December 31, 1991, 67666.
Foster Higgins Survey and Research Services. (1996). National
Survey of Employer-Sponsored Health Plans. New York:
Author.
Health Care Financing Administration. Health Care Financing
Review. Medicare and Medicaid Statistical Supplement,
1996.
Office of the President. (1997 and various years). Budget of
the U.S. Government: Fiscal year 1997 (Historical
Tables Volume). Washington, DC: U.S. Government
Printing Office.
Physician Payment Review Commission. (1997). Annual report to
Congress: 1997. Washington, DC: Author.
Prospective Payment Assessment Commission. (various years).
Report and recommendations to the Congress. Washington,
DC: Author.
Return to the Green Book Table of Contents