E-Mail Bulletin #5, January 1999
Contents
1) Competitive Bidding For Medicare HMOs -- Here We Go Again
1) Competitive Bidding For Medicare HMOs -- Here We Go Again
I believe it was Yogi Berra who said, "It's deja-vu all over again."
Just when you thought you'd seen enough and heard it all regarding HCFA and its Medicare HMO programs, now an old ghost -- competitive bidding by healthplans -- is coming back from the graveyard. It's a double whammy given other, recent news (which I'll briefly recap before discussing the old ghost).
Not long ago I sent you an e-mail bulletin highlighting HCFA's intention to change the way it funds Medicare HMOs. Specifically, HCFA is developing a means to risk-adjust its payments to account for each enrollee's health history and projected future needs. This would be a substantial change from the current methodology that pays each HMO in a service area the same 95% of historical, fee-for-service for each patient, essentially regardless of health (now adjusted only for simple discriminators such as age and sex).
If you've been following the action in Medicare Risk HMOs you're aware that the current payments, the AAPCCs (Adjusted Average Per Capita Costs), vary greatly from county to county, state to state. And those variations have created some problems for HCFA, healthplans, and providers. In some cases the payments are quite high, while in others they're so low that the healthplans won't even offer a senior HMO product. That's led to a lot of "cherry-picking" by HMOs both in the selection of seniors enrolled in plans and in the counties where the HMOs elect to do business. As a result, in some counties HCFA is actually spending more for Medicare Risk enrollees, on average, than it would have have paid had those seniors stayed in traditional, fee-for-service Medicare.
Over the past year many healthplans re-examined their bottom line performance on Medicare and decided to "bail-out" of the less profitable service areas. Effective January 1, 1999 some 40 healthplans left the program, forcing more than 400,000 seniors who had been in Medicare Risk HMOs to find alternative coverage. And now it appears that things may get even more complicated for those involved with senior managed care -- HCFA wants to put its business on the auction block.
HCFA is resurrecting an old plan to put Medicare HMO business up for competitive bidding -- that is, dropping the system whereby each HMO in a service area is guaranteed predetermined AAPCC payments and, instead, letting market forces determine market-based pricing. HCFA tried this a couple years ago in Denver, but clever maneuvering by local HMOs and the American Association of Health Plans caused HCFA to abandon the plan.
Still, HCFA is persistent. Starting in the Spring it intends to put approximately 50,000 senior lives in the Kansas City area up for bid, with contracts effective in the year 2000. (Perhaps this is the "true" Millenium Bug?) It's all part of a five year demonstration project to reduce the payment disparities between and among counties and states, to encourage expansion of managed Medicare into rural America where the current AAPCCs won't support new healthplan development, and, of course, to save money (billions if HCFA's estimates are accurate).
The competitive bidding system won't be simple as with traditional "auctions" -- one "winner" and lots of "losers." Instead, HCFA plans to take the average of all bids and use that as the community benchmark. Those plans bidding higher than the benchmark will have to charge seniors a monthly differential. Those bidding below the benchmark can retain the difference or add "perk" benefits (e.g., routine refractive vision exams, prescription medications, etc.) as in the past.
It remains to be seen if such a system can better distribute reduced, finite funding, and incentivize growth in certain areas. Most assuredly it will cause some operational disruptions, and benefit reductions in select service areas. For example, HMOs in counties which now are considered "rich" may have to reduce or drop "perk" benefits when reimbursements fall, or may be able to offer such enrollment incentives only with a premium surcharge. Just how that will fly with seniors choosing between Medicare HMOs and traditional Medicare is uncertain, but I think one can predict that they won't be pleased.
Whatever shakes out of the Kansas City experiment will be important as a measure of HCFA's ability to cut what seems to be a Gordian Knot. No matter the outcome, it's certain that the dollars flowing from HCFA to healthplans will be fewer, and that means there will be fewer dollars flowing to the providers for patient care. The shifting and increase of the collateral risk means that providers need to be participants in well capitalized, sophisticated delivery systems capable of managing overall costs and delivering quality care in the most efficient, timely manner.
This experiment in competitive bidding for seniors, combined with a multi-year transition to risk-adjusted payments, will be of major importance to everyone in vision and eyecare. I'll keep you posted as things develop.
2) Special Announcements
#1 If you've clicked on the "Surviving Managed Care" link on my website (www.gilweber.com) you know that I've been developing a special newsletter focusing on the business aspects of managed vision and eyecare. A "test" issue has been on the website since mid-1998, and I've solicited input from readers in an effort to refine the newsletter's content and focus before starting full-scale production.
I'm now pleased and honored to announce that I've entered into an exclusive production and distribution partnership with CIBA Vision for four issues of "Surviving Managed Care" in 1999. Each issue will be available at no cost to both established and new CIBA customers through local area sales representatives.
The first quarterly issue, out February 1st, focuses on finding useful managed care business information and data on the World Wide Web. As each issue is released the previous issue will be available soon thereafter on my website as well as CIBA's (www.cibavision.com). Your comments on the content and format will be appreciated.
#2 Look in the April 1999 issue of Review of Ophthalmology for my new article on ultimate financial responsibility when an HMO or other third party payor stops paying or becomes insolvent. It's an extended discussion of the issues raised in my special e-mail bulletin, November 1998.
3) Website Update -- Managed Care and Practice Management
My managed care and practice management website has been updated. Here's what you'll find on your next visit:
On the Site Directory (Welcome To My World) click on "Managed Care Websites." You'll find 14 new links added to an extensive list of healthplan URLs. The new links are:
- Blue Cross of California
- Care Choice (Michigan, Iowa)
- Community Care (Oklahoma)
- Coventry Health Care (PA, OH, MO, IL, WV, VA)
- Group Health Plan (Missouri, Illinois)
- HealthNet (California)
- HealthPartners (Alabama)
- Keystone Health Plan Central (Pennsylvania)
- Metlife Healthcare Network (California)
- PACC/Qual-Med (Oregon)
- Phoenix Health Plan (Arizona)
- Physicians Health Plan of Mid-Michigan
- Physicians Health Services (NY, CT, NJ)
- Priority Health (Michigan)
Click on a new link "Managed Care E-Mail Bulletin Archive" to review any of the managed care e-mail bulletins I've sent out over the past months.
Click on "Speaking Engagements" for a list of upcoming lectures.
Please let me know if there are any topics you'd like discussed. Until the next bulletin.....
Carpe Diem.
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