Physician's Capitation Trends-HCFA issues new rule on Medicare capitation
Physician's Capitation Trends-HCFA issues new rule on Medicare capitation
Agency stirs up capitation changes
Amid the stormy public debate over patient rights and managed care in general, the Health Care Financing Administration (HCFA) recently released an extensive regulation updating Medicare capitation requirements for insurers and physicians.
The Medicare+Choice (M+C) regulation is broad in scope. Below are key questions and answers excerpted from the 150-page new rule published
in the June 29, 2000, Federal Register, which relate specifically to capitation payment and physician participation in Medicare capitation:
Question: In the past six months, what impact has HCFA's new capitation risk adjustment system actually had? This new capitation methodology is geared to make capitation easier to deal with — especially when patient costs go up unexpectedly. How did payment levels actually respond?
Answer: Actual results are not yet fully clear to HCFA, but analysts are projecting impacts based on mathematical simulations in selected regions. Here are key findings, based on those projections:
• "None of our regions will experience increased [total] payments under the proposed system."
• "The variation between regions is not considerable." For example, organizations in the Atlanta region will see an average 0.7% reduction, and organizations in the Seattle region will see less than a 0.4% reduction.
• Payment levels do not vary based on size of the plan's enrollment. "The variation in impact between the small organizations and the large M+C organizations does not appear to be systematic," the regulation states. "M+C organizations of all sizes are very close to the national average, although smaller organizations will experience a slightly higher reduction."
The risk-adjustment methodology, in which Phase one was begun last January, seeks to adjust capitation payments more sensibly so that more resources can be provided for more costly illnesses and lower payments to less costly treatments. (For highlights of how this methodology works, see Physician's Managed Care, March 2000, pp. 39-42.) Some physician groups and payers have complained that it really boils down to less money, making them eager to get out of the program. HCFA officials, however, are unconvinced; they attribute it more to overall market uncertainty.
Question: If a Medicare+Select insurer plans to drop me out of their contract, or if they plan to leave Medicare+Select in my area, how many days notice is that insurer required by regulation to give me? Are they required to give me notice?
Answer: Insurers are required to give you adequate notice, although sometimes that doesn't happen, leaving physicians feeling like their patients are being abandoned. The new regulation extends the required notice from 15 days to 30 days notice. Here is how the regulation states this requirement: The insurer must "make a good faith effort to provide written notice of a termination of a contracted provider at least 30 calendar days (revised from 15 days) before the termination effective date." [This notice applies to] "all enrollees who are patients seen on a regular basis by the provider whose contract is terminating. The burden associated with this requirement has not changed."
Also, the regulation includes a provider anti-discrimination provision that requires the insurer to explain in writing the reason the provider is being dropped.
Question: Insurers complain that the new risk adjustment methodology reduces their payments, but HCFA officials say that's not necessarily true. What influence does HCFA believe the new adjusted capitation payment strategy will have on insurer participation in Medicare capitation contracts?
Answer: Current projections showing lowered payment totals in many areas will change as insurers are more comfortable bringing in less healthy patients, HCFA officials say. The incentive of the risk adjustment scheme is to offer insurers and physicians more of a safety net so that the capitation approach is fluid enough to cover higher-cost patients. Once insurers begin to enroll more at-risk patients, their capitation allocations will increase, rather than decrease.
Here is how the regulation expresses their logic: "Projections on reduced payments assume a stable mix of enrollees. However, we assume that organizations will respond appropriately to the incentives to attract more seriously ill beneficiaries. As a result, organizations can do better under risk adjustment than they would if case mix stayed the same." (For more coverage of insurer response to renewing their Medicare capitation contracts, see story, p. 122.)
Question: While physicians and insurers question payment issues, what's happening to premium payments that patients have to provide?
Answer: In a nutshell, here is the patient experience with Medicare HMOs: Higher premiums (therefore higher out-of-pocket costs to them) and reduced benefits. That's not a happy combination for patients, HCFA officials recognize. "While benefits, premiums, and cost sharing remained relatively stable in 1999, year 2000 has been different," the Federal Register notice points out.
Premiums have especially increased for rural residents. In 1999, a basic plan averaged $5.35 per month, while it tripled in cost to $15.84 in FY 2000.
Across the country, competition is driving a Wild West atmosphere of a wide array of offers that come, go, decrease, increase — seemingly overnight to some beneficiaries. The variation is incredible, HCFA points out. The biggest wild card appears to be the presence or absence of prescription drug coverage.
Here is how the regulation addresses the roller coaster cost issues for patients: "In Oregon, for example, premiums range from $35 to $83 for benefit packages that do not include outpatient drug coverage, and between $81 and $123 for packages including drug coverage. In Florida, the enrollment-weighted average monthly premium is $84 per month, and all enrollees in Florida M+C plans have drug coverage in their basic package."
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