The Medicare+Choice program may be the most significant change in Medicare since its inception in 1965, according to the Health Care Financing Administration (HCFA). On June 26, HCFA published lengthy new regulations governing Medicare+Choice (M+C).
M+C goes into effect on Jan. 1, 1999. Also dubbed Medicare Part C, it will offer seniors a wide array of options for obtaining Medicare services. Beneficiaries may elect either to retain current Medicare coverage through Part A and Part B or to select Part C coverage through a M+C plan. M+C plans must cover all the same services covered by Part A and Part B and may offer coverage for additional services.
It is no coincidence that M+C was enacted as part of the Balanced Budget Act of 1997. The program is, in many ways, an attempt to ease the government out of the healthcare business. HCFA will pay M+C organizations a fixed amount of capitation for each enrolled beneficiary, allowing the government to predict and control its healthcare expenditures for M+C enrollees. The burden of limiting healthcare costs would then fall on private M+C organizations that must stretch their capitated payments to cover all the costs of medical services provided to enrollees.
Enrollment under the new M+C plans begins in November when HCFA mails out millions of handbooks to Medicare beneficiaries explaining the new options and comparing local M+C health plans. In the meantime, health maintenance organizations (HMOs) and other managed care companies, as well as provider-sponsored organizations (PSOs) are signing up networks of physicians, hospitals and other healthcare professionals to provide treatment to beneficiaries who select coverage under M+C.
Types of M+C Plans
To prepare for contracting opportunities under M+C, providers need to be aware of the types of plans that will be offered, including the following three categories:
- Coordinated Care Plans -- These may be provided by HMOs, preferred provider organizations (PPOs) and PSOs. Such plans utilize a network of contracted providers to deliver health services to beneficiaries; they may pay network providers on a fee-for-service or risk basis.
- Medical Savings Account Plans (MSAs) -- Here, a portion of the beneficiary's premium is used to purchase a low-cost, high-deductible insurance policy; the remainder is deposited in a designated savings account to be used to pay the deductible or, if not used, to be retained by the beneficiary's estate.
- Private Fee-For-Service Plans -- This option resembles a traditional indemnity plan. The M+C organization may set its own fee-for-service rates but cannot put the provider at financial risk. Rates must not vary based on the utilization of services. The plan cannot restrict the beneficiary's right to choose a provider who agrees to accept the plan's terms and conditions of payment. M+C organizations are allowed to charge enrollees additional premiums to participate in such plans.
Provider Relationships
M+C regulations include specific provisions regarding the relationship between M+C and participating providers. Many are based on the federal Consumer Bill of Rights and Responsibilities. Thus, they provide some welcome protection for physicians and other healthcare providers who contract with M+C organizations. For example, M+C organizations providing services through a network of providers must establish reasonable participation procedures and must provide participating providers with:
- Written notice of rules of participation such as terms for payment, utilization review, quality improvement, credentialing, data reporting, confidentiality, clinical guidelines or standards and other administrative policies.
- Advance, written notice of material changes in participation rules.
- Written notices of adverse participation decisions.
- An appeals process conforming with specified peer review requirements.
Additionally, the M+C organization must consult with participating physicians and providers regarding the organization's medical policy, quality assurance program and medical management procedures. This ensures they are based on reasonable medical evidence, appropriate to the enrolled population and updated periodically.
The M+C organization must credential participating providers in accordance with specified standards. Discrimination is prohibited based solely on the basis of a provider's license or certification. However, an organization can decline to contract with providers whose services are not required. It also can establish lower payment rates for certain categories of providers.
If either party terminates the contract without cause, at least 60 days advance written notice must be given. Notice must be given to licensing or disciplinary bodies if the M+C organization terminates a contract with a provider based on problems with the quality of care.
An M+C organization may not prohibit or restrict a healthcare professional from advising or advocating on behalf of a patient regarding the patient's health, available types of treatment, and the risks and benefits of treatment and non-treatment. The provider cannot be required to indemnify the organization against liability for damage caused to a beneficiary as a result or the organization's denial of medically necessary care.
Effect of M+C Regulations
If nothing else, the complexity of the new M+C regulations makes it clear that becoming a participating M+C organization will be difficult, expensive and time-consuming. After reviewing the regulations, many physician and hospital networks, including IPAs and PHOs, may want to reconsider or postpone any plans for seeking status as a PSO under M+C.
For example, PSOs must go through the process of seeking state licensure as HMOs or similar risk-bearing entities. Under narrow circumstances, HCFA may waive state standards. This can only occur after the PSO has submitted all applications and evidence required for obtaining a state insurance license and has either been turned down for discriminatory reasons or because of inconsistent state solvency requirements.
The required M+C quality standards, in particular, have been cited as giving HMOs an unfair advantage over PSOs and PPOs. The latter two may not have the administrative ability to collect and analyze the extensive outcome data required by the standards.
Nevertheless, numerous opportunities remain for IPAs, PHOs and other provider networks to participate in PSOs and other M+C organizations without taking on the entire responsibility and risk of contracting directly with HCFA. Many will be expanding their provider networks to serve new M+C enrollees. Physicians and other providers should take the time to become familiar with the new program before entering into these relationships.