In a hearing this week, the Senate Finance Committee will consider expanding options for Medicare beneficiaries to include PPOs and medical savings accounts.
The session will continue the explor-ation by various congressional committees of ways to fundamentally alter the structure of Medicare to meet aggressive spending limits over the next seven years. Members of Congress want the elderly to have the same kinds of service choices that employees now enjoy.
Until now, the great majority of the nation's 36 million Medicare beneficiaries have been in fee-for-service plans. The only option has been a tightly managed HMO that doesn't pay for services outside the network. PPOs may provide Medigap coverage through the Medicare Select program, but they are not allowed to offer primary coverage.
"Now people want a broader choice," said Dennis Kasselman, senior vice president of HealthNet, a Kansas City, Mo., PPO.
When he testifies Wednesday, Kasselman also will be representing the American Association of Preferred Provider Organizations, which is proposing that Medicare PPOs be introduced.
Because their networks of doctors and hospitals are larger than those of HMOs, Kasselman said, PPOs offer Medicare beneficiaries more choice. They also usually make some reimbursement for out-of-network services, unlike tightly controlled HMOs.
Although the cost savings per beneficiary would not be as great as with HMOs, the broader realm of patient choice should make PPOs more attractive than HMOs. HCFA hasn't had as much success as it would like moving people into Medicare HMOs.
Commercial PPOs achieve savings by negotiating discounts with physicians and hospitals. Since Medicare pays hospitals based on DRGs and pays physicians discounted rates already, PPOs would have to find savings by managing utilization, especially the frequency and appropriateness of service. They would also exercise some quality assurance, through credentialing and peer review.
The hearing also will include testimony on HMOs from Karen Ignagni, president of the Group Health Association of America, but no details were available at press time.
Also testifying will be John C. Goodman, president of the National Center Dallas. The NCPA, whose slogan is "providing private-sector solutions to public-sector problems," has developed a medical savings account model. It has worked with Sen. Phil Gramm (R-Texas) on the concept.
In an interview last week, Goodman said that Medicare medical savings accounts would assure the necessary budgetary savings by providing "powerful incentives to elderly patients to control costs, reducing Medicare expenditures even further."
The MSA option, he said, "would allow the elderly the freedom to choose the benefits they want provided by the doctors and the hospitals they want. It also would provide full catastrophic coverage."
Beneficiaries could choose whether to buy a high- or low-deductible insurance policy with the money Medicare gives them. Goodman's policy analysts believe most people will buy a high-deductible policy, and put the rest in a medical savings account. After a year they could spend the savings account funds as they choose, giving them an incentive not to overspend on healthcare.
The Finance Committee also will hear a presentation from the Fairness Coalition, an ad hoc group of not-for-profit health providers in Minnesota and the Pacific Northwest.
The coalition argues that Medicare HMOs operating in efficient medical markets such as the Twin Cities, Seattle and Albuquerque, N.M., are being penalized in their capitation rates. An HMO in Minneapolis, for example, can receive $362 per enrollee per month from Medicare, while one in Brooklyn, N.Y., can receive $646.
Because some providers' margins are much thinner, beneficiaries in some areas have to pay premiums and make copayments that retirees in places like Miami would not be expected to pay.
HCFA also is interested in expanding the range of options for Medicare beneficiaries. In late June it announced a demonstration project in nine cities to examine possible Medicare PPOs, open-ended HMOs, point-of-service options and integrated delivery systems (July 3, p. 15).