Medicare payment increases for managed-care plans, which are running about 16% over two years, have been too high and Congress should restrain future adjustments, HCFA Administrator Bruce Vladeck said last week.
Vladeck told a conference sponsored by the American Association of Health Plans in Washington that recent updates "obviously are not supportable in terms of what is happening elsewhere in the healthcare market."
HCFA announced earlier this month that managed-care plans that contract with Medicare will receive an average update of 5.9% in 1997. Payments increased 10.1% in 1996.
The Congressional Budget Office estimates that the government will spend $19.1 billion on Medicare HMOs in 1996 and $24.6 billion in 1997.
Managed-care plans currently are paid based on a formula, called the Average Annual Per Capita Cost, that's meant to approximate 95% of what Medicare would spend on an average beneficiary in the fee-for-service sector.
The proposed fiscal 1997 Clinton administration budget would revamp the Medicare payment formula by putting a $300-per-month floor on payments and reducing the differential between the counties that receive the highest monthly payments and those that receive the lowest. The Clinton proposal would allow health plans an annual increase equal to the increase in the rate of per-capita Medicare spending, projected by the CBO to be 7.8% next year. The plan would save about $24 billion from 1997 through 2002, according to the CBO.
The Republican congressional budget would rework the way Medicare pays managed-care plans in much the same way the Clinton plan does.
A spokesman for the AAHP, an HMO trade group, said the organization supported revamping the payment system but took issue with Vladeck's claim that the reimbursements have been too high in recent years.
"Lawmakers want HMOs to offer comprehensive benefits like outpatient prescription drugs, keep premiums low, and do the other things that make managed care attractive to beneficiaries because there is evidence that higher managed-care penetration brings down overall Medicare costs, including fee-for-service," the spokesman said. "We think the increase this year was sufficient to allow plans to continue to offer those benefits."