Both the White House and Republican lawmakers are considering reducing the amount Medicare pays managed-care plans as one way to balance the budget, MODERN HEALTHCARE has learned.
The move comes as providers are clamoring to contract directly with Medicare to enroll beneficiaries and receive capitated payments. A squeeze on such payments could dampen providers' interest.
Now, Medicare pays managed-care plans at a rate of 95% of the amount Medicare estimates it pays on average for beneficiaries in the traditional fee-for-service sector.
The rate, called the Average Adjusted Per Capita Cost, varies by county.
Before federal budget negotiations collapsed last year, the Clinton administration and GOP leaders were nearing agreement on ways to reform the payment system. Specifically, the sides wanted to cap the growth of AAPCC rates and reduce the disparity between those rates by county.
In some counties the AAPCC was more than $750 per month, while in others it was less than $225.
Both sides say the disparity in reimbursement rates still needs to be addressed, but now lawmakers are con-sidering a more drastic step: lowering the rate Medi-care pays from the current 95% level.
According to sources who have had discussions with the White House about its budget, the Clinton administration is citing two studies that claim Medicare actually loses money on managed care. The studies say that's because Medicare HMOs enroll seniors who are healthier than average and therefore the cost of caring for them would be below average if they remained in the fee-for-service sector.
Managed-care groups disagree. They say that in areas where managed-care penetration rates are high, the selection issue disappears.
The White House budget is scheduled to be released Feb. 10.
Republicans also are considering reducing the AAPCC rate below 95%. According to one GOP aide, reducing the rate to "90% or 88%" is necessary to ensure budget savings.
Karen Ignagni, president of the American Association of Health Plans, said she was "concerned about the impact lowering the rate would have on beneficiaries."
Medicare HMOs usually provide extra benefits to seniors such as paying for eye care or prescription drugs, and reducing reimbursements might force plans to reduce those benefits, Ignagni said.