Insurers and providers sparred on Capitol Hill last week over provider-sponsored organizations, while state officials told federal lawmakers that states, not the federal government, should regulate PSOs.
In a round of hearings on Capitol Hill, providers called on federal lawmakers to support two bills, one in the House and one in the Senate, that would give PSOs a chance to enroll Medicare beneficiaries directly under federal regulations for a four-year period. After that, states that demonstrate quality and solvency standards equal to the federal standards would be allowed to take over PSO regulation.
HCFA Administrator Bruce Vladeck said the Clinton administration supports allowing plans to operate under federal quality and solvency regulations for two years, a period hospital officials said was too short to allow PSOs to get a foothold in the market.
But insurers and state officials argued that PSOs are performing the same function as HMOs and, therefore, oversight should remain with the state insurance commissioners who have traditionally overseen HMOs.
"Federal pre-emption of state insurance regulation will weaken protections for Medicare beneficiaries (and) further segment the health insurance market," said Glenn Pomeroy, vice president of the National Association of Insurance Commissioners.
The NAIC position was supported by the National Governors' Association and the National Conference of State Legislatures.
One of the sponsors of federal PSO legislation in the House, Rep. Charles Stenholm (D-Texas), said PSOs were the only way to bring a managed-care option to seniors in rural areas.
The Blue Cross and Blue Shield Association disagreed. The national organization released a report last week that said PSO legislation could have the opposite effect and actually jeopardize access to care in rural areas by allowing undercapitalized PSOs into the market.
According to the Blues, Medicare PSOs in rural areas would be under severe financial pressure because of a shortage of providers, the potential for adverse selection, out-of-network service use by their enrollees and limited access to capital.
While both the American Medical Association and the American Hospital Association said they supported the PSO legislation before Congress, they differ on how much of the Medicare benefit package PSOs should be required to handle in-network.
The AHA seeks a high standard, one that would require PSOs to deliver nearly all Medicare services within the network.
However, the AMA said such a high standard would make it impossible for physician-controlled PSOs to enter the market because they would not be able to offer inpatient services.
"The AMA is concerned that (the PSO bills) would favor the hospital-owned . . . model to the exclusion of others," the group said in testimony last week before the House Commerce health and environment subcommittee.