Medicare reimbursement for managed-care plans, including provider-sponsored organizations, will increase an average of 2% beginning Jan. 1, 1999, under a preliminary estimate sent by HCFA to health plans last week.
According to the notice, most plans functioning as part of the new Medicare+Choice structure will receive a 2% increase. Plans in rural counties likely will to get the statutory minimum payment of $378 a month.
Like traditional fee-for-service Medicare, reimbursement rates for Medicare+Choice vary by county. The yearly update is based on the rate of inflation in traditional Medicare. County rates in 1998 vary from the floor of $367 a month to more than $750 a month.
HCFA estimates that the underlying rate of inflation for 1999 will be 3.4%. The balanced-budget law enacted last year requires that rate to be reduced by 0.5 percentage points in 1999. And to compensate for an overpayment in 1998, the increase will be reduced an additional 0.9 percentage points, leaving an average update of 2%.
That announcement comes as a blow to plans in many counties with payment rates below the national average. At the request of rural lawmakers, the budget law included a provision that aimed to average a county's local rate with the national average. Another provision guaranteed that no county would have less than a 2% increase.
Since fee-for-service increases have been low in the past two years, the averaging designed to help low-reimbursement counties has not been done.
"Despite congressional intent, the gap (between high-payment and low-payment counties) is not being reduced," said Susan Foote, a lobbyist with Durenberger/Foote in Washington. "Our biggest fear is coming true: that there would be across-the-board cuts or increases, because they are unfair and only make the differences larger."
But even though averaging has not been done, very few plans have been disadvantaged, according to a GOP aide, who asked not to be identified.
For 1998, county reimbursement rates are nearly identical to projections from the budget bill debate, even without averaging. According to estimates by the Congressional Research Service, 70% of all counties have actual 1998 rates that are identical to projected rates. In all but a few counties, reimbursement rates are within 2% of projections. The aide said that without averaging, the rates probably will be close again in 1999.
"This whole thing is not quite as dramatic as it sounds," the aide said.