Managed-care plans, which have been lobbying HCFA for higher Medicare payment rates to prevent plans from leaving Medicare risk contracting, got some good news last week when a key lawmaker sent a supportive letter to HCFA.
But that good news was tempered by a report from HHS' inspector general's office that said Medicare may be overpaying health plans by as much as 7%.
The report is based on the inspector general's audit of Medicare fee-for-service programs for fiscal 1997. That audit found that as much as $20.3 billion, or 11% of total Medicare spending that year, was improper (April 27, p. 2).
Because calculations for Medicare HMO payment rates are based on fee-for-service rates, the HMO payment rates also are overstated, the agency said.
The report is the second by the inspector general in the last two months to conclude that health plans are being overpaid by Medicare. Last month, the agency said plans are improperly billing as much as $1 billion a year in overhead expenses as part of their Medicare costs.
Medicare HMO reimbursements are projected to grow from about $30 billion in federal fiscal 1998 to about $64 billion in 2002, according to the Congressional Budget Office.
Support for health plans, however, came in the form of a Sept. 23 letter by Senate Finance Committee Chairman William Roth (R-Del.) to HCFA Administrator Nancy-Ann Min DeParle. Roth wrote that he was concerned that if more health plans leave the Medicare HMO business, seniors will have fewer choices. He asked HCFA to consider delaying the implementation date of some of the new requirements in the 1997 Balanced Budget Act. Medicare HMOs said those requirements will increase their operating costs.
Roth also suggested the agency allow health plans to resubmit their "adjusted community rate" proposals for 1999. Those proposals, which were due in May, help Medicare set HMO payment rates. Plans argue that their original proposals may have underestimated their costs and therefore may artificially reduce new payment rates.
Karen Ignagni, president of the American Association of Health Plans, said members of Congress are becoming more receptive to a regulatory relief proposal, because worried beneficiaries have begun to contact their legislators.