A special government committee charged with developing a competitive bidding demonstration program for Medicare managed-care plans will meet next week to make the first round of site choices for the program.
However, some committee members and some managed-care groups say the program should be scrapped, given the recent rash of health plans that have announced pullouts from the Medicare risk market.
Plans are blaming those pullouts largely on inadequate Medicare payment rates, and any program that could drive those rates even lower would have little chance of attracting bidders, they argue.
Last year's federal balanced-budget law called for the 15-member Competitive Pricing Advisory Committee. HCFA had previously tried to implement competitive bidding pilot programs in Baltimore and Denver but dropped them because of criticism from local lawmakers and managed-care plans.
To avoid a similar fate, Congress and HCFA set up an independent committee that they hoped would avoid the political obstacles that scuttled the pilots.
Supporters of the demonstration project say it will bring market competition into Medicare risk contracting and will eventually reduce Medicare spending.
The group, which first met in May, has a tight deadline. The first two demonstration sites are scheduled to begin operating next year, with two more slated for 2000. The committee, which is charged with developing a framework for the demonstration project and selecting the sites, has the option of recommending three more sites in 2002, according to the balanced-budget law.
A subcommittee of the group has narrowed the possible sites, and the full committee will consider the issue at its meeting this week in Annapolis, Md., according to several committee members.
Given HCFA's track record with its first two attempts, the site selections are likely to be controversial decisions. According to several members, Denver is among the sites being considered, as are Miami and Minneapolis.
Under a committee proposal, all Medicare+Choice plans in an area, including any provider-sponsored organizations, would submit bids to HCFA for a defined package of benefits. Plans that chose to drop out of the Medicare program rather than submit a bid would not be penalized.
HCFA will choose a payment level, and plans that bid below it can offer extra benefits as a marketing incentive or pocket the difference. Plans that bid above the level will be required to charge the difference as a premium to beneficiaries.
Some commissioners and managed-care plans say that no matter what the structure, the program should be scrapped because the climate surrounding Medicare managed care has changed dramatically recently.
According to HCFA, more than 50 health plans have announced withdrawals from Medicare, which will affect more than 400,000 beneficiaries.
"Putting this demonstration in the midst of all that is going on in the program could create some problems," said Samuel Havens, a consultant from Chatham, N.J., and a committee member.
Havens said he plans at this week's meeting to bring up the possibility of delaying or scrapping the proposal and has been assured by committee chairman James Cubbin that the subject will be discussed. Cubbin is executive director of healthcare initiatives for General Motors.
Other committee members, however, say that forging ahead is exactly what the Medicare program needs.
"It is more essential now to run a demonstration than before," said Robert Reischauer, a Brookings Institute scholar and former director of the Congressional Budget Office. The recent flurry of plans exiting Medicare "should be a wake-up call that administrative mechanisms for setting payment for plans isn't the best system."