Medicare will launch a managed-care competitive bidding pilot program Jan. 1, 2000, in Kansas City, Kan., and in Phoenix. The sites were chosen last week during a meeting of a federal advisory panel.
Congress created the bipartisan 15-member Competitive Pricing Advisory Committee in 1997 in an effort to take the politics out of site selection.
Under the pilot program, health plans that want to stay in the Kansas City and Phoenix markets must submit bids for the standard Medicare benefit package. Plans that bid higher than a payment rate HCFA selects for all plans will be forced to absorb the difference or charge the difference as an enrollee premium. Plans that bid below the HCFA rate can offer additional benefits as an inducement.
HCFA attempted to implement a similar demonstration project in Baltimore and Denver in 1997 but was forced to pull the plug on both. Local lawmakers and managed-care plans objected to the program's structure, which they said would squeeze reimbursements. They argued that plans would be forced to increase costs and reduce benefits, making the plans less attractive to seniors.
The committee chose Kansas City and Phoenix from among eight finalists, which included Akron/Cleveland, Ohio; Atlantic City, N.J.; Baton Rouge, La.; Jacksonville and Orlando, Fla.; and Sacramento, Calif.
Lawmakers and business leaders from several of those markets wrote letters to the committee asking that they be eliminated from consideration. In the audience last week and also asking to be eliminated was a representative from one selected market.
Health plans say the penalty for bidding high under the program is too severe. Forcing them to charge seniors a higher premium will put the plans at a severe competitive disadvantage, they say, pushing them from the market.
The first two demonstration sites originally were to begin Jan. 1, 1999, but that date was pushed back because of time needed to implement changes. A HCFA spokesman said last week the agency hopes to receive bids this summer and have the program in place by Oct. 1. That date marks the start of the period when Medicare beneficiaries can enroll in health plans.
The pricing advisory committee is scheduled to select two more sites, which will begin operating Jan. 1, 2001.