A planned change to pay Medicare health plans based on enrollees' health status will be phased in over the next five years, reducing the hit on plans to $11.2 billion from $15.7 billion over the period, HCFA said last week.
HCFA had intended to implement the change, known as risk adjustment, all at once but changed its plans because of the impact of the cuts. The change will begin Jan. 1, 2000.
Without the phase-in, plan reimbursements would have been cut by $1.6 billion in 2000. However, because of the phase-in, plans will take a hit of $200 million, less than 1%, in 2000.
Most plans will experience a 5% to 8% payment reduction when the change has been fully phased in.
Despite the change, health plans want the program scrapped.
"The administration is penalizing beneficiaries who have chosen to join Medicare+Choice plans," said Karen Ignagni, president of the American Association of Health Plans. She called on Congress to stop the risk-adjustment program.
The change is designed to align Medicare health plan reimbursements more closely with seniors' health status. Several studies have shown that health plans enroll healthier, less costly seniors.
The risk-adjustment program will be based initially only on hospital inpatient data. The agency expects to begin collecting data from physicians and outpatient centers, and it will begin working from that data in 2004, said Robert Berenson, M.D., director of HCFA's Center for Health Plans and Providers.
Health plans say that using only hospital inpatient data will skew reimbursements, because the nature of health plans is to reduce the number of hospital inpatient admissions. Therefore, when compared with the traditional fee-for-service program, health plans will seem to have enrolled healthier patients, they argue.