HCFA and the Department of Veterans Affairs last week said they were close to signing an agreement allowing Medicare to reimburse the VA for treating some Medicare-eligible veterans.
Under the demonstration project, some VA facilities would serve as a Medicare+Choice managed-care plan for higher-income, nondisabled veterans who were eligible for but not entitled to VA care. (All veterans are eligible for healthcare, but entitlement to different types of care varies according to veterans' income and disability or illness.)
VA and HCFA officials did not say how many VA facilities would participate.
Hospitals oppose using Medicare funds for treatment in VA facilities because they fear it could drain the Medicare Hospital Insurance Trust Fund and that the VA facilities could steal patients from private-sector hospitals.
Officials from HCFA and the VA told the Senate Finance Committee last week they were still working on a payment formula so VA facilities don't unfairly profit from Medicare. Such a formula is needed to keep the project from depleting the Medicare trust fund more quickly.
Under the proposal, Medicare would not reimburse the VA networks until their Medicare expenditures exceeded total Medicare expenditures from the previous year.
Once that spending threshold was met, VA facilities would receive 95% of what Medicare+Choice plans receive after deductions for medical resident training, disproportionate share and a portion of capital reimbursement. Medicare's expenditures would be capped at $50 million per year.
Military healthcare managers have complained that making reimbursement contingent on the previous years' spending thresholds has caused budgetary uncertainty.
The demonstration would require congressional approval. It would be modeled on a three-year project that was authorized in 1997 and allows Medicare reimbursement of the military's Tricare managed-care plans in six locations.
At the Finance Committee hearing, the General Accounting Office said the rules for the spending threshold that triggers Medicare payments were still a thorny issue that HCFA and the Pentagon must work out.