In an effort to revive the ailing Medicare+Choice program, HHS Secretary Tommy Thompson has announced a pilot program that will give beneficiaries more coverage options and aims to encourage health plans to sign on.
A total of 33 health plans in 23 states will begin to offer Medicare benefits modeled after PPO coverage for a higher fee starting Jan. 1, 2003, under a three-year demonstration project Thompson unveiled last week.
Currently, Medicare beneficiaries can enroll in either a fee-for-service plan, chosen by 88% of beneficiaries, or a closed network HMO, chosen by 12% of beneficiaries. The Medicare PPO project will give them the option to go out of network, said Centers for Medicare and Medicaid Services Administrator Thomas Scully.
"We're giving to consumers what they want," Scully said. "It's clearly where the private sector under (age) 65 has gone." Some 46% of Americans under age 65 with health insurance are enrolled in PPO plans and 14% are enrolled in similar point-of-service plans, according to the CMS. Only 33% have HMO plans, and 7% are in fee-for-service or indemnity plans.
HHS has launched the test project, which does not need legislative approval, as the administration's prescription-drug benefit is stalled in Congress.
The new PPO option will be available to about 11 million Medicare beneficiaries, who account for 30% of all seniors in Medicare. The demonstration project includes both large and small health plans from states as diverse as Alabama and New Jersey. Benefits will vary depending on the market, but most will include preferred provider networks that offer drug benefits and disease-management services in addition to the basic Medicare benefits. Senior groups said they are optimistic about the project. "It is a good choice for some seniors," said Julie Alexis, manager of member health products for the AARP. "We'll be looking at it very closely."
The AARP has warned its members, however, that the expanded drug benefit is not a substitute for a Medicare overhaul, she added. "It is a good step toward choice, but our goal is to modify Medicare with a prescription-drug benefit," she said.
In recent years, health plans have left the Medicare+Choice program in droves, citing high costs. The federal government and the plans will share financial risk in the demonstration project to encourage insurers' involvement, Scully said.
Health plans praised the PPO plan. "The administration is taking a significant step toward creating a 21st century Medicare program that gives seniors access to affordable benefits and choices that currently are widely available in the private marketplace," said Karen Ignagni, president and chief executive officer of the American Association of Health Plans.
"Expanding Medicare options to include PPOs provides additional opportunities for beneficiaries to select affordable Medicare options," said Scott Serota, president and CEO of the Blue Cross and Blue Shield Association. Two Blues plans will participate in the project.