Managed Care
Disease
Management

Managed Medicare's Rapid Expansion

MANAGED CARE August 1997. © MediMedia USA

Managed Medicare's Rapid Expansion

Accounting for 12 percent of federal spending this year and projected to consume 15 percent of the budget in 2002 if not reined in, Medicare in 1997 is on the road to profound change.
MANAGED CARE August 1997. ©1997 Stezzi Communications

Accounting for 12 percent of federal spending this year and projected to consume 15 percent of the budget in 2002 if not reined in, Medicare in 1997 is on the road to profound change.

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As managed care becomes the norm in many parts of the nation for the commercial population, Medicare and Medicaid are increasingly seen by health plans as areas of growth. According to data from the Health Care Financing Administration, Medicare risk plan enrollment has grown an average of 21 percent a year since 1991, while enrollment in other types of Medicare managed care plans has declined. In Washington, the Great Debate continues over whether managed care plans are being paid too much (are risk plans cherry-pickers?), but it's unlikely that officialdom will change reimbursement rates so much as to destroy the risk program. Whether patients will continue to enjoy free access to services not covered under traditional fee-for-service Medicare is uncertain.

1 in 3 Medicare beneficiaries will be in a risk plan by 2007

The Congressional Budget Office projects that the percentage of Medicare beneficiaries in managed care plans (13 percent this year) will nearly triple to 35 percent by 2007.

SOURCE: CONGRESSIONAL BUDGET OFFICE, HEALTH CARE FINANCING ADMINISTRATION, WASHINGTON.

West Coast and Southwest have greatest managed Medicare penetration

Florida, Pennsylvania and Massachusetts are where the Medicare risk plan action is in the East, while most of the South is nearly untouched by the phenomenon. The real concentration is on the West Coast, where as many as one-third of a state's Medicare eligibles are in risk plans.Deepest penetration

SOURCE: ANALYSIS OF FEDERAL DATA FOR 1996 IN HEALTH AFFAIRS, MAY/JUNE 1997.

Almost one-third of Medicare HMO members live in California

Even though Medicare risk has high penetration in Oregon, Pennsylvania and Massachusetts, (see map above), in actual numbers of enrollees, California, also the nation's most populous state, is far ahead of any other. But Texas, the second most populous, is merely an also-ran.

SOURCE: ANALYSIS OF FEDERAL DATA FOR 1996 IN HEALTH AFFAIRS, MAY/JUNE 1997.

Most plans offer several added benefits

By law, if health plans provide mandated services for less than the capitated amounts set by the Health Care Financing Administration, they must distribute the savings to beneficiaries in some manner. Added services are typical, although some plans may charge extra premiums for these services if their costs and capitation do not differ.Percent of plans offering...

SOURCE: HEALTH CARE FINANCING ADMINISTRATION, WASHINGTON.

Additional monthly premiums paid by Medicare risk plan enrollees

The short-term trend has been away from plans' charging an additional premium, which they may do by law if they offer extra benefits or lower coinsurance than the traditional program.

Average premium, per month
1994: $32.00
1996: $13.52

SOURCE: ANALYSIS OF FEDERAL DATA IN HEALTH AFFAIRS, MAY/JUNE 1997.

The risk selection controversy

The graph represents the common view that advantageous risk selection of Medicare enrollees — i.e., healthier-than-average patients — has been good for HMOs. The Kaiser Medicare Policy Project says that "Medicare would have spent ... about 7.7 percent less if [risk] beneficiaries had remained in Medicare's traditional fee-for-service program."

But a new study from the Lewin Group, commissioned by the American Association of Health Plans, disputes this conclusion. Lewin found "lower levels of favorable selection into HMOs than previously estimated, particularly in the larger and more mature market areas with high HMO enrollment.... Over half of all Medicare HMO enrollees live in an area where expected costs for enrollees actually exceed the Medicare HMO plan payment amount."

SOURCE: ANALYSIS OF FEDERAL DATA FOR 1994 IN HEALTH CARE FINANCING REVIEW, SUMMER 1994; THE LEWIN GROUP/AMERICAN ASSOCIATION OF HEALTH PLANS.

Sicker patients somewhat less satisfied with Medicare HMOs

Medicare HMO enrollees in fair or poor health are almost as satisfied with their plans as the statistically average plan member.

SOURCE: PHYSICIAN PAYMENT REVIEW COMMISSION, WASHINGTON.

Meetings

HealthIMPACT Southeast Tampa, FL January 23, 2015