Medicare+Choice = Slow Start; Cost, Questionable Return Cited

The Medicare+Choice program is getting out of the gate rather slowly. At press time, the Health Care Financing Administration had received only two applications from groups wanting to establish provider-service organizations and one from a prospective preferred-provider organization — and none at all from insurers offering medical savings accounts.

What’s the problem? According to HCFA spokesman Peter Askenaz, it’s too early to make any judgments. The regulations were released June 26, Askenaz notes, and it takes time for health care organizations to get the paperwork together to submit to HCFA. Don’t rule out possible regulation confusion — after all, the 833-page regulation document isn’t exactly light reading. And finally, the decision to become a risk contractor is not one that “organizations should enter into lightly,” says Askenaz. “It represents a substantial financial commitment.”

Still another factor may be that interested parties are taking a hard look at the less-than-profitable experience some Medicare HMOs have experienced in certain markets, particularly in rural areas.

Currently, Medicare allows beneficiaries to enroll in health maintenance organizations. Medicare+Choice, also called Medicare Part C and a product of the Balanced Budget Act, is designed to provide beneficiaries with the option to enroll in other types of arrangements, such as PSOs and MSAs. Time is running out on the MSA option, however; beneficiaries who want to join must sign up by next month.

After so much hoopla about PSOs, their future is very much up in the air. According to Robert Berenson, director of HCFA’s Center for Health Plans and Providers, physician-run organizations may be reluctant to become risk contractors when payment rates do not necessarily promise to support such a bold move.

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