American College of Physicians: Internal Medicine — Doctors for Adults ®


Medicare reforms reflect ACP goals, but fall short of major change

From the October 1997 ACP Observer, copyright 1997 by the American College of Physicians.

By Michael J. Werner, JD

The Balanced Budget Act of 1997 contains many Medicare reforms advocated by the College for both the fee-for-service and managed care programs, but doesn't follow through on the College's goal to fundamentally change those programs.

Here are some of the positive changes to the programs:

  • Case management demonstration projects: In a major victory for fee-for-service enrollees, an amendment developed and sponsored by ACP requires Department of Health and Human Services Secretary Donna E. Shalala to establish demonstration projects to test the use of case management and other methods of coordinating care for chronically ill Medicare beneficiaries. ACP's 1996 paper, Reforming Medicare: Adapting a Successful Program to Meet New Challenges, promoted this concept, noting that services for the chronically ill are often fragmented. (See ACP amendment spurs case management study, September ACP Observer.
  • More preventive benefits. Medicare beneficiaries will have greater access to mammography, Pap smears and colorectal screening. Also consistent with ACP's recommendations, the law expands the current outreach program to increase pneumonia and influenza vaccination rates. (However, contrary to ACP guidelines, the new law authorizes an annual prostate screening test for men over age 50, consisting of any or all of the following: a digital rectal exam; a prostate-specific antigen blood test; and, after 2001, other procedures the Secretary finds appropriate.)
  • No gag clauses. The bill prohibits gag clauses—contract provisions that prevent physicians from discussing certain treatment options with their patients. The College has supported such a ban.
  • Help for Medicare beneficiaries. The law requires that beneficiaries be given the information they need to choose whether to stay in the fee-for-service program or to select from among various managed care plans (see Budget bill moves Medicare toward privatization). The report accompanying the legislation said, "The Secretary [must] take all steps necessary to ensure that all seniors are provided the information they need to make informed choices about health coverage."
  • Quality program for managed care. The legislation mandates that managed care plans have a quality assurance program that stresses health outcomes, evaluates the continuity and coordination of care that enrollees receive and uses continuous quality improvement methods to improve performance. The College has supported these provisions to ensure that Medicare beneficiaries who enroll in managed care plans receive high quality care.

Despite these successes, however, Congress rejected other attempts to fundamentally restructure the Medicare fee-for-service and managed care programs.

For example, the College has urged Congress to reform the fee-for-service program by adopting techniques used successfully in the private sector. Examples include changes in the existing benefit structure, new cost sharing requirements and changes in coverage and pricing policies to help ensure the appropriate use of services and technology. Unfortunately, the law is virtually silent on these subjects.

Congress also ignored ACP's recommendation to expand the successful "bundled payment" demonstration program, which creates a risk sharing arrangement among providers by combining fee-for-service payments for specific services.

In addition, despite pleas from the ACP and others that the payment methodology for Medicare HMOs needs to be changed, Congress did not act decisively in this area. However, Congress did remove payment for graduate medical education (GME) from HMO reimbursement. In its paper, the College noted that including GME payments within the Medicare HMO payment formula overpays HMOs since most do not support GME. The new law gradually removes these overpayments.

Other attempts to make dramatic and necessary changes to the payment methodology for Medicare HMOs were either delayed or defeated. For example, Congress rejected calls to immediately implement some form of risk adjustment to payments. ACP and others had recommended using risk adjusters to ensure that reimbursement from Medicare managed care plans would more accurately reflect their enrollees' health status. Studies had shown that many Medicare HMOs enrolled relatively healthy beneficiaries and were, therefore, being overpaid. However, opponents have argued that formulas to adjust risk payments could lead to other disparities. The bill delays any such payment adjustments until 2000.

Michael J. Werner is Senior Associate for Government Relations in ACP's Washington, D.C., office.

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