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AUG
9
1995
asim
american society of internal medicine
President
August 16, 1995
KATHLEEN M. WEAVER. MD
Portland, Oregon
Ms. Carol Rasco
President-Elect
WILLIAM E. GOLDEN, MD
Director
Little Rock. Arkansas
Domestic Policy Council
Secretary-Treasurer
West Wing
J. LEONARD LICHTENFELD. MD
The White House
Baltimore, Maryland
Washington, DC 20500
Immediate Past President
YANK D. COBLE Jr., MD
Jacksonville. Florida
Dear Ms. Rasco:
TRUSTEES
Late last month, the American Society of Internal Medicine issued a set of proposals
LOUIS H. DIAMOND, MD
Washington, D.C.
for reforming Medicare. An executive summary and complete set of recommendations
is enclosed for your information. As ASIM states in the executive summary, our
CYRIL M. HETSKO, MD
Madison. Wisconsin
principal aim in offering this plan is to ensure that all participants in the Medicare
E. RODNEY HORNBAKE III. MD
program share the responsibility for preserving this pillar of the nation's commitment
Rochester, New York
to its elderly citizens well into the next century.
ISABEL V. HOVERMAN, MD
Austin, Texas
ASIM continues to believe that changes in Medicare should ideally be made in the
ROBERT D. McCARTNEY. MD
context of other health system reforms-insurance market reforms, changes in medical
Denver, Colorado
liability, due process for patients and physicians in all health plans -- that will promote
PHILIP T. RODILOSSO. MD
an environment in which changes made to Medicare will not adversely affect
Arlington, Virginia
beneficiaries. Nevertheless, as calls have grown for specific changes in Medicare,
BERNARD M. ROSOF, MD
ASIM has attempted to respond to these requests by outlining those immediate
Huntington, New York
changes we feel should be made in Medicare's current financing and the existing risk
RONALD L. RUECKER. MD
contracting program and those reforms we believe are necessary for the long term
Decatur. Illinois
survival of the program.
M. BOYD SHOOK, MD
Oklahoma City, Oklahoma
Many of the changes we are proposing in the current Medicare system are consistent
LAURENCE D. WELLIKSON, MD
with several of the administration's policies set out in last year's Health Security Act.
Orange. California
These include: increasing the choice of managed care plans under the risk
CECIL B. WILSON. MD
Winter Park. Florida
contracting program to include preferred provider organizations (PPOs) and point-of-
service (POS) plans; giving beneficiaries comparative information on risk contracting
Executive Vice President
ALAN R. NELSON, MD
plans; improving financing of Medicare through increased taxes on tobacco products
and alcohol as well as limitations on the tax deductibility of health insurance beyond
Thirty-ninth Annual Meeting
an average premium cost; revising the disproportionate hospital share system of
Washington, D.C.
payments; and creating an all payer funding pool to finance graduate medical
October 18-22. 1995
education and decreasing the number of residency positions funded by the federal
REPRESENTING
government.
Internists and
All Subspecialists
of Internal Medicine
However, in light of increasing budgetary pressures and a growing Medicare
population, ASIM believes that the creation of a voluntary voucher program, albeit with
certain safeguards, will not only broaden the choice of coverage options now
available to beneficiaries but will introduce additional market incentives that can
control rising costs under Medicare. ASIM understands that the administration has
expressed reservations over voucher proposals. As outlined below, ASIM has
2011 PENNSYLVANIA AVENUE, NW
SUITE 800
WASHINGTON, DC 20006-1808
TELEPHONE (202) 835-2746
FAX (202) 835-0443
attempted to address in its recommendations several of the major criticisms lodged against a
voucher system for Medicare.
1. Vouchers will take away the broad choice of physician and provider that beneficiaries now
enjoy under tradtional Medicare.
ASIM agrees that beneficiaries should not be deprived of their choice of physician. Under our
proposal, beneficiaries could remain in traditional, fee-for-service Medicare. The voucher program
would be entirely voluntary. Indeed, a voucher program might enhance choice of physician if
beneficiaries discover that the physician they wish to see is participating in a health plan that had
heretofore been ineligible to contract with the Medicare program.
In addition, ASIM is recommending that voucher plans with networks of providers be required to
offer to prospective enrollees the chance to buy a point-of-service rider that would allow the
beneficiaries to seek care from non-network physicians. ASIM further recommends that this POS
rider be priced at an actuarially-determined level because many studies have shown that the
additional costs of POS are modest. Imposing this limit on the cost of POS riders would protect
beneficiaries from excessive charges for going out of a health plan network.
2. Vouchers will leave beneficiaries exposed to "cherry-picking", deceptive marketing and other
practices designed by insurers to avoid covering the sickest of patients.
ASIM wholeheartedly agrees that discriminatory insurance practices should be eliminated, not only
for Medicare patients, but for all segments of the population. The insurance reform measure
recently reported out of the Senate Labor and Human Resources Committee is a step in the right
direction. Insofar as a Medicare voucher system is concerned, though, ASIM addresses problems
with insurance industry discrimination by requiring voucher plans to guarantee acceptance to
beneficiaries seeking enrollment, by requiring voucher plans to provide the range of benefits now
covered under Parts A and B, along with preventive care services, by requiring plans to submit
their marketing materials to the Department of Health and Human Services for review and by
establishing a reinsurance mechanism to cushion plans with large numbers of seriously ill
enrollees.
3. Vouchers will fail to keep pace with the costs of medical care, increasingly reducing
beneficiaries' selection of affordable health plans and/or subjecting beneficiaries to greater and
greater out-of-pocket costs.
ASIM agrees that, if the government's contribution is set too low, such as the lowest priced plan
in a region, or at some national average, this could adversely affect the ability of many
beneficiaries to buy a satisfactory health plan. ASIM believes that by setting the voucher amount
according to regional health costs and adjusting it for age, sex, and disability, ESRD and
institutional status, this will avoid a situation in which the voucher is set at such a level as to
render it basically worthless to most beneficiaries. Furthermore, as noted above, requirements
that all voucher plans offer the services covered under Parts A and B, plus preventive care,
should ensure that all beneficiaries, no matter how modest of means, will receive the benefits to
which they are now accustomed under the Medicare program.
ASIM also believes that the voucher must be updated to keep pace with the costs of providing
services to beneficiaries and does not support capping or limiting the voucher according to some
arbitrary formula. In the event that spending for the voucher program exceeds estimated budget
goals, ASIM would prefer that an independent body be established to examine the reasons for
that cost overrun and to propose a response that does not solely rely on cuts to providers and
increased costs to beneficiaries. In addition, ASIM states that Congress should commit itself to
increasing funds for the voucher program if spending under that side of Medicare is deemed to
have derived from provision of medically necessary services.
To the contention that a voucher system would subject beneficiaries to excessive out-of-pocket
costs should they choose to remain in the traditional fee-for-service sector or if they want to go
outside a plan's network of physicians, ASIM is proposing the use of its "competitive pricing,
informed choices" proposal for Medicare beneficiaries who wish to remain with fee-for-service or
to use a POS option. As described in item 9 of ASIM's recommendations, using the competitive
pricing approach would give beneficiaries "up front" the information they need concerning
physicians' charges so that they could decide for themselves how much they were willing to pay
to see a particular provider.
ASIM also urges that, with regard to traditional Medicare or under voucher plans using a fee
schedule either for their regular plan or for their point-of-service option, charges in excess of
Medicare's payment amounts be forbidden under the following circumstances: where
beneficiaries' income falls below a certain level; in emergency situations; when beneficiaries have
little choice in selection of a hospital-based physician; or in areas of the country where there is
little or no competition for a particular medical specialty.
I hope that you find ASIM's recommendations for Medicare reform useful and would welcome the
opportunity to discuss our proposal with you further. If you or your staff have additional
questions, please feel free to contact ASIM's Vice President for Government Affairs and Public
Policy, Robert Doherty at 202-466-0283 or Susan Prokop, ASIM's Director, Health Care Policy at
202-835-2746, ext. 259.
Sincerely,
Alan R Nalemn MD
Alan R. Nelson, MD
Executive Vice President
rasco.895
ASIMTODAY
KEEPING MEDICARE AFFORDABLE
RECOMMENDATIONS OF THE
AMERICAN SOCIETY OF INTERNAL MEDICINE
July 1995
american society of internal medicine
2011 PENNSYLVANIA AVENUE, NW . SUITE 800
WASHINGTON, DC 20006-1808 (202) 835-2746
KEEPING MEDICARE AFFORDABLE
RECOMMENDATIONS OF THE
AMERICAN SOCIETY OF INTERNAL MEDICINE
EXECUTIVE SUMMARY
Thirty years ago, the Medicare program was created to ensure that the nation's elderly. would not
be denied medical care when they needed it. Today, almost all Americans over 65 feel secure in
the knowledge that health care services will be accessible to them. The American Society of
Internal Medicine, representing the nation's largest medical specialty and the principal providers of
medical care to Medicare beneficiaries, is committed to preserving this contract with older
Americans. However, in the face of changing demographics, burgeoning costs and the need to
restrain overall federal spending, the Medicare program is facing an unprecedented challenge.
Responding to this challenge will require both immediate changes in the program's financing and
current risk contracting program as well as long-term reforms to broaden beneficiaries' choice of
insurance options, control costs through enhanced competition and instill a sense of responsibility
among all those involved with and affected by its policies.
This set of recommendations is ASIM's response to policymakers calls for proposals to address
the need for fundamental changes in the Medicare program so that it may continue to be a
reliable source of medical care for the nation's elderly well into the new century. For ASIM, the
overarching philosophy on which these Medicare reform proposals rest is that of shared
responsibility.
Physicians have a responsibility to deliver care to greater numbers of Medicare patients under
health care delivery systems that will increasingly require them to accept financial risk and to be
accountable for the cost and quality of their clinical decisions-and to compete within this new
system on the basis of cost and quality.
Medicare patients have a responsibility to consider the costs of alternative sources of health care
coverage, to be willing to contribute more in out-of-pocket costs if they choose more expensive
coverage and-for those who can afford to-to contribute more to the financial support of Medicare
so that those of lesser means can afford coverage.
Taxpayers have a responsibility to accept changes in the tax code that would raise revenue and
introduce positive incentives into the health care system including a limit on the tax deductibility of
employer paid insurance and increased taxes on tobacco.
The insurance industry has a responsibility to compete in the new system-not solely on price or
risk avoidance but on benefits offered and quality-and to accept reasonable standards to protect
beneficiaries who choose private insurance coverage.
And the federal government has a responsibility to assure that the government's contribution
remains adequate to guarantee that all beneficiaries can obtain high quality coverage through
traditional Medicare and private sector alternatives-and to provide sufficient oversight over the
market to protect patients' interests.
1
Changing the Medicare Financing System
Steps can be taken now to reform the current Medicare program so that future efforts to change
the system need not be enacted in an atmosphere of crisis. These steps include:
1. increasing the eligibility age for Medicare to align it with eligibility for Social
Security.
2, increasing the amount contributed by upper income beneficiaries to financing
the Medicare system.
3. applying the Part B coinsurance to home health services.
4. including in taxable income the value of health insurance benefits beyond a set
value of insurance premium.
5. limiting disproportionate hospital share (DSH) payments only to those facilities
that, in fact, care for a disproportionate share of Medicare patients.
6. increasing federal excise taxes on alcohol and tobacco if the revenues from
changes identified above prove inadequate to finance an appropriate level of
benefits.
7. creation of a national all-payor funding pool for GME.
8. increasing the direct GME weighting factor for general internal medicine and
other primary care residency positions while decreasing the weighting factor for
others.
9. creation of a private sector physician workforce planning initiative.
10. decreasing the number of funded residency positions to 110 percent of U.S.
medical school graduates.
Instilling Market-based Incentives in the Medicare Program
Additional steps can be taken to improve the existing Medicare risk contracting program so that
this mechanism designed to enhance market competition can operate as it was intended until
more substantial reforms are implemented. These steps include:
1. changing the adjusted average per capita cost (AAPCC) formula used to pay
health plans.
2. applying risk adjustments-such as severity of illness-in setting payments to risk
contracting plans.
3. broadening managed care choices for beneficiaries to include HMOs with point-
of-service and preferred provider organizations (PPOs), instead of limiting
2
participation only to health plans that require beneficiaries to obtain services from
contracted physicians and other providers.
4. requiring that beneficiaries be provided comparative information concerning all
Medicare risk contracting plans that are available to them.
5. giving beneficiaries one opportunity per enrollment year to disenroll from a
Medicare risk contracting within 60 days of enrollment. Once a beneficiary has
been in a-plan-more-than-60-days,he-or.she should required to wait until the
next open enrollment period.
6. mandating reasonable, non-punitive increases in premiums and other cost
sharing for beneficiaries who choose to remain with the traditional fee-for-service
Medicare program.
Medicare Vouchers
Changing the existing fee-for-service Medicare program and improving the current risk contract
program will help to stabilize Medicare for the short term. However, major restructuring of
Medicare is necessary to achieve a system that relies on competition to control costs and
broaden beneficiary choices, that instills individual responsibility for the appropriate use of scarce
medical resources and that assures the program's long term survival. One way to accomplish this
is through the creation of a voucher program.
ASIM supports creation of a voucher system and believes that the following elements are
necessary to any voucher program designed for Medicare to ensure that beneficiaries have
access to the widest range of cost-effective, high quality health plans, physicians and providers.
1. Medicare beneficiaries should be given the option of staying in the current
Medicare program or using a voucher to buy any private health plan that meets
certain conditions of participation.
If a plan purchased with a voucher becomes insolvent, or ceases operation in a
beneficiary's area, beneficiaries should be able to enroll in another plan. When the
annual enrollment period occurs, beneficiaries should be able to return to the
traditional Medicare program at that time.
2. Under a voucher program, beneficiaries should have access to a variety of
plans ranging from indemnity models to staff model HMOs. All voucher plans that
restrict enrollees to the use of network providers should be required to offer at an
actuarially-determined level an optional rider that would provide point-of-service
access to non-network physicians for those enrollees. Enrollees should be able
to select from among a network plan's panel of physicians an internal medicine
subspecialist as their primary care physician and plans should be prohibited from
discriminating against physicians in their selection processes based on a
physician's patient population.
3
3. Beneficiaries should have the option of using their government contribution-
e.g. the voucher-to establish a Medical Savings Account (MSA) rather than to
purchase coverage through a health plan. The MSA would:
a) be coupled with a catastrophic health insurance policy purchased through a
purchasing group to help preserve community rating;
b) be comprised of a fund from which a beneficiary could pay deductible medical
expenses and catastrophic-heal insurance to cover- expenses that, in the
aggregate, exceed the catastrophic insurance deductible;
c) permit accumulation of unspent balances within the fund;
d) allow state and federally tax exempt distribution of funds only for medical
expenses, health insurance premiums and/or long term care.
4. Voucher plans should be required to accept all applicants during an open
enrollment period to minimize adverse risk selection. Beneficiaries should be
required to remain in a plan after the first 60 days until the next open enrollment
period. Beneficiaries should be explicitly informed of this requirement by the
health plan and should be required to sign a written acknowledgement of the
conditions of enrollment.
A reinsurance mechanism should be available to those plans subject to adverse
risk selection or to a sudden influx of voucher enrollees whose previous plan has
gone bankrupt.
5. The defined contribution-or voucher-should be set at a level that would
produce incentives for beneficiaries to consider cost in choosing a health plan
without forcing them into the cheapest plans that are most restrictive of choice of
physician. The voucher should not be set at the cost of the lowest priced plan in
a region.
The voucher amount should be adjusted according to age, sex, disability status,
institutional status, and Medicaid-buy in status and applied by region. Once the
regionally adjusted voucher amount was established, HHS or HCFA would accept
applications from health plans to participate in the voucher program.
6. The voucher should be updated on a regular basis to keep pace with the costs
of providing services to beneficiaries. In the event that spending under the
voucher program exceeds estimated savings goals or targets, the voucher should
not be subject to arbitrary caps. Mechanisms to keep spending within designated
limits or to recoup excess expenditures, such as a "look back sequester", should
be rejected. Instead, an independent board or. commission should be established
that would involve all participants in the health care system in devising a response
to cost control that would not focus solely on cuts to providers and increased
costs to beneficiaries. If spending is greater than projected due to development of
valuable new technologies or increased patient utilization of services deemed
medically necessary, there should be a commitment to increasing the amount of
4
funds devoted to the voucher program in order to ensure vouchers retain sufficient
purchasing power and to assure appropriate medical outcomes.
7. A reassessment of the voucher program should be required after five years.
This reevaluation should be undertaken by an agency or commission not
responsible for funding Medicare.
8. Beneficiaries opting for the voucher program should be provided incentives that
encourage-their-selection of-an economically priced plan but that do not force
enrollees into those plans that are most restrictive of choice of physician and that
impose the strictest limits on access to services. Incentives should come in the
form of additional benefits or services provided by the health plan and not in the
form of a cash rebate. With rules in place to ensure that all beneficiaries have
access through voucher plans to the full range of Medicare covered benefits and
services, beneficiaries should pay the difference between the voucher amount and
any premium charged by a plan that exceeds the voucher amount.
9. Reasonable cost sharing under voucher plans -- both fee for service and
managed care -- should be imposed to assure consumer cost consciousness in
utilization of services. Lower cost sharing should be imposed on clinically-proven
preventive services so that people are not unduly discouraged from obtaining
beneficial care. Preventive services should be subject only to copayments, not
deductibles. Copayments for preventive services should be set lower than those
for other services.
To avoid unjustified restrictions on choice of physician, POS voucher plans should
not impose unreasonable coinsurance on services provided by out-of-network
physicians. To prevent beneficiaries who seek out-of-network care from being
subject to unexpected out-of-pocket costs, POS plans and physicians should be
required to establish their own conversion factors to be used against an improved
resource based relative value scale (RBRVS). This would determine the rates the
POS plan would pay and the fees the physicians would charge for their services.
Plans and physicians would be required to supply enrollees in the POS plan with
information based on these conversion factors to enable enrollees to determine in
advance how much they would pay in going out of the plan's network of
physicians.
As an incentive to promote greater price consciousness in the traditional Medicare
program and to encourage the movement of beneficiaries into the voucher system,
those who choose to stay in the traditional Medicare program should be subject to
reasonable and non-punitive increases in cost-sharing. As with POS plans, in
order to buffer beneficiaries from unexpected costs, a requirement could be
imposed under traditional Medicare that physicians must establish their conversion
factor for their services each year concomitant with the announcement of
Medicare's conversion factor. Enrollees in traditional Medicare would be supplied
annually with information comparing the charges of physicians in their area to
Medicare's fees based on their respective conversion factors. In this fashion,
beneficiaries would know in advance whether or not they would have to pay out-
of-pocket for services charged under traditional Medicare.
5
Beneficiaries should not be subject to charges in excess of Medicare's payment
amounts under the following circumstances: in the case of low income
beneficiaries; emergency situations; when the beneficiary has little voice in the
selection of a physician or in areas of the country where there is no competition for
a particular medical specialty.
10. To qualify as a voucher plan under Medicare, health plans should have to:
offer a standard minimum Medicare benefits package that includes preventive
services-meet-certain utilization review and quality assurance standards; involve
participating physicians in development of the plan's utilization review (UR) and
quality assurance (QA) and provider selection policies and procedures; disclose
their utilization review and quality assurance policies, restrictions on choice, risk
arrangements and provider selection criteria; establish due process mechanisms in
selection of plan providers; meet certain solvency standards; report certain
information - such as premium costs, out-of-pocket liability, consumer satisfaction
and the percentage of premium dollars devoted to administration versus benefits --
to a central data collection entity so that this information can be distributed to
beneficiaries and use uniform claims forms and standard billing and claims
processing procedures.
Health plans that selectively contract with physicians should be required to offer
enrollees the opportunity to buy a rider that provides point-of-service access to
non-network physicians, in addition to meeting the foregoing standards.
11. Because Medicare is a federally funded program, the federal government must
continue to ensure that health plans are accountable for the care they give to
beneficiaries and that they abide by standards set out for Medicare plans. HCFA
or another federal agency should be responsible for contracting with health plans;
reviewing marketing materials; disseminating to beneficiaries objective data about
each plan in a region in a standard format; ensuring health plan compliance with
certain standards governing their rules and operations; and ensuring that health
plans meet certain quality standards. However, private accreditation agencies
should be able to achieve "deemed" status to fulfill the role played by HHS in
approving voucher plans. Mechanisms should be available for patients and
physicians to pursue grievances against health plans for denial of medically
necessary care. Patients and physicians should retain access to fair hearing and
judicial review processes at least comparable to those now available under
traditional Medicare.
12. Self-referral restrictions affecting shared laboratory facilities and group
practices should be removed and antitrust reforms enacted to enable physicians
and providers to negotiate on an equal footing with health plans and purchasers.
medrefm.exe
6
KEEPING MEDICARE AFFORDABLE
RECOMMENDATIONS OF THE
AMERICAN SOCIETY OF INTERNAL MEDICINE
Introduction
1
Thirty years ago,the-Medicare-progr was created. to ensure that the nation's elderly would not
2
be denied medical care when they needed it. Today, almost all Americans over 65 feel secure in
3
the knowledge that health care services will be accessible to them. The American Society of
4
Internal Medicine, representing the nation's largest medical specialty and the principal providers of
5
medical care to Medicare beneficiaries, is committed to preserving this contract with older
6
Americans. However, in the face of changing demographics, burgeoning costs and the need to
7
restrain overall federal spending, the Medicare program-as well as all those affected by its
8
policies-is facing an unprecedented challenge.
9
10
Earlier this year, the trustees for the Hospital Insurance Fund declared that the Part A fund which
11
finances hospital care will be bankrupt by the year 2002. What few realize is that the fund has
12
already begun to run a deficit. Bankruptcy is merely the end product of the red ink that is
13
beginning to accumulate in the system today.
14
15
As the population of Medicare eligible individuals grows, the ratio of working Americans who
16
support the program with their payroll taxes to beneficiaries has diminished. Whereas today there
17
are five working-age persons for each person over 65, by 2030-when today's workers retire and
18
their children are wage earners-the ratio will be three working-age persons for each American
19
over 65. Without any policy changes, Medicare SMI (Part B) will grow to more than 7 percent of
20
the payroll tax base by 2030-up from one percent today. Although beneficiaries overall continue
21
to have ready access to physicians and other providers, disturbing trends have been identified by
22
the Physician Payment Review Commission (PPRC) and other organizations tracking the Medicare
23
program. For example, the PPRC notes in its 1995 report to Congress "those over age 85,
24
individuals living in poverty areas and the disabled continue to experience access barriers" that
25
existed prior to the latest round of Medicare reform. The Employee Benefits Research Institute
26
(EBRI) recently issued data showing that the number of Medicare patients seen each week by
27
internists has been declining steadily since 1989. At the same time, there has been a significant
28
increase in internists contracting with managed care plans. In the wake of continuing cuts in
29
Medicare reimbursement to control program costs, physicians may be entering practice
30
environments where the degree of involvement with Medicare patients is limited.
31
32
Indeed, cuts already enacted in previous budget reconciliation measures that are now being
33
implemented will reduce payment levels to physicians over the next seven years by 17 percent,
34
even before the impact of inflation is taken into account. Under one of the savings options
35
proposed by a subgroup of the House Budget Committee, the reductions in payment levels for
36
physician services will increase to 31 percent over the next seven years. If the debate beginning
37
now in Congress is about making sure the elderly have access to appropriate, high quality health
38
care into the next century, continued reductions of this type will only undermine this promise and
39
create a Medicare program that guarantees access in name only.
40
1
1
If no action is taken, the hospital side of Medicare will go broke in less than a decade, the
2
supplemental medical insurance portion of Medicare will consume increasing amounts of the
3
federal budget and beneficiaries may face increasing difficulty in obtaining needed health care.
4
This is clearly not a viable option.
5
6
Policymakers could continue with the historical approach to attempting to reign in Medicare's
7
costs-enacting cuts in provider payments and imposing increasing regulatory rules on the
8
program as part of massive year-end budget reconciliation measures. This, of course, does not
9
address the underlying reasons for increasing-costs under the program and will only serve to
10
exacerbate many of the growing problems in Medicare.
11
12
The third option is to reform the Medicare program so that its financing is placed on a sound
13
basis and to introduce the kind of marketplace incentives that have enjoyed success in the private
14
sector in holding down the growth of health care costs. ASIM strongly believes that this is the
15
only option that Congress should consider.
16
17
ASIM recognizes the urgent need for reforming the Medicare program and restraining growth in
18
spending under other federal health care programs. However, internists also believe that
19
significant changes in these programs ideally should be made in the context of other health
20
system reforms. Medical liability reform, insurance market reform, measures to broaden and
21
protect choice of plan and physician, and steps to ensure due process for patients and providers
22
in health plan operations and clinical decisions are important system-wide reforms that will foster
23
an environment in which changes in Medicare will have a positive impact. Nevertheless, the
24
following set of recommendations is ASIM's response to policymakers calls for proposals to
25
address the need for fundamental changes in the Medicare program so that it may continue to be
26
a reliable source of medical care for the nation's elderly well into the new century.
27
28
The recommendations propose both immediate and longer-term reforms in the following areas:
29
30
1.
Immediate changes in Medicare financing and the current Medicare risk
31
contracting program.
32
33
2.
Longer term reforms to expand beneficiaries' choice of insurance options through
34
enactment of a defined federal contribution-or voucher-program.
35
36
Changing the Medicare Financing System
37
38
Many analysts and policymakers contend that only complete transformation of the Medicare
39
program can solve its financing problems. Any type of restructuring, however, will be the subject
40
of considerable debate and, given the realities of the policymaking process, could take a number
41
of years to implement. In the meantime, the red ink will grow and problems of access will be
42
exacerbated. Steps can be taken now to reform the current Medicare program so that future
43
efforts to change the system need not be enacted in an atmosphere of crisis.
44
45
Last December, a report on entitlement reform options was issued by staff from the Bipartisan
46
Commission on Entitlement and Tax Reform (hereinafter referred to as the Commission). That
47
report identified a number of measures that could be enacted in the existing Medicare program to
48
stem the imbalance in funding. These improvements can be made with or without enactment of
2
1
other long term reforms, such as a voucher program. Among those improvements ASIM supports
2
are:
3
4
1. increasing the eligibility age for Medicare to align it with eligibility for Social
5
Security. By early in the next century, the eligibility age for Social Security will be
6
67. It would make sense, both financially and administratively, to couple the
7
eligibility age for Social Security with that for Medicare. However, such a change
8
must come in concert with insurance market reforms and other measures to assist
9
those-elderly-under-67-with-chronic.but not-disabling, illnesses.i maintaining
10
insurance coverage.
11
12
2. increasing the amount contributed by upper income beneficiaries to financing
13
the Medicare system. The Commission staff proposed reducing the Part B
14
premium subsidy and creating a new Part A premium indexed according to growth
15
in program costs. ASIM believes this premium should instead be indexed to
16
income. This would avoid imposing an excessive burden on those with modest
17
means while concomitantly calling for appropriate contributions from those with
18
greater ability to finance their health care.
19
20
3. applying the Part B coinsurance to home health services. Current law requires
21
no cost sharing by beneficiaries for these services. Home health care has been
22
among the fastest growing parts of the Medicare budget and cost sharing has
23
been demonstrated effective in stemming overutilization of services.
24
25
4. including in taxable income the value of health insurance benefits beyond a set
26
value of insurance premium. Today, employers and workers benefit from a system
27
that gives preferential tax treatment to high cost health plans. Placing a limit on
28
the tax deductibility of such health insurance will promote the purchase of cost-
29
effective but moderately priced health plans and would bring in significant revenue
30
into the health care financing system.
31
32
5. limiting disproportionate hospital share (DSH) payments only to those facilities
33
that, in fact, care for a disproportionate share of Medicare patients. The
34
Commission staff report cited studies showing that DSH payments, intended to
35
compensate hospitals for services provided to low income individuals, have been
36
used by some states for purposes beyond its original intent. Without harming
37
those hospitals truly in need of these payments, the formula should be changed--
38
e.g. elimination of DSH payments for hospitals whose disproportionate share index
39
is below the 80th percentile-to avoid inappropriate uses of federal payments.
40
41
In accord with ASIM's longstanding policy that Medicare trust fund reserves should be augmented
42
through a combination of expenditure reductions, program efficiencies and revenue increases,
43
ASIM also supports:
44
45
6. increasing federal excise taxes on alcohol and tobacco if the revenues from
46
changes identified above prove inadequate to finance an appropriate level of
47
benefits. Not only would these additional revenues help to support the program
48
but they would discourage certain behaviors that result in increased public and
49
personal health costs.
3
1
Historically, Medicare has served as a major source of financing for training of this nation's
2
doctors. However, changes have been proposed in Medicare's funding of graduate medical
3
education (GME) as another avenue for achieving significant savings in the program's budget.
4
One proposal offered by the Health Care Working Group of the House Budget Committee would
5
cut direct and indirect GME spending by $27.24 billion over seven years.
6
7
ASIM believes it is time to rethink Medicare funding of graduate medical education, not simply as
8
a device to reduce federal spending, but in order to respond to the changing health care delivery
9
environment-and to ensure that all components of the health care system that benefit from highly
10
trained physicians contribute to the cost of their education. To those ends, ASIM supports:
11
12
7. creation of a national all-payer funding pool for GME. All payers and health
13
plans should contribute a percentage of their premiums to a financing pool for
14
graduate medical education. With managed care plans and other health delivery
15
organizations seeking qualified, well-trained physicians for their networks, they, as
16
well as all payers interested in providing the best care possible for their insureds,
17
have a stake in the education of the physicians that will contract with their plans.
18
Until now, no one has asked these health plans and insurers to help support the
19
cost of training this nation's physicians. However, given Medicare's financial
20
condition, the federal government can no longer be viewed as a major source of
21
funding for the future supply of doctors.
22
23
8. creation of a private sector physician workforce planning initiative. The
24
American Medical Association has proposed that a taskforce be established with
25
participation of both public and private sectors to offer recommendations to
Congress about the physician workforce supply and the future of GME. If the all-
27
payer GME pool is established, such a task force will be necessary to advise how
28
the funds in the all-payer pool would be distributed.
29
30
9. increasing the direct GME weighting factor for general internal medicine and
31
other primary care residency positions while decreasing the weighting factor for
32
others. Currently, direct medical education payments are based on hospital-
33
specific, per resident costs multiplied by the number of residents. Proposals have
34
been offered in past Congresses to reimburse hospitals more for primary care
35
residents than for specialty residents in order to encourage training of more
36
primary care physicians. The need for more primary care physicians has grown
37
with the increase in the elderly population as well as with the desire of health plans
38
for physicians to manage the care of their enrollees. Alterations in the financing of
39
medical education will encourage changes in training programs to meet those
40
needs.
41
42
10. decreasing the number of funded residency positions to 110 percent of U.S.
43
medical school graduates. The Physician Payment Review Commission has
44
recommended that the number of funded residency positions in the United States
45
be reduced in order to respond to the fact that the country is facing, in general, an
46
excess of physicians. By taking this action, the U.S. would cut the oversupply of
47
physicians while at the same time-if the other steps are taken-increase the
48
proportion of primary care physicians relative to the population.
49
4
1
Instilling Market-based Incentives In the Medicare Program
2
3
The current Medicare program includes an optional program intended to use competition among
4
health plans as a means to moderate costs. The Medicare risk contracting program-in which
5
Medicare contracts with health plans and pays them a capitated payment based on less than 95%
6
of the adjusted actual per capita costs of caring for Medicare patients-was intended to encourage
7
health plans to control utilization of services and, subsequently, costs. Because of flaws in the
8
formula for paying risk contracting plans and because healthier beneficiaries are more likely to
9
enroll in these health-plans-than-other-beneficiaries,-the risk-contracting program has not been as
10
successful at reducing Medicare spending as originally anticipated.
11
12
Again, steps can be taken to improve this existing mechanism designed to enhance market
13
competition until more substantial reforms are implemented. These include:
14
15
1. changing the adjusted average per capita cost (AAPCC) formula used to pay
16
health plans. The current AAPCC is based on historical, fee-for-service costs in an
17
area. This has resulted in overgenerous payments to health plans in high cost
18
areas and modest payments to health plans in regions where health care costs
19
have been kept relatively low. Changes in the AAPCC should reward cost effective
20
health plans in areas with historically low utilization rates instead of penalizing
21
such plans with less generous AAPCC payments.
22
23
2. applying risk adjustments-such as severity of illness-in setting payments to risk
24
contracting plans. This change should be coupled with other reforms in the
25
AAPCC to avoid driving away from the program managed care plans that might
26
attract more seriously ill patients and to make regional plan payments more
27
equitable.
28
29
3. broadening managed care choices for beneficiaries to include HMOs with point-
30
of-service and preferred provider organizations (PPOs), instead of limiting
31
participation only to health plans that require beneficiaries to obtain services from
32
contracted physicians and other providers. Under the current risk contracting
33
program, beneficiaries have a limited range of health plans from which to choose
34
and are precluded from taking advantage of the numerous managed care products
35
that have arisen in recent years in the private market.
36
37
4. requiring that beneficiaries be provided comparative information concerning all
38
Medicare risk contracting plans that are available to them. In order for
39
beneficiaries to make fully informed choices about their health plan, they should be
40
provided sufficient data that will enable them to compare these plans on costs,
41
physicians and other providers, quality and benefits.
42
43
5. giving beneficiaries one opportunity per enrollment year to disenroll from a plan
44
within 60 days of enrollment. Once a beneficiary has been in a plan over 60 days,
45
he or she should be required to wait until the next open enrollment period. Under
46
current law, beneficiaries may disenroll from a health plan with only a 30 days
47
notice. This makes it difficult for many risk contracting plans to anticipate costs for
48
a health plan year. It is also contrary to most enrollment policies effective in the
49
private sector which call for enrollment or disenrollment during a particular "open
5
1
season". Asking beneficiaries to stay with a plan until the next open season once
2
they have been in a plan for two months would offer additional stability to a risk
3
contracting plan without limiting too severely beneficiaries' ability to change their
4
minds about managed care. Such a requirement would make Medicare more
5
consistent with the private sector in which workers are required to make an annual
6
selection of a health plan and to stay with that plan for an entire year. Limiting the
7
disenrollment opportunity to one per year would also prevent cases in which
8
people jump from plan to plan every so often prior to the 60 day deadline.
9
Medicare patients.should.accept the same degree of responsibility in choosing a
10
health plan that is expected from those under 65.
11
12
6. mandating reasonable, non-punitive increases in premiums and other cost
13
sharing for beneficiaries who choose to remain with the traditional fee-for-service
14
Medicare program. With improvements in the risk contracting program, it is
15
reasonable to expect that those who choose to remain with the higher cost fee-for-
16
service side of Medicare should bear a portion of those higher expenditures.
17
18
The current risk contracting program would be repealed upon enactment of a voucher program as
19
described below.
20
21
Medicare Vouchers
22
23
Making changes in the existing fee-for-service Medicare program and improvements in the current
24
risk contract program will help to stabilize the program for the short term. However, to achieve a
25
system that relies on competition to control costs and broaden beneficiary choices, that instills
26
individual responsibility for the appropriate use of scarce medical resources and that assures the
27
long term survival of Medicare, major restructuring of the program will be required. One way to
28
do this is for the government to offer beneficiaries the opportunity to take a defined government
29
contribution-or voucher-and purchase private insurance coverage with those funds.
30
31
There are a number of issues that must be addressed for any voucher plan to be successfully
32
implemented. ASIM supports creation of a voucher system and believes that the following
33
elements are necessary to any voucher program designed for Medicare to ensure that
34
beneficiaries have access to the widest range of cost-effective, high quality health plans,
35
physicians and providers.
36
37
1. Medicare beneficiaries should be given the option of staying in the current
38
Medicare program or using a voucher to buy any private health plan that meets
39
certain conditions of participation.
40
41
If a plan purchased with a voucher becomes insolvent, or ceases operation in a
42
beneficiary's area, beneficiaries should be able to enroll in another plan. When the
43
annual enrollment period occurs, beneficiaries should be able to return to the
44
traditional Medicare program at that time.
45
46
Transition to a voucher program should be done gradually to account for the fact that some areas
47
of the country may not have the degree of managed care penetration necessary to make
48
competition among health plans work. Retaining traditional Medicare would provide reassurance
6
1
to beneficiaries while serving as a spur to voucher plans to make their products attractive enough
2
to encourage enrollment by Medicare recipients.
3
4
2. Under a voucher program, beneficiaries should have access to a variety of
5
plans ranging from indemnity models to staff model HMOs. All voucher plans that
6
restrict enrollees to the use of network providers should be required to offer at an
7
actuarially-determined cost an optional rider that would provide point-of-service
8
access to non-network physicians for those enrollees. Enrollees should be able
9
to select from among a.network plan's panel of physicians an internal medicine
10
subspecialist as their primary care physician and plans should be prohibited from
11
discriminating against physicians in their selection processes based on a
12
physician's patient population.
13
14
Under the present Medicare system, beneficiaries are entitled to receive all covered benefits from
15
any provider of their choice. A voucher system could undermine this basic premise of the
16
program. For example, depending on the amount of the voucher and other rules governing the
17
voucher program, beneficiaries could find their choice of health plan in reality to be quite limited.
18
Furthermore, if the voucher is inadequately funded, some beneficiaries may be compelled to
19
select a plan that limits the physicians and providers they may see for services. Adequate choice
20
of physician and health plan can be promoted by offering beneficiaries a wide menu of plans and
21
by establishing the federal contribution at a level that does not force patients to choose the
22
cheapest plan available, as discussed below. By requiring voucher plans that use a network of
23
physicians to offer enrollees the opportunity to buy a point-of-service rider, enrollees who want the
24
flexibility to go outside the network will be able to select this option while those beneficiaries who
25
wish to choose a closed-panel HMO may do so. In addition, a POS rider requirement for all
26
health plans with restricted provider networks might ameliorate adverse risk selection arising from
27
the tendency of very ill beneficiaries in an area to gravitate toward traditional Medicare and/or one
28
plan with point-of-service.
29
30
3. Beneficiaries should have the option of using their government contribution-
31
e.g. the voucher-to establish a Medical Savings Account (MSA) rather than to
32
purchase coverage through a health plan. The MSA would:
33
34
a) be coupled with a catastrophic health insurance policy purchased through a
35
purchasing group to help preserve community rating;
36
37
b) be comprised of a fund from which a beneficiary could pay deductible medical
38
expenses and would be coupled with purchase of catastrophic health insurance to
39
cover expenses that, in the aggregate, exceed the catastrophic insurance
40
deductible;
41
42
c) permit accumulation of unspent balances within the fund;
43
44
d) allow state and federally tax exempt distribution of funds only for medical
45
expenses, health insurance premiums and/or long term care.
46
47
Since 1987, ASIM has supported the concept of medical savings accounts and the idea of
48
integrating medical savings accounts into an overall health system in which people could choose
49
among a variety of health plans, including medical savings accounts. These accounts are useful
7
1
as part of a continuum of health care coverage options, particularly for their impact in enhancing
2
consumers' awareness of the costs of health care.
3
4
ASIM feels strongly, however, that MSAs should not be used as the sole source of health care
5
coverage but should be established in concert with a catastrophic health insurance policy.
6
Furthermore, ASIM agrees with the concerns of some MSA critics that these accounts would
7
adversely affect community rating of insurance and diminish the potential for widening insurance
8
coverage. Ways to ameliorate these effects include ensuring that money in an MSA be used only
9
for health care, including long term care, and making MSAs available for purchase only through
10
purchasing groups to address problems with community rating.
11
12
ASIM acknowledges that MSAs appear to run counter to the trend in the health care system
13
toward managed care. On the other hand, a spokesman for the American Academy of Actuaries
14
Workgroup on MSAs predicted that managed care plans may respond "creatively" to these
15
savings accounts by offering managed care products compatible with MSAs. Because MSAs
16
appeal to so many patients and physicians, ASIM believes efforts should be made to include them
17
in the menu of coverage options available to beneficiaries. To make medical savings accounts a
18
reality under the Medicare program, however, will require many more provisions than the outline
19
provided above. To implement MSAs, answers will be needed to questions such as: how will the
20
government ensure that the funds in an MSA are, in fact, used for health care purposes?; will
21
beneficiaries be able to contribute their own money to MSAs and, if so, will there have to be
22
separate accounts established for private funds and the federal contribution?; can the savings
23
instrument into which the government contribution is placed be protected against adverse market
24
downtums so that beneficiaries do not lose their medical coverage?; should copayments be
25
required as part of the catastrophic coverage?
26
27
4. Voucher plans should be required to accept all applicants during an open
28
enrollment period to minimize adverse risk selection. Beneficiaries should be
29
allowed one opportunity per enrollment year to disenroll from a plan within 60 days
30
of enrollment. Once a beneficiary has been in a plan over 60 days, he or she
31
should be required to wait until the next open enrollment period. Beneficiaries
32
should be explicitly informed of this requirement by the health plan and should be
33
required to sign a written acknowledgement of the conditions of enrollment.
34
35
A reinsurance mechanism should be available to those plans subject to adverse
36
risk selection or to a sudden influx of voucher enrollees whose previous plan has
37
gone bankrupt.
38
39
Another set of problems related to choice of physician and plan has to do with the response of
40
health plans to those beneficiaries holding vouchers. To avoid circumstances in which health
41
plans sought to avoid covering the very ill, all plans should be required to enroll any beneficiary
2
with a voucher who seeks entrance into the plan. On the other hand, mandated acceptance and
.3
the ability of beneficiaries-under current Medicare risk contract rules-to enroll and disenroll
14
outside of any prescribed enrollment period leaves plans vulnerable to unanticipated costs. In
45
such a scenario, beneficiaries' right to choice of plan/physician conflicts with health plans' needs
46
to maintain their cost and utilization control. The Congressional Budget Office has suggested that
47
an annual enrollment period with a point-of-service policy "would permit Medicare enrollees to go
48
to providers outside (a managed care plan's] panel when they wanted to and yet it need not
+9
increase benefit costs for either the [the plan] or Medicare." To avoid circumstances in which
8
1
beneficiaries enroll in and disenroll from plans multiple times using the 60 day window, there
2
should only be one opportunity during an enrollment year to disenroll from a plan within two
3
months, after which the beneficiary would have to wait for the next open enrollment period.
4
For such changes to work, beneficiaries must be given enough information at the outset to
5
understand that, in signing up for a managed care plan, they must remain with that plan until the
6
next open enrollment period once they have been in a plan over two months. This puts the
7
burden of education on the managed care plan and the decision in the hands of the beneficiary.
8
In addition, such an approach would make managed care more palatable to both beneficiaries
9
and physicians.
10
11
5. The defined contribution-or voucher-should be set at a level that would
12
produce incentives for beneficiaries to consider cost in choosing a health plan
13
without forcing them into the cheapest plans that are most restrictive of choice of
14
physician. The voucher should not be set at the cost of the lowest priced plan in
15
a region.
16
17
The voucher amount should be adjusted according to age, sex, disability status,
18
institutional status, and Medicaid-buy in status and applied by region. Once the
19
regionally adjusted voucher amount was established, HHS or HCFA would accept
20
applications from health plans to participate in the voucher program.
21
22
If the voucher is set too high it will have little impact on controlling Medicare costs. Set too low
23
and beneficiaries choosing the voucher option may find their choice of plan and, ultimately choice
24
of physician, quite limited. In addition, for a segment of the Medicare population, a voucher will
25
not cover what a health plan would spend on treating them. This would seem to call for some
26
type of adjustment in the value of the voucher through mechanisms that are reasonably simple
27
and inexpensive to administer. Otherwise, health plans might attempt to discourage certain
28
beneficiaries from selecting that plan by adopting discriminatory policies or marketing strategies.
29
30
A voucher set at some national average would fail to reflect the appropriate regional differences in
31
costs of health care delivery. Setting a regional voucher amount is a more accurate way for the
32
voucher to reflect local health care costs, would be less likely to drive people into restrictive
33
health plans and would ensure that there would be at least one plan in a region that could serve
34
Medicare beneficiaries for the price of the voucher. Any process used to set the voucher amount
35
in which plans submit their premiums to the government and the government then sets the
36
voucher on some portion of those premiums must ensure that the resulting voucher is not so low
37
as to make it worthless to most beneficiaries.
38
39
6. The voucher should be updated on a regular basis to keep pace with the costs
40
of providing services to beneficiaries. In the event that spending under the
41
voucher program exceeds estimated savings goals or targets, the voucher should
42
not be subject to arbitrary caps. Mechanisms to keep spending within designated
43
limits or to recoup excess expenditures, such as a "look back sequester", should
44
be rejected. Instead, an independent board or commission should be established
45
that would involve all participants in the health care system in devising a response
46
to cost control that would not focus solely on cuts to providers and increased
47
costs to beneficiaries. If spending is greater than projected due to development of
48
valuable new technologies or increased patient utilization of services deemed
49
medically necessary, there should be a commitment to increasing the amount of
9
1
funds devoted to the voucher program in order to ensure vouchers retain sufficient
2
purchasing power and to assure appropriate medical outcomes.
3
4
The way in which the voucher is updated will determine to a large extent how much purchasing
5
power the voucher continues to give beneficiaries. Given too great an increase and the voucher
6
will be ineffective in controlling health costs. Given too little, and the voucher may drive some
7
beneficiaries into lower quality, more restrictive health plans. There is also always a risk that the
8
voucher update could fall victim to budget politics and be "frozen" or "capped" at some point to
9
meet deficit reduction-targets.
10
11
If spending under a voucher program is higher than anticipated because valuable new
12
technologies or treatments have become available and patients have sought to take advantage of
13
these advances in medicine, it does not make sense to penalize physicians by cutting their
14
payments when costs increase for legitimate reasons. Furthermore, if beneficiaries do not
15
participate in the voucher program in numbers sufficient to keep costs down, physicians should
16
not be held financially responsible for beneficiaries' independent decisions. In addition, across-
17
the-board cuts in physician and provider payments do not target those areas where health care
18
costs have inappropriately increased and penalize caregivers who may in fact have kept their
19
costs down. Arbitrary reductions in payments will serve only to perpetuate inequities in the
20
Medicare payment system and compel physicians to limit their exposure to Medicare patients.
21
22
Finally, a cap on spending for the voucher implies a lack of confidence in the ability of the market
23
to control the cost of health plan premiums and may have the unintended consequence of
24
becoming a "floor" rather than a ceiling. If health plans know that the government's contribution
25
will be capped at a certain percentage rate of growth, this may serve as an incentive to those
26
plans whose rates of growth are lower than that percentage to allow their premiums to rise to
27
meet the government's growth rate.
28
29
In the event federal health program costs remain uncontrollable, some entity -- such as a
30
commission or board -- should be established separate from any government financing office to
31
involve all parties in the health care system in devising a response to cost control that would not
32
focus solely on cuts to providers and increased costs to beneficiaries. If beneficiaries are to be
33
assured of getting all the necessary care they need when they need it, the voucher amount
34
should keep pace with the costs of providing services. If the value of the voucher is allowed to
35
erode over time, beneficiaries may lose access to many high quality health plans offering
36
comprehensive services or they may be forced to pay increasing amounts out-of-pocket to
37
maintain a certain level of service. This would be especially detrimental for those beneficiaries of
38
low and moderate-income who may be unable to bear an increasing financial burden. If the
39
market is unable to deliver health care to patients within a predetermined cap, this should not be
40
used as an excuse to diminish the government's commitment to Medicare beneficiaries.
41
42
7. A reassessment of the voucher program should be required after five years.
43
This reevaluation should be undertaken by an agency or commission not
44
responsible for funding Medicare.
45
46
Given the untried nature of a voucher program for Medicare, there should be an evaluation of the
47
program relatively early in its life. There was little comprehensive evaluation of the original
48
Medicare program in its early stages and many of the present troubles in the system derive from
49
that oversight. If the voucher program does not seem to be living up to its expectations,
10
1
Congress and the administration should not merely tinker at the edges to provide short term fixes
2
but should step back, take a hard look at the program and even consider starting all over again.
3
4
8. Beneficiaries opting for the voucher program should be provided incentives that
5
encourage their selection of an economically priced plan but that do not force
6
enrollees into those plans that are most restrictive of choice of physician and that
7
impose the strictest limits on access to services. Incentives should come in the
8
form of additional benefits or services provided by the health plan and not in the
9
form of a cash-rebate.-With-rules in place to ensure that all beneficiaries have
10
access through voucher plans to the full range of Medicare covered benefits and
11
services, beneficiaries should pay the difference between the voucher amount and
12
any premium charged by a plan that exceeds the voucher amount.
13
14
Some analysts contend that beneficiaries should be provided incentives to select a health plan
15
that costs less than the federal contribution amount, or voucher. These incentives typically fall
16
into two categories-cash rebates or additional services. Giving beneficiaries a cash rebate if their
17
premium is less than the voucher amount would remove funds from the health care system that
18
ought to be providing for health care services. Instead, any excess value should be returned to
19
the beneficiary in the form of additional benefits such as coverage of additional services,
20
providing coverage for long term care or creating a health care spending account. There is also
21
debate over whether beneficiaries should bear the full cost of a health plan more expensive than
22
the voucher to encourage enrollees to select more economical health plans. Although there is
23
concern that such an incentive might drive beneficiaries to select plans of lesser quality or that
24
don't cover the full range of benefits, this is less of a problems if all plans offer the full range of
25
Medicare-covered services.
26
27
9. Reasonable cost sharing under voucher plans -- both fee for service and
28
managed care -- should be imposed to assure consumer cost consciousness in
29
utilization of services. Lower cost sharing should be imposed on clinically-proven
30
preventive services so that people are not unduly discouraged from obtaining
31
beneficial care. Preventive services should be subject only to copayments, not
32
deductibles. Copayments for preventive services should be set lower than those
33
for other services.
34
35
To avoid unjustified restrictions on choice of physician, POS voucher plans should
36
not impose unreasonable coinsurance on services provided by out-of-network
37
physicians. To prevent beneficiaries who seek out-of-network care from being
38
subject to unexpected out-of-pocket costs, POS plans and physicians should be
39
required to establish their own conversion factors to be used against an improved
40
resource based relative value scale (RBRVS). This would determine the rates the
41
POS plan would pay and the fees the physicians would charge for their services.
42
Plans and physicians would be required to supply enrollees in the POS plan with
43
information based on these conversion factors to enable enrollees to determine in
44
advance how much they would pay in going out of the plan's network of
45
physicians.
46
47
As an incentive to promote greater price consciousness in the traditional Medicare
48
program and to encourage the movement of beneficiaries into the voucher system,
49
those who choose to stay in the traditional Medicare program should be subject to
11
1
reasonable and non-punitive increases in cost-sharing. As with POS plans, in
2
order to buffer beneficiaries from unexpected costs, a requirement could be
3
imposed under traditional Medicare that physicians must establish their conversion
4
factor for their services each year concomitant with the announcement of
5
Medicare's conversion factor. Enrollees in traditional Medicare would be supplied
6
annually with information comparing the charges of physicians in their area to
7
Medicare's fees based on their respective conversion factors. In this fashion,
8
beneficiaries would know in advance whether or not they would have to pay out-
9
of-pocket for services charged-under. traditional Medicare.
10
11
Beneficiaries should not be subject to charges in excess of Medicare's payment
12
amounts under the following circumstances: in the case of low income
13
beneficiaries; emergency situations; when the beneficiary has little voice in the
14
selection of a physician or in areas of the country where there is no competition for
15
a particular medical specialty.
16
17
If true reform is to be instituted in the Medicare system, enrollees must understand the nature of
18
the costs of their care under that program. At the same time, policymakers should not lose sight
19
of the fact that 83 percent of Medicare expenditures go to beneficiaries with incomes at or below
20
$25,000 and thus their exposure to additional costs should be limited.
21
22
ASIM believes it is especially important that cost sharing on preventive services be reduced and
23
deductibles on these services be eliminated entirely to avoid discouraging patients from obtaining
24
necessary care. By erecting barriers to cost-effective preventive care-for example, imposition of
25
cost sharing on mammograms-patients may avoid those services and wind up with more serious,
26
and expensive, illnesses in the future.
27
28
In addition, ASIM supports limits on the degree to which additional cost sharing can be imposed
29
on those enrolled in managed care plans who use a plan's point-of-service (POS) option to seek
30
care outside the plan's network of physicians. The intent behind POS is to allow beneficiaries
31
greater choice in physician and provider. If the cost sharing imposed on a beneficiary for going
32
outside a health plan's physician network is excessively burdensome, then the promise of greater
33
choice is a hollow one.
34
35
Obviously, if beneficiaries are to be encouraged to enter the voucher program, those who opt to
36
stay in traditional Medicare must bear a greater share of the cost of remaining in the more
37
expensive program. Nevertheless, any additional cost sharing should follow the principles stated
38
above so that primary care and preventive services are sheltered from deductibles and are
39
subject to cost sharing at a rate lower than that imposed on other services. Because high
40
deductibles can act as a disincentive for patients to receive needed primary care and preventive
41
services, ASIM does not support replacing the current coinsurance requirements under traditional
42
Medicare with a single high deductible.
43
44
ASIM believes that its Competitive Pricing, Informed Choices proposal-issued in 1992-offers a
45
means to instill price competition among physicians, eñhance consumer cost consciousness and
46
prevent price gouging by unscrupulous providers. If health plans that pay according to a fee
47
schedule (POS plans, traditional Medicare, etc.) and physicians were required to set and publish
48
the conversion factors they would use each year to determine their charges and fees, this
49
information could be used by beneficiaries to determine what they would pay out-of-pocket, if
12
1
anything, if they joined a particular health plan or used a particular doctor. Beneficiaries would
2
then be able to decide if the value they derived from a health plan and/or physician in terms of
3
quality and service was worth the price of any additional costs.
4
5
For example, assume Mrs. Jones is a Medicare beneficiary who receives from HCFA a booklet
6
listing all the health plans and physicians in her area. Among the information contained in the
7
booklet might be the percentage difference between the conversion factors used by traditional
8
Medicare and POS plans and the physicians listed in the booklet. Mrs. Jones might see that Dr.
9
Smith has a-conversion factor_10 percent higher than Medicare's conversion factor. If she went to
10
Dr. Smith for care under traditional Medicare, she would know that she would pay an additional
11
ten percent on Dr. Smith's charges beyond the payment traditional Medicare would make. Or,
12
Mrs. Jones might see that health plan ABC has a conversion factor for its POS option 20 percent
13
lower than Dr. Smith's conversion factor. She would then know that Plan ABC would pay 20
14
percent less for the services of Dr. Smith-who does not participate in her health plan physician
15
network-and she would be responsible for the 20 percent difference between the health plan's
16
payments and Dr. Smith's fees, in addition to any additional cost sharing required by Plan ABC for
17
enrollees going out of the network.
18
19
While ASIM generally supports cost sharing by patients in order to enhance cost consciousness in
20
the utilization of scarce health care resources, there are situations in which billing beyond
21
Medicare's payment rates or additional cost sharing should not be imposed. These situations
22
arise where beneficiaries' income is simply too low to sustain any additional out-of-pocket
23
financial burden, where they have no opportunity to "shop around" for a physician (e.g.
24
emergency situations), where beneficiaries have but one choice of physician (such as typically
25
occurs during hospitalizations when patients are essentially assigned certain hospital-based
26
doctors to deliver designated services) or where there are so few physicians in a particular
27
specialty within a community that there is no chance for competition among physicians to operate.
28
29
10. To qualify as a voucher plan under Medicare, health plans should have to:
30
offer a standard minimum Medicare benefits package that includes preventive
31
services; meet certain utilization review and quality assurance standards; involve
32
participating physicians in development of the plan's utilization review (UR) and
33
quality assurance (QA) and provider selection policies and procedures; disclose
34
their utilization review and quality assurance policies, restrictions on choice, risk
35
arrangements and provider selection criteria; establish due process mechanisms in
36
selection of plan providers; meet certain solvency standards; report certain
37
information - such as premium costs, out-of-pocket liability, consumer satisfaction
38
and the percentage of premium dollars devoted to administration versus benefits -
39
to a central data collection entity so that this information can be distributed to
40
beneficiaries and use uniform claims forms and standard billing and claims
41
processing procedures.
42
43
Health plans that selectively contract with physicians should be required to offer
44
enrollees the opportunity to buy a rider that provides point-of-service access to
45
non-network physicians, in addition to meeting the foregoing standards.
46
47
Health plans should play by the same rules if competition is truly to be effective in controlling
48
costs. Given that the idea behind many Medicare voucher proposals is to enhance competition
49
within the program so as to bring down costs, it would seem equally advisable that health plans
13
1
should be required to meet certain rules if they wish to participate in the voucher program and
2
market themselves to beneficiaries as Medicare voucher plans.
3
4
A uniform minimum benefit policy would assure a basic level of care for all beneficiaries. In
5
addition, it would facilitate beneficiaries' comparison of health plans. If beneficiaries are to have
6
sufficient information to make informed choices with their vouchers, they will need data on a
7
plan's costs, patient out-of-pocket liability, provider panels, and quality. Furthermore, disclosure
8
of UR and selection standards benefits not only the providers involved with a health plan but
9
helps beneficiaries.as-well-by.giving them another piece of information on which to compare
10
health plans.
11
12
In addition, it is important that physicians have a role in developing and implementing health plan
13
policies and procedures that directly affect clinical decision-making--e.g. benefits coverage
14
criteria, determination of medical necessity, preauthorization of services, quality assurance
15
standards, protocols and processes for selection and deselection of physicians. To leave
16
decisions affecting patient care solely in the hands of health plan administrators whose concerns
17
center largely on cost containment may jeopardize the quality of care given to enrollees and deny
18
patients access to medically necessary services. Furthermore, health plans that involve
19
physicians in development of these policies are far more likely to obtain the cooperation of their
20
network physicians in proper implementation of those policies.
21
22
Finally, it is important that voucher plans be required to operate under similar billing and claims
23
processing procedures to avoid unnecessary red tape. All plans that currently operate within the
24
Medicare system must abide by the uniform claims form and billing rules and it would be logical
25
to expect that voucher plans should use a standard format and follow standard claims processing
26
procedures for this new variation of the Medicare program.
27
28
The type of standards to which ASIM refers-involvement of physicians in clinical policymaking,
29
providing information to enrollees and prospective enrollees sufficient to enable them to make
30
informed decisions about the plan-are, in fact, those that are being adopted by many well-run
31
health plans in today's marketplace. In a competitive environment, those plans that pursue
32
"patient-friendly" policies such as these are more likely to succeed than others.
33
34
11. Because Medicare is a federally funded program, the federal government must
35
continue to ensure that health plans are accountable for the care they give to
36
beneficiaries and that they abide by standards set out for Medicare plans. HCFA
37
or another federal agency should be responsible for contracting with health plans;
38
reviewing marketing materials; disseminating to beneficiaries objective data about
39
each plan in a region in a standard format; ensuring health plan compliance with
40
certain standards governing their rules and operations; and ensuring that health
41
plans meet certain quality standards. However, private accreditation agencies
42
should be able to achieve "deemed" status to fulfill the role played by HHS in
43
approving voucher plans. Mechanisms should be available for patients and
44
physicians to pursue grievances against health.plans for denial of medically
45
necessary care. Patients and physicians should retain access to fair hearing and
46
judicial review processes at least comparable to those now available under
47
traditional Medicare.
48
14
1
Because vouchers would require more thought and decisionmaking by Medicare recipients, some
2
analysts question whether beneficiaries would find the voucher program truly appealing. Other
3
policymakers argue that the basic premise of the voucher program is simple and that most
4
beneficiaries, given the right kind of information, will be able to make proper decisions about a
5
health plan. While this may indeed be the case for healthy beneficiaries who are mentally alert,
6
the frail and disabled elderly, those who do not speak English very well or those with little
7
education may find the task of sorting through health plan information daunting. To respond to
8
some of these concerns, the voucher program should have an entity with which voucher plans
9
would contract and which would ensure voucher plan. adherence to any standards adopted
10
governing such plans.
11
12
Given the characteristics of the Medicare population, an ombudsman's office should be created
13
to receive, investigate and resolve complaints against voucher plans as well as to offer guidance
14
to beneficiaries with questions about the voucher program. Finally, beneficiaries and physicians
15
should retain access to the current Medicare appeals process.
16
17
ASIM would prefer that the health care industry voluntarily abide by the standards established for
18
a voucher program and, indeed, supports the idea of a private accreditation body responsible for
19
ensuring health plan adherence to voucher program standards. However, the voucher program
20
will be funded by federal dollars and the federal government should not relinquish its
21
responsibility for ensuring that health plans are accountable for the care they deliver to
22
beneficiaries and for seeing that corrective actions are taken when deficiencies are found if a plan
23
wishes to remain in the voucher program. Health plans that accept the government contributions
24
should understand that, if they are going to compete for the business of the federal government
25
through the voucher program, they must accept certain standards and certain reasonable
26
oversight.
27
28
12. Self-referral restrictions affecting shared laboratory facilities and group
29
practices should be removed and antitrust reforms enacted to enable physicians
30
and providers to negotiate on an equal footing with health plans and purchasers.
31
32
Antitrust reforms and other modifications to statutory restrictions on physicians could improve the
33
functioning of health plans offered under a voucher system and the ability of physicians to deliver
34
services within their context. For example, self-referral restrictions on group practice
35
compensation arrangements not only interfere in the internal affairs of private businesses but lead
36
to confusion over how such practices may distribute revenue from ancillary services without
37
indirectly taking into account the referrals made by physicians. Furthermore, subspecialists-such
38
as oncologists and infectious disease specialists-in many group practices are barred from
39
providing drugs and other services to their patients because of the self-referral laws.
40
41
Limitations on the ability of physicians to share information in order to form integrated service
42
networks may impede the goals of voucher advocates who wish to foster competition that reduces
43
the cost of care and increases benefits to attract voucher recipients. Indeed, antitrust laws
44
developed at a time when most physicians and other providers practiced independently of one
45
another now prevent these caregivers from organizing preferred provider organizations, health
46
plans and other delivery networks that would enable physician-directed health care organizations
47
to compete in the marketplace and offer beneficiaries a wider choice of health care options.
48
49
15
1
Conclusion
2
3
ASIM is under no illusion that reforming Medicare will be simple, easy, or quick. Changes of the
4
magnitude required to place the program on sound financial footing and to guarantee that
5
beneficiaries continue to receive the high quality health care to which they have become
6
accustomed and to which they are entitled will require a great deal of thought and debate. For
7
ASIM, the overarching philosophy on which these Medicare reform proposals rest is that of shared
8
responsibility.
9
10
Physicians have a responsibility to deliver care to greater numbers of Medicare patients under
11
health care delivery systems that will increasingly require them to accept financial risk and to be
12
accountable for the cost and quality of their clinical decisions-and to compete within this new
13
system on the basis of cost and quality.
14
15
Medicare patients have a responsibility to consider the costs of alternative sources of health care
16
coverage, to be willing to contribute more in out-of-pocket costs if they choose more expensive
17
coverage and-for those who can afford to-to contribute more to the financial support of Medicare
18
so that those of lesser means can afford coverage.
19
20
Taxpayers have a responsibility to accept changes in the tax code that would raise revenue and
21
introduce positive incentives into the health care system including a limit on the tax deductibility of
22
employer paid insurance and increased taxes on tobacco.
23
24
The insurance industry has a responsibility to compete in the new system-not solely on price or
25
risk avoidance but on benefits offered and quality-and to accept reasonable standards to protect
26
beneficiaries who choose private insurance coverage.
27
28
And the federal government has a responsibility to assure that the government's contribution
29
remains adequate to guarantee that all beneficiaries can obtain high quality coverage through
30
traditional Medicare and private sector alternatives-and to provide sufficient oversight over the
31
market to protect patients' interests.
16
KEEPING MEDICARE AFFORDABLE
RECOMMENDATIONS OF THE
AMERICAN SOCIETY OF INTERNAL MEDICINE
EXECUTIVE SUMMARY
Thirty years ago, the Medicare program was created to ensure that the nation's elderly would not
be denied medical care when they needed it. Today, almost all Americans over 65 feel secure in
the knowledge that health care services will be accessible to them. The American Society of
Internal Medicine, representing the nation's largest medical specialty and the principal providers of
medical care to Medicare beneficiaries, is committed to preserving this contract with older
Americans. However, in the face of changing demographics, burgeoning costs and the need to
restrain overall federal spending, the Medicare program is facing an unprecedented challenge.
Responding to this challenge will require both immediate changes in the program's financing and
current risk contracting program as well as long-term reforms to broaden beneficiaries' choice of
insurance options, control costs through enhanced competition and instill a sense of responsibility
among all those involved with and affected by its policies.
This set of recommendations is ASIM's response to policymakers calls for proposals to address
the need for fundamental changes in the Medicare program so that it may continue to be a
reliable source of medical care for the nation's elderly well into the new century. For ASIM, the
overarching philosophy on which these Medicare reform proposals rest is that of shared
responsibility.
Physicians have a responsibility to deliver care to greater numbers of Medicare patients under
health care delivery systems that will increasingly require them to accept financial risk and to be
accountable for the cost and quality of their clinical decisions-and to compete within this new
system on the basis of cost and quality.
Medicare patients have a responsibility to consider the costs of alternative sources of health care
coverage, to be willing to contribute more in out-of-pocket costs if they choose more expensive
coverage and-for those who can afford to-to contribute more to the financial support of Medicare
so that those of lesser means can afford coverage.
Taxpayers have a responsibility to accept changes in the tax code that would raise revenue and
introduce positive incentives into the health care system including a limit on the tax deductibility of
employer paid insurance and increased taxes on tobacco.
The insurance industry has a responsibility to compete in the new system-not solely on price or
risk avoidance but on benefits offered and quality-and to accept reasonable standards to protect
beneficiaries who choose private insurance coverage.
And the federal government has a responsibility to assure that the government's contribution
remains adequate to guarantee that all beneficiaries can obtain high quality coverage through
traditional Medicare and private sector alternatives-and to provide sufficient oversight over the
market to protect patients' interests.
1
Changing the Medicare Financing System
Steps can be taken now to reform the current Medicare program so that future efforts to change
the system need not be enacted in an atmosphere of crisis. These steps include:
1. increasing the eligibility age for Medicare to align it with eligibility for Social
Security.
2. increasing the amount contributed by upper income beneficiaries to financing
the Medicare system.
3. applying the Part B coinsurance to home health services.
4. including in taxable income the value of health insurance benefits beyond a set
value of insurance premium.
5. limiting disproportionate hospital share (DSH) payments only to those facilities
that, in fact, care for a disproportionate share of Medicare patients.
6. increasing federal excise taxes on alcohol and tobacco if the revenues from
changes identified above prove inadequate to finance an appropriate level of
benefits.
7. creation of a national all-payor funding pool for GME.
8. increasing the direct GME weighting factor for general internal medicine and
other primary care residency positions while decreasing the weighting factor for
others.
9. creation of a private sector physician workforce planning initiative.
10. decreasing the number of funded residency positions to 110 percent of U.S.
medical school graduates.
Instilling Market-based Incentives In the Medicare Program
Additional steps can be taken to improve the existing Medicare risk contracting program so that
this mechanism designed to enhance market competition can operate as it was intended until
more substantial reforms are implemented. These steps include:
1. changing the adjusted average per capita cost (AAPCC) formula used to pay
health plans.
2. applying risk adjustments-such as severity of illness-in setting payments to risk
contracting plans.
3. broadening managed care choices for beneficiaries to include HMOs with point-
of-service and preferred provider organizations (PPOs), instead of limiting
2
participation only to health plans that require beneficiaries to obtain services from
contracted physicians and other providers.
4. requiring that beneficiaries be provided comparative information concerning all
Medicare risk contracting plans that are available to them.
5. giving beneficiaries one opportunity per enrollment year to disenroll from a
Medicare risk contracting within 60 days of enrollment. Once a beneficiary has
been in a-plan-more-than-60-days,-he-or.she should be required to wait until the
next open enrollment period.
6. mandating reasonable, non-punitive increases in premiums and other cost
sharing for beneficiaries who choose to remain with the traditional fee-for-service
Medicare program.
Medicare Vouchers
Changing the existing fee-for-service Medicare program and improving the current risk contract
program will help to stabilize Medicare for the short term. However, major restructuring of
Medicare is necessary to achieve a system that relies on competition to control costs and
broaden beneficiary choices, that instills individual responsibility for the appropriate use of scarce
medical resources and that assures the program's long term survival. One way to accomplish this
is through the creation of a voucher program.
ASIM supports creation of a voucher system and believes that the following elements are
necessary to any voucher program designed for Medicare to ensure that beneficiaries have
access to the widest range of cost-effective, high quality health plans, physicians and providers.
1. Medicare beneficiaries should be given the option of staying in the current
Medicare program or using a voucher to buy any private health plan that meets
certain conditions of participation.
If a plan purchased with a voucher becomes insolvent, or ceases operation in a
beneficiary's area, beneficiaries should be able to enroll in another plan. When the
annual enrollment period occurs, beneficiaries should be able to return to the
traditional Medicare program at that time.
2. Under a voucher program, beneficiaries should have access to a variety of
plans ranging from indemnity models to staff model HMOs. All voucher plans that
restrict enrollees to the use of network providers should be required to offer at an
actuarially-determined level an optional rider that would provide point-of-service
access to non-network physicians for those enrollees. Enrollees should be able
to select from among a network plan's panel of physicians an internal medicine
subspecialist as their primary care physician and plans should be prohibited from
discriminating against physicians in their selection processes based on a
physician's patient population.
3
3. Beneficiaries should have the option of using their government contribution--
e.g. the voucher-to establish a Medical Savings Account (MSA) rather than to
purchase coverage through a health plan. The MSA would:
a) be coupled with a catastrophic health insurance policy purchased through a
purchasing group to help preserve community rating;
b) be comprised of a fund from which a beneficiary could pay deductible medical
expenses and catastrophic-health insurance to cover-expenses that, in the
aggregate, exceed the catastrophic insurance deductible;
c) permit accumulation of unspent balances within the fund;
d) allow state and federally tax exempt distribution of funds only for medical
expenses, health insurance premiums and/or long term care.
4. Voucher plans should be required to accept all applicants during an open
enrollment period to minimize adverse risk selection. Beneficiaries should be
required to remain in a plan after the first 60 days until the next open enrollment
period. Beneficiaries should be explicitly informed of this requirement by the
health plan and should be required to sign a written acknowledgement of the
conditions of enrollment.
A reinsurance mechanism should be available to those plans subject to adverse
risk selection or to a sudden influx of voucher enrollees whose previous plan has
gone bankrupt.
5. The defined contribution-or voucher-should be set at a level that would
produce incentives for beneficiaries to consider cost in choosing a health plan
without forcing them into the cheapest plans that are most restrictive of choice of
physician. The voucher should not be set at the cost of the lowest priced plan in
a region.
The voucher amount should be adjusted according to age, sex, disability status,
institutional status, and Medicaid-buy in status and applied by region. Once the
regionally adjusted voucher amount was established, HHS or HCFA would accept
applications from health plans to participate in the voucher program.
6. The voucher should be updated on a regular basis to keep pace with the costs
of providing services to beneficiaries. In the event that spending under the
voucher program exceeds estimated savings goals or targets, the voucher should
not be subject to arbitrary caps. Mechanisms to keep spending within designated
limits or to recoup excess expenditures, such as a "look back sequester", should
be rejected. Instead, an independent board or. commission should be established
that would involve all participants in the health care system in devising a response
to cost control that would not focus solely on cuts to providers and increased
costs to beneficiaries. If spending is greater than projected due to development of
valuable new technologies or increased patient utilization of services deemed
medically necessary, there should be a commitment to increasing the amount of
4
funds devoted to the voucher program in order to ensure vouchers retain sufficient
purchasing power and to assure appropriate medical outcomes.
7. A reassessment of the voucher program should be required after five years.
This reevaluation should be undertaken by an agency or commission not
responsible for funding Medicare.
8. Beneficiaries opting for the voucher program should be provided incentives that
encourage-their-selection of an economically priced plan but that do not force
enrollees into those plans that are most restrictive of choice of physician and that
impose the strictest limits on access to services. Incentives should come in the
form of additional benefits or services provided by the health plan and not in the
form of a cash rebate. With rules in place to ensure that all beneficiaries have
access through voucher plans to the full range of Medicare covered benefits and
services, beneficiaries should pay the difference between the voucher amount and
any premium charged by a plan that exceeds the voucher amount.
9. Reasonable cost sharing under voucher plans - both fee for service and
managed care -- should be imposed to assure consumer cost consciousness in
utilization of services. Lower cost sharing should be imposed on clinically-proven
preventive services so that people are not unduly discouraged from obtaining
beneficial care. Preventive services should be subject only to copayments, not
deductibles. Copayments for preventive services should be set lower than those
for other services.
To avoid unjustified restrictions on choice of physician, POS voucher plans should
not impose unreasonable coinsurance on services provided by out-of-network
physicians. To prevent beneficiaries who seek out-of-network care from being
subject to unexpected out-of-pocket costs, POS plans and physicians should be
required to establish their own conversion factors to be used against an improved
resource based relative value scale (RBRVS). This would determine the rates the
POS plan would pay and the fees the physicians would charge for their services.
Plans and physicians would be required to supply enrollees in the POS plan with
information based on these conversion factors to enable enrollees to determine in
advance how much they would pay in going out of the plan's network of
physicians.
As an incentive to promote greater price consciousness in the traditional Medicare
program and to encourage the movement of beneficiaries into the voucher system,
those who choose to stay in the traditional Medicare program should be subject to
reasonable and non-punitive increases in cost-sharing. As with POS plans, in
order to buffer beneficiaries from unexpected costs, a requirement could be
imposed under traditional Medicare that physicians must establish their conversion
factor for their services each year concomitant with the announcement of
Medicare's conversion factor. Enrollees in traditional Medicare would be supplied
annually with information comparing the charges of physicians in their area to
Medicare's fees based on their respective conversion factors. In this fashion,
beneficiaries would know in advance whether or not they would have to pay out-
of-pocket for services charged under traditional Medicare.
5
Beneficiaries should not be subject to charges in excess of Medicare's payment
amounts under the following circumstances: in the case of low income
beneficiaries; emergency situations; when the beneficiary has little voice in the
selection of a physician or in areas of the country where there is no competition for
a particular medical specialty.
10. To qualify as a voucher plan under Medicare, health plans should have to:
offer a standard minimum Medicare benefits package that includes preventive
services;meet-certain. utilization review and quality assurance standards; involve
participating physicians in development of the plan's utilization review (UR) and
quality assurance (QA) and provider selection policies and procedures; disclose
their utilization review and quality assurance policies, restrictions on choice, risk
arrangements and provider selection criteria; establish due process mechanisms in
selection of plan providers; meet certain solvency standards; report certain
information - such as premium costs, out-of-pocket liability, consumer satisfaction
and the percentage of premium dollars devoted to administration versus benefits --
to a central data collection entity so that this information can be distributed to
beneficiaries and use uniform claims forms and standard billing and claims
processing procedures.
Health plans that selectively contract with physicians should be required to offer
enrollees the opportunity to buy a rider that provides point-of-service access to
non-network physicians, in addition to meeting the foregoing standards.
11. Because Medicare is a federally funded program, the federal government must
continue to ensure that health plans are accountable for the care they give to
beneficiaries and that they abide by standards set out for Medicare plans. HCFA
or another federal agency should be responsible for contracting with health plans;
reviewing marketing materials; disseminating to beneficiaries objective data about
each plan in a region in a standard format; ensuring health plan compliance with
certain standards governing their rules and operations; and ensuring that health
plans meet certain quality standards. However, private accreditation agencies
should be able to achieve "deemed" status to fulfill the role played by HHS in
approving voucher plans. Mechanisms should be available for patients and
physicians to pursue grievances against health plans for denial of medically
necessary care. Patients and physicians should retain access to fair hearing and
judicial review processes at least comparable to those now available under
traditional Medicare.
12. Self-referral restrictions affecting shared laboratory facilities and group
practices should be removed and antitrust reforms enacted to enable physicians
and providers to negotiate on an equal footing with health plans and purchasers.
medrefm.exe
6
KEEPING MEDICARE AFFORDABLE
RECOMMENDATIONS OF THE
AMERICAN SOCIETY OF INTERNAL MEDICINE
Introduction
1
Thirty years ago,-the-Medicare-program was created to ensure that the nation's elderly would not
2
be denied medical care when they needed it. Today, almost all Americans over 65 feel secure in
3
the knowledge that health care services will be accessible to them. The American Society of
4
Internal Medicine, representing the nation's largest medical specialty and the principal providers of
5
medical care to Medicare beneficiaries, is committed to preserving this contract with older
6
Americans. However, in the face of changing demographics, burgeoning costs and the need to
7
restrain overall federal spending, the Medicare program-as well as all those affected by its
8
policies-is facing an unprecedented challenge.
9
10
Earlier this year, the trustees for the Hospital Insurance Fund declared that the Part A fund which
11
finances hospital care will be bankrupt by the year 2002. What few realize is that the fund has
12
already begun to run a deficit. Bankruptcy is merely the end product of the red ink that is
13
beginning to accumulate in the system today.
14
15
As the population of Medicare eligible individuals grows, the ratio of working Americans who
16
support the program with their payroll taxes to beneficiaries has diminished. Whereas today there
17
are five working-age persons for each person over 65, by 2030-when today's workers retire and
18
their children are wage earners-the ratio will be three working-age persons for each American
19
over 65. Without any policy changes, Medicare SMI (Part B) will grow to more than 7 percent of
20
the payroll tax base by 2030-up from one percent today. Although beneficiaries overall continue
21
to have ready access to physicians and other providers, disturbing trends have been identified by
22
the Physician Payment Review Commission (PPRC) and other organizations tracking the Medicare
23
program. For example, the PPRC notes in its 1995 report to Congress "those over age 85,
24
individuals living in poverty areas and the disabled continue to experience access barriers" that
25
existed prior to the latest round of Medicare reform. The Employee Benefits Research Institute
26
(EBRI) recently issued data showing that the number of Medicare patients seen each week by
27
internists has been declining steadily since 1989. At the same time, there has been a significant
28
increase in internists contracting with managed care plans. In the wake of continuing cuts in
29
Medicare reimbursement to control program costs, physicians may be entering practice
30
environments where the degree of involvement with Medicare patients is limited.
31
32
Indeed, cuts already enacted in previous budget reconciliation measures that are now being
33
implemented will reduce payment levels to physicians over the next seven years by 17 percent,
34
even before the impact of inflation is taken into account. Under one of the savings options
35
proposed by a subgroup of the House Budget Committee, the reductions in payment levels for
36
physician services will increase to 31 percent over the next seven years. If the debate beginning
37
now in Congress is about making sure the elderly have access to appropriate, high quality health
38
care into the next century, continued reductions of this type will only undermine this promise and
39
create a Medicare program that guarantees access in name only.
40
1
1
If no action is taken, the hospital side of Medicare will go broke in less than a decade, the
2
supplemental medical insurance portion of Medicare will consume increasing amounts of the
3
federal budget and beneficiaries may face increasing difficulty in obtaining needed health care.
4
This is clearly not a viable option.
5
6
Policymakers could continue with the historical approach to attempting to reign in Medicare's
7
costs-enacting cuts in provider payments and imposing increasing regulatory rules on the
8
program as part of massive year-end budget reconciliation measures. This, of course, does not
9
address the underlying reasons for increasing-costs. under the program and will only serve to
10
exacerbate many of the growing problems in Medicare.
11
12
The third option is to reform the Medicare program so that its financing is placed on a sound
'3
basis and to introduce the kind of marketplace incentives that have enjoyed success in the private
14
sector in holding down the growth of health care costs. ASIM strongly believes that this is the
15
only option that Congress should consider.
16
17
ASIM recognizes the urgent need for reforming the Medicare program and restraining growth in
18
spending under other federal health care programs. However, internists also believe that
19
significant changes in these programs ideally should be made in the context of other health
20
system reforms. Medical liability reform, insurance market reform, measures to broaden and
21
protect choice of plan and physician, and steps to ensure due process for patients and providers
22
in health plan operations and clinical decisions are important system-wide reforms that will foster
23
an environment in which changes in Medicare will have a positive impact. Nevertheless, the
24
following set of recommendations is ASIM's response to policymakers calls for proposals to
25
address the need for fundamental changes in the Medicare program so that it may continue to be
26
a reliable source of medical care for the nation's elderly well into the new century.
27
28
The recommendations propose both immediate and longer-term reforms in the following areas:
29
30
1.
Immediate changes in Medicare financing and the current Medicare risk
31
contracting program.
32
33
2.
Longer term reforms to expand beneficiaries' choice of insurance options through
34
enactment of a defined federal contribution-or voucher-program.
35
36
Changing the Medicare Financing System
37
38
Many analysts and policymakers contend that only complete transformation of the Medicare
39
program can solve its financing problems. Any type of restructuring, however, will be the subject
40
of considerable debate and, given the realities of the policymaking process, could take a number
41
of years to implement. In the meantime, the red ink will grow and problems of access will be
42
exacerbated. Steps can be taken now to reform the current Medicare program so that future
43
efforts to change the system need not be enacted in an atmosphere of crisis.
44
45
Last December, a report on entitlement reform options was issued by staff from the Bipartisan
46
Commission on Entitlement and Tax Reform (hereinafter referred to as the Commission). That
47
report identified a number of measures that could be enacted in the existing Medicare program to
48
stem the imbalance in funding. These improvements can be made with or without enactment of
2
1
other long term reforms, such as a voucher program. Among those improvements ASIM supports
2
are:
3
4
1. increasing the eligibility age for Medicare to align it with eligibility for Social
5
Security. By early in the next century, the eligibility age for Social Security will be
6
67. It would make sense, both financially and administratively, to couple the
7
eligibility age for Social Security with that for Medicare. However, such a change
8
must come in concert with insurance market reforms and other measures to assist
9
those elderly-under-67-with.chronic, but not-disabling, illnesses.in maintaining
10
insurance coverage.
11
12
2. increasing the amount contributed by upper income beneficiaries to financing
13
the Medicare system. The Commission staff proposed reducing the Part B
14
premium subsidy and creating a new Part A premium indexed according to growth
15
in program costs. ASIM believes this premium should instead be indexed to
16
income. This would avoid imposing an excessive burden on those with modest
17
means while concomitantly calling for appropriate contributions from those with
18
greater ability to finance their health care.
19
20
3. applying the Part B coinsurance to home health services. Current law requires
21
no cost sharing by beneficiaries for these services. Home health care has been
22
among the fastest growing parts of the Medicare budget and cost sharing has
23
been demonstrated effective in stemming overutilization of services.
24
25
4. including in taxable income the value of health insurance benefits beyond a set
26
value of insurance premium. Today, employers and workers benefit from a system
27
that gives preferential tax treatment to high cost health plans. Placing a limit on
28
the tax deductibility of such health insurance will promote the purchase of cost-
29
effective but moderately priced health plans and would bring in significant revenue
30
into the health care financing system.
31
32
5. limiting disproportionate hospital share (DSH) payments only to those facilities
33
that, in fact, care for a disproportionate share of Medicare patients. The
34
Commission staff report cited studies showing that DSH payments, intended to
35
compensate hospitals for services provided to low income individuals, have been
36
used by some states for purposes beyond its original intent. Without harming
37
those hospitals truly in need of these payments, the formula should be changed--
38
e.g. elimination of DSH payments for hospitals whose disproportionate share index
39
is below the 80th percentile-to avoid inappropriate uses of federal payments.
40
41
In accord with ASIM's longstanding policy that Medicare trust fund reserves should be augmented
42
through a combination of expenditure reductions, program efficiencies and revenue increases,
43
ASIM also supports:
44
45
6. increasing federal excise taxes on alcohol and tobacco if the revenues from
46
changes identified above prove inadequate to finance an appropriate level of
47
benefits. Not only would these additional revenues help to support the program
48
but they would discourage certain behaviors that result in increased public and
49
personal health costs.
3
1
Historically, Medicare has served as a major source of financing for training of this nation's
2
doctors. However, changes have been proposed in Medicare's funding of graduate medical
3
education (GME) as another avenue for achieving significant savings in the program's budget.
4
One proposal offered by the Health Care Working Group of the House Budget Committee would
5
cut direct and indirect GME spending by $27.24 billion over seven years.
6
7
ASIM believes it is time to rethink Medicare funding of graduate medical education, not simply as
8
a device to reduce federal spending, but in order to respond to the changing health care delivery
9
environment-and to ensure that all components of the health care system that benefit from highly
10
trained physicians contribute to the cost of their education. To those ends, ASIM supports:
11
12
7. creation of a national all-payer funding pool for GME. All payers and health
13
plans should contribute a percentage of their premiums to a financing pool for
14
graduate medical education. With managed care plans and other health delivery
15
organizations seeking qualified, well-trained physicians for their networks, they, as
16
well as all payers interested in providing the best care possible for their insureds,
17
have a stake in the education of the physicians that will contract with their plans.
18
Until now, no one has asked these health plans and insurers to help support the
19
cost of training this nation's physicians. However, given Medicare's financial
20
condition, the federal government can no longer be viewed as a major source of
21
funding for the future supply of doctors.
22
23
8. creation of a private sector physician workforce planning initiative. The
24
American Medical Association has proposed that a taskforce be established with
25
participation of both public and private sectors to offer recommendations to
Congress about the physician workforce supply and the future of GME. If the all-
27
payer GME pool is established, such a task force will be necessary to advise how
28
the funds in the all-payer pool would be distributed.
29
30
9. increasing the direct GME weighting factor for general internal medicine and
31
other primary care residency positions while decreasing the weighting factor for
32
others. Currently, direct medical education payments are based on hospital-
33
specific, per resident costs multiplied by the number of residents. Proposals have
34
been offered in past Congresses to reimburse hospitals more for primary care
35
residents than for specialty residents in order to encourage training of more
36
primary care physicians. The need for more primary care physicians has grown
37
with the increase in the elderly population as well as with the desire of health plans
38
for physicians to manage the care of their enrollees. Alterations in the financing of
39
medical education will encourage changes in training programs to meet those
40
needs.
41
42
10. decreasing the number of funded residency positions to 110 percent of U.S.
43
medical school graduates. The Physician Payment Review Commission has
44
recommended that the number of funded residency positions in the United States
45
be reduced in order to respond to the fact that the country is facing, in general, an
46
excess of physicians. By taking this action, the U.S. would cut the oversupply of
47
physicians while at the same time-if the other steps are taken-increase the
48
proportion of primary care physicians relative to the population.
49
4
1
Instilling Market-based Incentives In the Medicare Program
2
3
The current Medicare program includes an optional program intended to use competition among
4
health plans as a means to moderate costs. The Medicare risk contracting program-in which
5
Medicare contracts with health plans and pays them a capitated payment based on less than 95%
6
of the adjusted actual per capita costs of caring for Medicare patients-was intended to encourage
7
health plans to control utilization of services and, subsequently, costs. Because of flaws in the
8
formula for paying risk contracting plans and because healthier beneficiaries are more likely to
9
enroll in these health-plans-than-other-beneficiaries,-the-risk-co program has not been as
10
successful at reducing Medicare spending as originally anticipated.
11
12
Again, steps can be taken to improve this existing mechanism designed to enhance market
13
competition until more substantial reforms are implemented. These include:
14
15
1. changing the adjusted average per capita cost (AAPCC) formula used to pay
16
health plans. The current AAPCC is based on historical, fee-for-service costs in an
17
area. This has resulted in overgenerous payments to health plans in high cost
18
areas and modest payments to health plans in regions where health care costs
19
have been kept relatively low. Changes in the AAPCC should reward cost effective
20
health plans in areas with historically low utilization rates instead of penalizing
21
such plans with less generous AAPCC payments.
22
23
2. applying risk adjustments-such as severity of illness-in setting payments to risk
24
contracting plans. This change should be coupled with other reforms in the
25
AAPCC to avoid driving away from the program managed care plans that might
26
attract more seriously ill patients and to make regional plan payments more
27
equitable.
28
29
3. broadening managed care choices for beneficiaries to include HMOs with point-
30
of-service and preferred provider organizations (PPOs), instead of limiting
31
participation only to health plans that require beneficiaries to obtain services from
32
contracted physicians and other providers. Under the current risk contracting
33
program, beneficiaries have a limited range of health plans from which to choose
34
and are precluded from taking advantage of the numerous managed care products
35
that have arisen in recent years in the private market.
36
37
4. requiring that beneficiaries be provided comparative information concerning all
38
Medicare risk contracting plans that are available to them. In order for
39
beneficiaries to make fully informed choices about their health plan, they should be
40
provided sufficient data that will enable them to compare these plans on costs,
41
physicians and other providers, quality and benefits.
42
43
5. giving beneficiaries one opportunity per enrollment year to disenroll from a plan
44
within 60 days of enrollment. Once a beneficiary has been in a plan over 60 days,
45
he or she should be required to wait until the next open enrollment period. Under
46
current law, beneficiaries may disenroll from a health plan with only a 30 days
47
notice. This makes it difficult for many risk contracting plans to anticipate costs for
48
a health plan year. It is also contrary to most enrollment policies effective in the
49
private sector which call for enrollment or disenrollment during a particular "open
5
1
season". Asking beneficiaries to stay with a plan until the next open season once
2
they have been in a plan for two months would offer additional stability to a risk
3
contracting plan without limiting too severely beneficiaries' ability to change their
4
minds about managed care. Such a requirement would make Medicare more
5
consistent with the private sector in which workers are required to make an annual
6
selection of a health plan and to stay with that plan for an entire year. Limiting the
7
disenrollment opportunity to one per year would also prevent cases in which
8
people jump from plan to plan every so often prior to the 60 day deadline.
9
Medicare patients.should.accept the same degree of responsibility in choosing a
10
health plan that is expected from those under 65.
11
12
6. mandating reasonable, non-punitive increases in premiums and other cost
13
sharing for beneficiaries who choose to remain with the traditional fee-for-service
14
Medicare program. With improvements in the risk contracting program, it is
15
reasonable to expect that those who choose to remain with the higher cost fee-for-
16
service side of Medicare should bear a portion of those higher expenditures.
17
18
The current risk contracting program would be repealed upon enactment of a voucher program as
19
described below.
20
21
Medicare Vouchers
22
23
Making changes in the existing fee-for-service Medicare program and improvements in the current
24
risk contract program will help to stabilize the program for the short term. However, to achieve a
25
system that relies on competition to control costs and broaden beneficiary choices, that instills
26
individual responsibility for the appropriate use of scarce medical resources and that assures the
27
long term survival of Medicare, major restructuring of the program will be required. One way to
28
do this is for the government to offer beneficiaries the opportunity to take a defined government
29
contribution-or voucher-and purchase private insurance coverage with those funds.
30
31
There are a number of issues that must be addressed for any voucher plan to be successfully
32
implemented. ASIM supports creation of a voucher system and believes that the following
33
elements are necessary to any voucher program designed for Medicare to ensure that
34
beneficiaries have access to the widest range of cost-effective, high quality health plans,
35
physicians and providers.
36
37
1. Medicare beneficiaries should be given the option of staying in the current
38
Medicare program or using a voucher to buy any private health plan that meets
39
certain conditions of participation.
40
41
If a plan purchased with a voucher becomes insolvent, or ceases operation in a
42
beneficiary's area, beneficiaries should be able to enroll in another plan. When the
43
annual enrollment period occurs, beneficiaries should be able to return to the
44
traditional Medicare program at that time.
45
46
Transition to a voucher program should be done gradually to account for the fact that some areas
47
of the country may not have the degree of managed care penetration necessary to make
48
competition among health plans work. Retaining traditional Medicare would provide reassurance
6
1
to beneficiaries while serving as a spur to voucher plans to make their products attractive enough
2
to encourage enrollment by Medicare recipients.
3
4
2. Under a voucher program, beneficiaries should have access to a variety of
5
plans ranging from indemnity models to staff model HMOs. All voucher plans that
6
restrict enrollees to the use of network providers should be required to offer at an
7
actuarially-determined cost an optional rider that would provide point-of-service
8
access to non-network physicians for those enrollees. Enrollees should be able
9
to select from among a.network plan's panel of physicians an internal medicine
10
subspecialist as their primary care physician and plans should be prohibited from
11
discriminating against physicians in their selection processes based on a
12
physician's patient population.
13
14
Under the present Medicare system, beneficiaries are entitled to receive all covered benefits from
15
any provider of their choice. A voucher system could undermine this basic premise of the
16
program. For example, depending on the amount of the voucher and other rules governing the
17
voucher program, beneficiaries could find their choice of health plan in reality to be quite limited.
18
Furthermore, if the voucher is inadequately funded, some beneficiaries may be compelled to
19
select a plan that limits the physicians and providers they may see for services. Adequate choice
20
of physician and health plan can be promoted by offering beneficiaries a wide menu of plans and
21
by establishing the federal contribution at a level that does not force patients to choose the
22
cheapest plan available, as discussed below. By requiring voucher plans that use a network of
23
physicians to offer enrollees the opportunity to buy a point-of-service rider, enrollees who want the
24
flexibility to go outside the network will be able to select this option while those beneficiaries who
25
wish to choose a closed-panel HMO may do so. In addition, a POS rider requirement for all
26
health plans with restricted provider networks might ameliorate adverse risk selection arising from
27
the tendency of very ill beneficiaries in an area to gravitate toward traditional Medicare and/or one
28
plan with point-of-service.
29
30
3. Beneficiaries should have the option of using their government contribution-
31
e.g. the voucher-to establish a Medical Savings Account (MSA) rather than to
32
purchase coverage through a health plan. The MSA would:
33
34
a) be coupled with a catastrophic health insurance policy purchased through a
35
purchasing group to help preserve community rating;
36
37
b) be comprised of a fund from which a beneficiary could pay deductible medical
38
expenses and would be coupled with purchase of catastrophic health insurance to
39
cover expenses that, in the aggregate, exceed the catastrophic insurance
40
deductible;
41
42
c) permit accumulation of unspent balances within the fund;
43
44
d) allow state and federally tax exempt distribution of funds only for medical
45
expenses, health insurance premiums and/or löng term care.
46
47
Since 1987, ASIM has supported the concept of medical savings accounts and the idea of
48
integrating medical savings accounts into an overall health system in which people could choose
49
among a variety of health plans, including medical savings accounts. These accounts are useful
7
1
as part of a continuum of health care coverage options, particularly for their impact in enhancing
2
consumers' awareness of the costs of health care.
3
4
ASIM feels strongly, however, that MSAs should not be used as the sole source of health care
5
coverage but should be established in concert with a catastrophic health insurance policy.
6
Furthermore, ASIM agrees with the concerns of some MSA critics that these accounts would
7
adversely affect community rating of insurance and diminish the potential for widening insurance
8
coverage. Ways to ameliorate these effects include ensuring that money in an MSA be used only
9
for health care, including long term care, and making MSAs available for purchase only through
10
purchasing groups to address problems with community rating.
11
12
ASIM acknowledges that MSAs appear to run counter to the trend in the health care system
13
toward managed care. On the other hand, a spokesman for the American Academy of Actuaries
14
Workgroup on MSAs predicted that managed care plans may respond "creatively" to these
15
savings accounts by offering managed care products compatible with MSAs. Because MSAs
16
appeal to so many patients and physicians, ASIM believes efforts should be made to include them
17
in the menu of coverage options available to beneficiaries. To make medical savings accounts a
18
reality under the Medicare program, however, will require many more provisions than the outline
19
provided above. To implement MSAs, answers will be needed to questions such as: how will the
20
government ensure that the funds in an MSA are, in fact, used for health care purposes?; will
21
beneficiaries be able to contribute their own money to MSAs and, if so, will there have to be
22
separate accounts established for private funds and the federal contribution?; can the savings
23
instrument into which the government contribution is placed be protected against adverse market
24
downturns so that beneficiaries do not lose their medical coverage?; should copayments be
25
required as part of the catastrophic coverage?
26
27
4. Voucher plans should be required to accept all applicants during an open
28
enrollment period to minimize adverse risk selection. Beneficiaries should be
29
allowed one opportunity per enrollment year to disenroll from a plan within 60 days
30
of enrollment. Once a beneficiary has been in a plan over 60 days, he or she
31
should be required to wait until the next open enrollment period. Beneficiaries
32
should be explicitly informed of this requirement by the health plan and should be
33
required to sign a written acknowledgement of the conditions of enrollment.
34
35
A reinsurance mechanism should be available to those plans subject to adverse
36
risk selection or to a sudden influx of voucher enrollees whose previous plan has
37
gone bankrupt.
38
39
Another set of problems related to choice of physician and plan has to do with the response of
40
health plans to those beneficiaries holding vouchers. To avoid circumstances in which health
41
plans sought to avoid covering the very ill, all plans should be required to enroll any beneficiary
2
with a voucher who seeks entrance into the plan. On the other hand, mandated acceptance and
.3
the ability of beneficiaries-under current Medicare risk contract rules-to enroll and disenroll
44
outside of any prescribed enrollment period leaves plans vulnerable to unanticipated costs. In
45
such a scenario, beneficiaries' right to choice of plan/physician conflicts with health plans' needs
n6
to maintain their cost and utilization control. The Congressional Budget Office has suggested that
47
an annual enrollment period with a point-of-service policy "would permit Medicare enrollees to go
48
to providers outside [a managed care plan's] panel when they wanted to and yet it need not
+9
increase benefit costs for either the [the plan] or Medicare." To avoid circumstances in which
8
1
beneficiaries enroll in and disenroll from plans multiple times using the 60 day window, there
2
should only be one opportunity during an enrollment year to disenroll from a plan within two
3
months, after which the beneficiary would have to wait for the next open enrollment period.
4
For such changes to work, beneficiaries must be given enough information at the outset to
5
understand that, in signing up for a managed care plan, they must remain with that plan until the
6
next open enrollment period once they have been in a plan over two months. This puts the
7
burden of education on the managed care plan and the decision in the hands of the beneficiary.
8
In addition, such an approach would make managed care more palatable to both beneficiaries
9
and physicians.
10
11
5. The defined contribution-or voucher-should be set at a level that would
12
produce incentives for beneficiaries to consider cost in choosing a health plan
13
without forcing them into the cheapest plans that are most restrictive of choice of
14
physician. The voucher should not be set at the cost of the lowest priced plan in
15
a region.
16
17
The voucher amount should be adjusted according to age, sex, disability status,
18
institutional status, and Medicaid-buy in status and applied by region. Once the
19
regionally adjusted voucher amount was established, HHS or HCFA would accept
20
applications from health plans to participate in the voucher program.
21
22
If the voucher is set too high it will have little impact on controlling Medicare costs. Set too low
23
and beneficiaries choosing the voucher option may find their choice of plan and, ultimately choice
24
of physician, quite limited. In addition, for a segment of the Medicare population, a voucher will
25
not cover what a health plan would spend on treating them. This would seem to call for some
26
type of adjustment in the value of the voucher through mechanisms that are reasonably simple
27
and inexpensive to administer. Otherwise, health plans might attempt to discourage certain
28
beneficiaries from selecting that plan by adopting discriminatory policies or marketing strategies.
29
30
A voucher set at some national average would fail to reflect the appropriate regional differences in
31
costs of health care delivery. Setting a regional voucher amount is a more accurate way for the
32
voucher to reflect local health care costs, would be less likely to drive people into restrictive
33
health plans and would ensure that there would be at least one plan in a region that could serve
34
Medicare beneficiaries for the price of the voucher. Any process used to set the voucher amount
35
in which plans submit their premiums to the government and the government then sets the
36
voucher on some portion of those premiums must ensure that the resulting voucher is not so low
37
as to make it worthless to most beneficiaries.
38
39
6. The voucher should be updated on a regular basis to keep pace with the costs
40
of providing services to beneficiaries. In the event that spending under the
41
voucher program exceeds estimated savings goals or targets, the voucher should
42
not be subject to arbitrary caps. Mechanisms to keep spending within designated
43
limits or to recoup excess expenditures, such as a "look back sequester, should
44
be rejected. Instead, an independent board or commission should be established
45
that would involve all participants in the health care system in devising a response
46
to cost control that would not focus solely on cuts to providers and increased
47
costs to beneficiaries. If spending is greater than projected due to development of
48
valuable new technologies or increased patient utilization of services deemed
49
medically necessary, there should be a commitment to increasing the amount of
9
1
funds devoted to the voucher program in order to ensure vouchers retain sufficient
2
purchasing power and to assure appropriate medical outcomes.
3
4
The way in which the voucher is updated will determine to a large extent how much purchasing
5
power the voucher continues to give beneficiaries. Given too great an increase and the voucher
6
will be ineffective in controlling health costs. Given too little, and the voucher may drive some
7
beneficiaries into lower quality, more restrictive health plans. There is also always a risk that the
8
voucher update could fall victim to budget politics and be "frozen" or "capped" at some point to
9
meet deficit reduction targets.
10
11
If spending under a voucher program is higher than anticipated because valuable new
12
technologies or treatments have become available and patients have sought to take advantage of
13
these advances in medicine, it does not make sense to penalize physicians by cutting their
14
payments when costs increase for legitimate reasons. Furthermore, if beneficiaries do not
15
participate in the voucher program in numbers sufficient to keep costs down, physicians should
16
not be held financially responsible for beneficiaries' independent decisions. In addition, across-
17
the-board cuts in physician and provider payments do not target those areas where health care
18
costs have inappropriately increased and penalize caregivers who may in fact have kept their
19
costs down. Arbitrary reductions in payments will serve only to perpetuate inequities in the
20
Medicare payment system and compel physicians to limit their exposure to Medicare patients.
21
22
Finally, a cap on spending for the voucher implies a lack of confidence in the ability of the market
23
to control the cost of health plan premiums and may have the unintended consequence of
24
becoming a "floor" rather than a ceiling. If health plans know that the government's contribution
25
will be capped at a certain percentage rate of growth, this may serve as an incentive to those
26
plans whose rates of growth are lower than that percentage to allow their premiums to rise to
27
meet the government's growth rate.
28
29
In the event federal health program costs remain uncontrollable, some entity - such as a
30
commission or board - should be established separate from any government financing office to
31
involve all parties in the health care system in devising a response to cost control that would not
32
focus solely on cuts to providers and increased costs to beneficiaries. If beneficiaries are to be
33
assured of getting all the necessary care they need when they need it, the voucher amount
34
should keep pace with the costs of providing services. If the value of the voucher is allowed to
35
erode over time, beneficiaries may lose access to many high quality health plans offering
36
comprehensive services or they may be forced to pay increasing amounts out-of-pocket to
37
maintain a certain level of service. This would be especially detrimental for those beneficiaries of
38
low and moderate-income who may be unable to bear an increasing financial burden. If the
39
market is unable to deliver health care to patients within a predetermined cap, this should not be
40
used as an excuse to diminish the government's commitment to Medicare beneficiaries.
41
42
7. A reassessment of the voucher program should be required after five years.
43
This reevaluation should be undertaken by an agency or commission not
44
responsible for funding Medicare.
45
46
Given the untried nature of a voucher program for Medicare, there should be an evaluation of the
47
program relatively early in its life. There was little comprehensive evaluation of the original
48
Medicare program in its early stages and many of the present troubles in the system derive from
49
that oversight. If the voucher program does not seem to be living up to its expectations,
10
1
Congress and the administration should not merely tinker at the edges to provide short term fixes
2
but should step back, take a hard look at the program and even consider starting all over again.
3
4
8. Beneficiaries opting for the voucher program should be provided incentives that
5
encourage their selection of an economically priced plan but that do not force
6
enrollees into those plans that are most restrictive of choice of physician and that
7
impose the strictest limits on access to services. Incentives should come in the
8
form of additional benefits or services provided by the health plan and not in the
9
form of a cash-rebate.-With-rules in place to ensure that all beneficiaries have
10
access through voucher plans to the full range of Medicare covered benefits and
11
services, beneficiaries should pay the difference between the voucher amount and
12
any premium charged by a plan that exceeds the voucher amount.
13
14
Some analysts contend that beneficiaries should be provided incentives to select a health plan
15
that costs less than the federal contribution amount, or voucher. These incentives typically fall
16
into two categories-cash rebates or additional services. Giving beneficiaries a cash rebate if their
17
premium is less than the voucher amount would remove funds from the health care system that
18
ought to be providing for health care services. Instead, any excess value should be returned to
19
the beneficiary in the form of additional benefits such as coverage of additional services,
20
providing coverage for long term care or creating a health care spending account. There is also
21
debate over whether beneficiaries should bear the full cost of a health plan more expensive than
22
the voucher to encourage enrollees to select more economical health plans. Although there is
23
concern that such an incentive might drive beneficiaries to select plans of lesser quality or that
24
don't cover the full range of benefits, this is less of a problems if all plans offer the full range of
25
Medicare-covered services.
26
27
9. Reasonable cost sharing under voucher plans - both fee for service and
28
managed care -- should be imposed to assure consumer cost consciousness in
29
utilization of services. Lower cost sharing should be imposed on clinically-proven
30
preventive services so that people are not unduly discouraged from obtaining
31
beneficial care. Preventive services should be subject only to copayments, not
32
deductibles. Copayments for preventive services should be set lower than those
33
for other services.
34
35
To avoid unjustified restrictions on choice of physician, POS voucher plans should
36
not impose unreasonable coinsurance on services provided by out-of-network
37
physicians. To prevent beneficiaries who seek out-of-network care from being
38
subject to unexpected out-of-pocket costs, POS plans and physicians should be
39
required to establish their own conversion factors to be used against an improved
40
resource based relative value scale (RBRVS). This would determine the rates the
41
POS plan would pay and the fees the physicians would charge for their services.
42
Plans and physicians would be required to supply enrollees in the POS plan with
43
information based on these conversion factors to enable enrollees to determine in
44
advance how much they would pay in going out of the plan's network of
45
physicians.
46
47
As an incentive to promote greater price consciousness in the traditional Medicare
48
program and to encourage the movement of beneficiaries into the voucher system,
49
those who choose to stay in the traditional Medicare program should be subject to
11
1
reasonable and non-punitive increases in cost-sharing. As with POS plans, in
2
order to buffer beneficiaries from unexpected costs, a requirement could be
3
imposed under traditional Medicare that physicians must establish their conversion
4
factor for their services each year concomitant with the announcement of
5
Medicare's conversion factor. Enrollees in traditional Medicare would be supplied
6
annually with information comparing the charges of physicians in their area to
7
Medicare's fees based on their respective conversion factors. In this fashion,
8
beneficiaries would know in advance whether or not they would have to pay out-
9
of-pocket for services charged-under. traditional Medicare.
10
11
Beneficiaries should not be subject to charges in excess of Medicare's payment
12
amounts under the following circumstances: in the case of low income
13
beneficiaries; emergency situations; when the beneficiary has little voice in the
14
selection of a physician or in areas of the country where there is no competition for
15
a particular medical specialty.
16
17
If true reform is to be instituted in the Medicare system, enrollees must understand the nature of
18
the costs of their care under that program. At the same time, policymakers should not lose sight
19
of the fact that 83 percent of Medicare expenditures go to beneficiaries with incomes at or below
20
$25,000 and thus their exposure to additional costs should be limited.
21
22
ASIM believes it is especially important that cost sharing on preventive services be reduced and
23
deductibles on these services be eliminated entirely to avoid discouraging patients from obtaining
24
necessary care. By erecting barriers to cost-effective preventive care-for example, imposition of
25
cost sharing on mammograms-patients may avoid those services and wind up with more serious,
26
and expensive, illnesses in the future.
27
28
In addition, ASIM supports limits on the degree to which additional cost sharing can be imposed
29
on those enrolled in managed care plans who use a plan's point-of-service (POS) option to seek
30
care outside the plan's network of physicians. The intent behind POS is to allow beneficiaries
31
greater choice in physician and provider. If the cost sharing imposed on a beneficiary for going
32
outside a health plan's physician network is excessively burdensome, then the promise of greater
33
choice is a hollow one.
34
35
Obviously, if beneficiaries are to be encouraged to enter the voucher program, those who opt to
36
stay in traditional Medicare must bear a greater share of the cost of remaining in the more
37
expensive program. Nevertheless, any additional cost sharing should follow the principles stated
38
above so that primary care and preventive services are sheltered from deductibles and are
39
subject to cost sharing at a rate lower than that imposed on other services. Because high
40
deductibles can act as a disincentive for patients to receive needed primary care and preventive
41
services, ASIM does not support replacing the current coinsurance requirements under traditional
42
Medicare with a single high deductible.
43
44
ASIM believes that its Competitive Pricing, Informed Choices proposal-issued in 1992-offers a
45
means to instill price competition among physicians, enhance consumer cost consciousness and
46
prevent price gouging by unscrupulous providers. If health plans that pay according to a fee
47
schedule (POS plans, traditional Medicare, etc.) and physicians were required to set and publish
48
the conversion factors they would use each year to determine their charges and fees, this
49
information could be used by beneficiaries to determine what they would pay out-of-pocket, if
12
1
anything, if they joined a particular health plan or used a particular doctor. Beneficiaries would
2
then be able to decide if the value they derived from a health plan and/or physician in terms of
3
quality and service was worth the price of any additional costs.
4
5
For example, assume Mrs. Jones is a Medicare beneficiary who receives from HCFA a booklet
6
listing all the health plans and physicians in her area. Among the information contained in the
7
booklet might be the percentage difference between the conversion factors used by traditional
8
Medicare and POS plans and the physicians listed in the booklet. Mrs. Jones might see that Dr.
9
Smith has a-conversion factor_10 percent higher than Medicare's conversion factor. If she went to
10
Dr. Smith for care under traditional Medicare, she would know that she would pay an additional
11
ten percent on Dr. Smith's charges beyond the payment traditional Medicare would make. Or,
12
Mrs. Jones might see that health plan ABC has a conversion factor for its POS option 20 percent
13
lower than Dr. Smith's conversion factor. She would then know that Plan ABC would pay 20
14
percent less for the services of Dr. Smith-who does not participate in her health plan physician
15
network-and she would be responsible for the 20 percent difference between the health plan's
16
payments and Dr. Smith's fees, in addition to any additional cost sharing required by Plan ABC for
17
enrollees going out of the network.
18
19
While ASIM generally supports cost sharing by patients in order to enhance cost consciousness in
20
the utilization of scarce health care resources, there are situations in which billing beyond
21
Medicare's payment rates or additional cost sharing should not be imposed. These situations
22
arise where beneficiaries' income is simply too low to sustain any additional out-of-pocket
23
financial burden, where they have no opportunity to "shop around" for a physician (e.g.
24
emergency situations), where beneficiaries have but one choice of physician (such as typically
25
occurs during hospitalizations when patients are essentially assigned certain hospital-based
26
doctors to deliver designated services) or where there are so few physicians in a particular
27
specialty within a community that there is no chance for competition among physicians to operate.
28
29
10. To qualify as a voucher plan under Medicare, health plans should have to:
30
offer a standard minimum Medicare benefits package that includes preventive
31
services; meet certain utilization review and quality assurance standards; involve
32
participating physicians in development of the plan's utilization review (UR) and
33
quality assurance (QA) and provider selection policies and procedures; disclose
34
their utilization review and quality assurance policies, restrictions on choice, risk
35
arrangements and provider selection criteria; establish due process mechanisms in
36
selection of plan providers; meet certain solvency standards; report certain
37
information - such as premium costs, out-of-pocket liability, consumer satisfaction
38
and the percentage of premium dollars devoted to administration versus benefits -
39
to a central data collection entity so that this information can be distributed to
40
beneficiaries and use uniform claims forms and standard billing and claims
41
processing procedures.
42
43
Health plans that selectively contract with physicians should be required to offer
44
enrollees the opportunity to buy a rider that provides point-of-service access to
45
non-network physicians, in addition to meeting the foregoing standards.
46
47
Health plans should play by the same rules if competition is truly to be effective in controlling
48
costs. Given that the idea behind many Medicare voucher proposals is to enhance competition
49
within the program so as to bring down costs, it would seem equally advisable that health plans
13
1
should be required to meet certain rules if they wish to participate in the voucher program and
2
market themselves to beneficiaries as Medicare voucher plans.
3
4
A uniform minimum benefit policy would assure a basic level of care for all beneficiaries. In
5
addition, it would facilitate beneficiaries' comparison of health plans. If beneficiaries are to have
6
sufficient information to make informed choices with their vouchers, they will need data on a
7
plan's costs, patient out-of-pocket liability, provider panels, and quality. Furthermore, disclosure
8
of UR and selection standards benefits not only the providers involved with a health plan but
9
helps beneficiaries.as-well-by-giving them another piece of information on which to compare
10
health plans.
11
12
In addition, it is important that physicians have a role in developing and implementing health plan
13
policies and procedures that directly affect clinical decision-making-e.g. benefits coverage
14
criteria, determination of medical necessity, preauthorization of services, quality assurance
15
standards, protocols and processes for selection and deselection of physicians. To leave
16
decisions affecting patient care solely in the hands of health plan administrators whose concerns
17
center largely on cost containment may jeopardize the quality of care given to enrollees and deny
18
patients access to medically necessary services. Furthermore, health plans that involve
19
physicians in development of these policies are far more likely to obtain the cooperation of their
20
network physicians in proper implementation of those policies.
21
22
Finally, it is important that voucher plans be required to operate under similar billing and claims
23
processing procedures to avoid unnecessary red tape. All plans that currently operate within the
24
Medicare system must abide by the uniform claims form and billing rules and it would be logical
25
to expect that voucher plans should use a standard format and follow standard claims processing
26
procedures for this new variation of the Medicare program.
27
28
The type of standards to which ASIM refers-involvement of physicians in clinical policymaking,
29
providing information to enrollees and prospective enrollees sufficient to enable them to make
30
informed decisions about the plan-are, in fact, those that are being adopted by many well-run
31
health plans in today's marketplace. In a competitive environment, those plans that pursue
32
"patient-friendly" policies such as these are more likely to succeed than others.
33
34
11. Because Medicare is a federally funded program, the federal government must
35
continue to ensure that health plans are accountable for the care they give to
36
beneficiaries and that they abide by standards set out for Medicare plans. HCFA
37
or another federal agency should be responsible for contracting with health plans;
38
reviewing marketing materials; disseminating to beneficiaries objective data about
39
each plan in a region in a standard format; ensuring health plan compliance with
40
certain standards governing their rules and operations; and ensuring that health
41
plans meet certain quality standards. However, private accreditation agencies
42
should be able to achieve "deemed" status to fulfill the role played by HHS in
43
approving voucher plans. Mechanisms should be available for patients and
44
physicians to pursue grievances against health-plans for denial of medically
45
necessary care. Patients and physicians should retain access to fair hearing and
46
judicial review processes at least comparable to those now available under
47
traditional Medicare.
48
14
1
Because vouchers would require more thought and decisionmaking by Medicare recipients, some
2
analysts question whether beneficiaries would find the voucher program truly appealing. Other
3
policymakers argue that the basic premise of the voucher program is simple and that most
4
beneficiaries, given the right kind of information, will be able to make proper decisions about a
5
health plan. While this may indeed be the case for healthy beneficiaries who are mentally alert,
6
the frail and disabled elderly, those who do not speak English very well or those with little
7
education may find the task of sorting through health plan information daunting. To respond to
8
some of these concerns, the voucher program should have an entity with which voucher plans
9
would contract and which would ensure voucher plan. adherence to any standards adopted
10
governing such plans.
11
12
Given the characteristics of the Medicare population, an ombudsman's office should be created
13
to receive, investigate and resolve complaints against voucher plans as well as to offer guidance
14
to beneficiaries with questions about the voucher program. Finally, beneficiaries and physicians
15
should retain access to the current Medicare appeals process.
16
17
ASIM would prefer that the health care industry voluntarily abide by the standards established for
18
a voucher program and, indeed, supports the idea of a private accreditation body responsible for
19
ensuring health plan adherence to voucher program standards. However, the voucher program
20
will be funded by federal dollars and the federal government should not relinquish its
21
responsibility for ensuring that health plans are accountable for the care they deliver to
22
beneficiaries and for seeing that corrective actions are taken when deficiencies are found if a plan
23
wishes to remain in the voucher program. Health plans that accept the government contributions
24
should understand that, if they are going to compete for the business of the federal government
25
through the voucher program, they must accept certain standards and certain reasonable
26
oversight.
27
28
12. Self-referral restrictions affecting shared laboratory facilities and group
29
practices should be removed and antitrust reforms enacted to enable physicians
30
and providers to negotiate on an equal footing with health plans and purchasers.
31
32
Antitrust reforms and other modifications to statutory restrictions on physicians could improve the
33
functioning of health plans offered under a voucher system and the ability of physicians to deliver
34
services within their context. For example, self-referral restrictions on group practice
35
compensation arrangements not only interfere in the internal affairs of private businesses but lead
36
to confusion over how such practices may distribute revenue from ancillary services without
37
indirectly taking into account the referrals made by physicians. Furthermore, subspecialists-such
38
as oncologists and infectious disease specialists-in many group practices are barred from
39
providing drugs and other services to their patients because of the self-referral laws.
40
41
Limitations on the ability of physicians to share information in order to form integrated service
42
networks may impede the goals of voucher advocates who wish to foster competition that reduces
43
the cost of care and increases benefits to attract voucher recipients. Indeed, antitrust laws
44
developed at a time when most physicians and other providers practiced independently of one
45
another now prevent these caregivers from organizing preferred provider organizations, health
46
plans and other delivery networks that would enable physician-directed health care organizations
47
to compete in the marketplace and offer beneficiaries a wider choice of health care options.
48
49
15
1
Conclusion
2
3
ASIM is under no illusion that reforming Medicare will be simple, easy, or quick. Changes of the
4
magnitude required to place the program on sound financial footing and to guarantee that
5
beneficiaries continue to receive the high quality health care to which they have become
6
accustomed and to which they are entitled will require a great deal of thought and debate. For
7
ASIM, the overarching philosophy on which these Medicare reform proposals rest is that of shared
8
responsibility.
9
10
Physicians have a responsibility to deliver care to greater numbers of Medicare patients under
11
health care delivery systems that will increasingly require them to accept financial risk and to be
12
accountable for the cost and quality of their clinical decisions-and to compete within this new
13
system on the basis of cost and quality.
14
15
Medicare patients have a responsibility to consider the costs of alternative sources of health care
16
coverage, to be willing to contribute more in out-of-pocket costs if they choose more expensive
17
coverage and-for those who can afford to-to contribute more to the financial support of Medicare
18
so that those of lesser means can afford coverage.
19
20
Taxpayers have a responsibility to accept changes in the tax code that would raise revenue and
21
introduce positive incentives into the health care system including a limit on the tax deductibility of
22
employer paid insurance and increased taxes on tobacco.
23
24
The insurance industry has a responsibility to compete in the new system-not solely on price or
25
risk avoidance but on benefits offered and quality-and to accept reasonable standards to protect
26
beneficiaries who choose private insurance coverage.
27
28
And the federal government has a responsibility to assure that the government's contribution
29
remains adequate to guarantee that all beneficiaries can obtain high quality coverage through
30
traditional Medicare and private sector alternatives-and to provide sufficient oversight over the
31
market to protect patients' interests.
16