Medicare News
| For Immediate Release: | Contact: |
| Monday, March 01, 1999 | CMS Office of Public Affairs 202-690-6145 |
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MEDICARE+CHOICE YEAR 2000 PAYMENT RATES ANNOUNCED
Medicare payments to managed care plans in calendar year 2000 will continue to narrow geographic payment variations and, for the first time, will include a blend of local and national payment rates, the Health Care Financing Administration (HCFA) announced today.
Concerned that uneven county payment levels contributed to wide differences in benefit levels across the country, Congress in the Balanced Budget Act of 1997 created a new payment method for managed care plans. Before the change in law, Medicare payments to managed care plans were based almost entirely on fee-for-service costs in individual counties.
"Increased payments in the counties where these higher blended rates will be paid should help stabilize the market and encourage more plans to participate in Medicare+Choice in these areas," said HCFA Administrator Nancy-Ann DeParle. "That means more choices for Medicare beneficiaries."
As a result of the Balanced Budget Act, the county rates paid to plans in 1997 became the basis for all future payments. The law sets each county's rate at the highest of three amounts. The first is a minimum 2 percent increase over the prior year's amount; the second is a guaranteed minimum known as a "floor" payment; and the third is a blending of local and national rates. The last two amounts are based on the overall increase in Medicare spending.
In 1998 and 1999, the blended formula could not be used because of budget-neutrality requirements in the law. In 2000, however, 63 percent of counties nationally will receive blended payments.
The final estimate of the national per capita Medicare+Choice growth rate, adjusted by prior years' over-projections and reductions required by law, is 5.04 percent for aged beneficiaries next year. Payment increases for individual counties can be significantly different from the overall 5.04 percent increase. Some counties will receive the minimum 2 percent increase, while others will receive increases substantially higher than 5.04 percent because of the blend of local and national rates.
About 10 percent of counties nationally will receive the guaranteed minimum 2 percent increase. Examples include the three counties with the highest rates in the country: Richmond (Staten Island), N.Y., where monthly rates for aged beneficiaries will increase from $798.35 in 1999 to $814.32 in 2000; Dade, Fla., where monthly rates for aged beneficiaries will increase from $778.45 in 1999 to $794.02 in 2000; and Bronx, N.Y., where monthly rates for aged beneficiaries will increase from $757.66 in 1999 to $772.81 in 2000.
The monthly floor payment rate, which affects 27 percent of counties nationally, will increase 5.73 percent for aged beneficiaries from $379.84 in 1999 to $401.61 in 2000. Examples of floor counties include such areas as Yavapai, Ariz.; Kennebec, Maine; and Washington, Miss.
In the blend counties, payment rate increases will range from slightly more than 2 percent to about 18 percent. For example, monthly payment rates for aged Medicare beneficiaries will increase 12.4 percent in Clackamas, Ore., from $390.49 to $438.74; 9.6 percent in Avoyelles, La., from $384.96 to $421.89; and 8.3 percent in Dakota, Minn., from $394.42 to $438.75. The county with the biggest percentage increase nationally is Skagway-Yakutat, Alaska, where the monthly rate for aged beneficiaries will increase 18.2 percent from $381.11 to $450.46.
County rates in 2000 will also for the first time be adjusted to reflect the health status of Medicare beneficiaries enrolled in Medicare+Choice plans. Known as risk adjustment and required by the Balanced Budget Act, the new approach, which HCFA will phase in over five years, will increase payments to plans that care for the sickest beneficiaries. Medicare currently adjusts rates only for demographic factors such as age and sex. "Introducing risk adjustment into Medicare managed care is an important step in making sure beneficiaries have access to the care they need and that Medicare pays plans fairly," said Robert Berenson, M.D., director of HCFA's Center for Health Plans and Providers. "We are taking a careful and balanced approach to risk adjustment, and we will closely monitor the impact on both beneficiaries and plans."
Risk adjustment looks at a person's diagnosis in one year and predicts how much, if any, additional cost there will be for that person the next year. For example, a person who has appendicitis in one year is not expected to have higher than average costs the following year. If a person has breast cancer, however, additional costs beyond the average are predicted and a plan would receive a larger payment to cover the additional expected costs.
As required by law, risk-adjusted payments to plans will begin Jan. 1, 2000. However, to ensure that plans have time to adjust to the new payment method, HCFA built a five-year transition period into the risk adjustment methodology it adopted. In 2000, only 10 percent of a plan's payment for each beneficiary will be calculated based on the new risk adjusters, while 90 percent of the payment for each beneficiary will be based on the current system. The full effects of risk adjustment will be phased in between 2000 and 2004.
HCFA also is working with Congress to give plans an additional two months to file the information that is used to approve the benefits and premiums offered to Medicare beneficiaries. The move from May 1 to July 1 should help managed care plans base the costs and premiums for health care to Medicare beneficiaries on current trends and costs in the health care marketplace.
Of Medicare's 39 million beneficiaries, more than six million are in managed care and more than 32 million are in traditional fee-for-service Medicare.
