Uncertainties Surround Proposal To Expand Prepaid Health Plan Contracting

HRD-88-14: Published: Nov 2, 1987. Publicly Released: Nov 17, 1987.

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Pursuant to a congressional request, GAO reviewed a Department of Health and Human Services (HHS) proposal seeking legislative authority to contract with employer-based health plans to provide Medicare benefits to the employers' retirees.

GAO found that: (1) the proposed methods for reimbursing employer-based plans differ significantly from those HHS uses to reimburse risk-based health maintenance organizations; (2) HHS has had problems implementing prior capitation initiatives; (3) HHS should develop safeguards to ensure that payment rates do not result in overcompensating health service plans; and (4) HHS plans to research the proposed legislation's effect on existing Medicare prepaid plans.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: Section 4015 of the Omnibus Budget Reconciliation Act of 1987 limited HHS to funding three Medicare insured group demonstration projects and required that they be evaluated before program expansion.

    Matter: If the House Ways and Means Committee, Subcommittee on Health, considers the HHS Medicare-insured group proposal, it should consider deferring authorizing implementation until HHS demonstrates that the Medicare-insured group rate-setting methods and beneficiary and program safeguards are reasonable and adequate.


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