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Medicare+Choice: Reforms Have Reduced, but Likely Not Eliminated, Excess Plan Payments

HEHS-99-144 Published: Jun 18, 1999. Publicly Released: Jun 22, 1999.
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Pursuant to a congressional request, GAO reviewed concerns surrounding the Balanced Budget Act's (BBA) health plan payment changes, focusing on: (1) the extent to which health plans provide additional benefits and whether they could continue to provide additional benefits if payments were reduced; (2) the evidence regarding managed care's effect on Medicare spending; and (3) whether BBA provisions will eliminate excess plan payments.


Matter for Congressional Consideration

Matter Status Comments
To avoid unnecessary Medicare spending, Congress may wish to consider revising each county's base rate to more accurately reflect the estimated FFS cost of serving the average Medicare beneficiary. Such a revision would eliminate Medicare Choice and FFS spending disparities caused by: (1) flaws in the methodology HCFA used to set base rates in each county before BBA; (2) the incorporation of the 1997 forecast error in 1998 and future rates; and (3) the annual payment rate update reductions mandated by BBA. If Congress wishes to share in the efficiencies of Medicare Choice plans, base rates should be set below estimated average FFS costs as they were under the Medicare risk-contract program. Congress may also want to consider maintaining a minimum base rate to encourage greater participation by Medicare Choice plans in rural areas.
Closed – Not Implemented
Representatives of some Medicare+Choice plans have stated that current payment rates are inadequate. A number of plans have withdrawn from the Medicare+Choice program or reduced their participation. In light of these facts, legislators are considering whether Medicare's payment methodology should be revised.

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