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6 Cards in this Set

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THERE ARE 2 WAYS SENIORS CAN BE COVERED UNDER MEDICARE:
The Traditional Medicare Fee-for-Service Program
- or -
Medicare + Choice (renamed to “Medicare Advantage” in 2004)
 Comprehensive care delivered by an HMO, PPO, POS, or PSO*.
 The contract between the MCO and the government is called a Medicare Risk contract.
* A PSO (provider-sponsored organization) is a group of doctors and hospitals that provides a health insurance-like product directly to employers or senior citizens.
THIS CHAPTER (pp. 1060 - 1072) COVERS:
 Eligibility: What kinds of MCOs and insurers may enter into a Medicare Risk contract
 How the contractor is paid by the government (“contractor” means the MCO)
 How the BBA (Balanced Budget Act of 1997) changed the eligibility rules and levels of payment.

This section is only about the Medicare + Choice program, not about the regular Medicare fee-for-service program. Also note that this chapter was written before the Medicare Modernization Act of 2003.
THE GOVERNMENT’S REIMBURSEMENT OF M+C CONTRACTORS
 The government pays the MCO a fixed monthly capitation based on demographics and member health statuses. (Adjusted Community Rating)
The MCO has two options:
 Provide a plan equal to Medicare’s and return any payments not needed; or
 Use the extra government payments to provide enrollees with additional benefits or reduced cost-sharing (most participating MCOs chose this option)
THE BALANCED BUDGET ACT OF 1997 (BBA)
Goals of the Balanced Budget Act of 1997:
 To cut down health spending to balance the budget
 To encourage more MCOs to join the Medicare Risk program.
 Especially in rural areas
 To provide more choices of types of health plans for seniors:
 HMO’s
 PPO’s
 PSO’s
 Private FFS plans
 POS plans
 High-deductible plans with separate MSA Accounts
 Increases patients’ prudence in spending.
Requirements by an Organization in order to become an M+C Plan:
Federal Requirements to become an M+C Plan
 Finances. Sufficient capital; license as a risk-bearing entity.
 Medicare Regulations. Mandated benefit package; mandated limit on additional premiums and copays chargeable to beneficiaries.
 Health Care Delivery. Access, Quality, and Credentials.

The BBA’s eases to previous requirements:
 Repeal of 50/50 requirement.
 Waiver of 5000-member minimum requirement
 PSO’s given easier financial requirements
 Medicare area of coverage no longer must equal non-Medicare area

Other Terms of the BBA:
 The MCO can offer “supplemental benefits”
 The premium for these extras is restricted
 They must be non-discriminatory.
Payment Methodology: How Participating MCO’s are Paid
Before the BBA of 1997
 Each MCO was paid a monthly capitation equal to 95% of the expected cost that the enrollees would have incurred under the traditional fee-for-service Medicare.
 Payments were adjusted for age, sex, and location.

After the BBA of 1997
The BBA of 1997 changed (mostly lowered!) the way Medicare Risk MCO’s were paid.
 An HMO’s payment would now be the maximum of the following:
A) A blended local and national rate PMPM

B) Flat dollar amount ($367 PMPM in 1998),

or

C) 2% higher than the prior year’s rate (for renewing MCO’s)


 Risk adjustment (for specified medical diagnoses) would be phased in.
 MCOs would get more money for their sickest beneficiaries.
 Medical education costs were now paid to contractors as incurred, not in advance.
 New entrant bonus given to plans entering previously empty areas.
 Next year’s rates and demographic factors are announced a year in advance.



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