Copyright 1999 Federal News Service, Inc.
Federal News Service
FEBRUARY 25, 1999, THURSDAY
SECTION: IN THE NEWS
LENGTH:
2256 words
HEADLINE: PREPARED TESTIMONY OF
JUDITH
A. DISCENZA
VICE PRESIDENT
BLUE CROSS AND BLUE SHIELD OF FLORIDA
BEFORE THE HOUSE COMMERCE COMMITTEE
SUBCOMMITTEE ON
HEALTH AND ENVIRONMENT
SUBJECT - MEDICARE+CHOICE RISK
ADJUSTMENT METHODOLOGY
BODY:
Mr. Chairman
and members of the subcommittee, I am Judith A. Discenza, Vice President and
Actuary for Blue Cross and Blue Shield of Florida. Our Health Options plan is a
large Medicare risk contractor with an enrollment of approximately 123,000
Medicare beneficiaries.
I appreciate the opportunity to testify before the
Subcommittee today on how HCFA's current approach to implementing risk
adjustment will heighten already existing threats to the
Medicare+Choice (M+C) program. As a result of constrained payments and the
business risks of implementing the regulations, more than 500,000 Medicare
beneficiaries were affected when health plans in 1998 scaled back their service
or decided not to participate. The result is that Medicare beneficiaries were
left with fewer, not more, health plan choices. Because of uncertainty related
to regulation and reimbursement around Medicare+Choice and in large part,
uncertainty around the risk adjustment methodology, continued
volatility in Medicare+Choice is likely.
In light of the existing serious
issues surrounding Medicare+Choice, we urge delaying the current risk
adjustment approach and encourage HCFA to work with the industry to
study, refine, and test a risk adjustment model. While we
support efforts to devise and apply more effective methods of risk
adjustment, we are concerned that HCFA's current approach will
ultimately cause health plans to exit the program or significantly reduce
benefits for three reasons:
- First, HCFA's current approach is flawed
because it only uses inpatient data;
- Second, HCFA's current approach is
fraught with unresolved data and systems questions, all of which will accentuate
the problems of implementing an inherently biased risk
adjustment methodology; and- Third, even in the first year of the
phase-in, HCFA's current approach could lead to significant proportionate
reductions in payments to plans, particularly in areas that have been capped at
2 percent for several years running.
I shall now address these points in
more detail.
I. THE CURRENT RISK ADJUSTMENT METHOD IS
FLAWED BECAUSE IT RELIES ON INPATIENT DATA
Currently, HCFA is proposing that
a proxy be used for true risk assessment. The substitute methodology is based
only on inpatient hospital data.
Using only inpatient stays of two days or
more will also create an incomplete picture of a plan's health risks. For
example, any attempt to identify diabetics by using hospitalization data will
almost certainly miss most of them. One would need data on physician visits, or
better yet, pharmacy data, to identify beneficiaries with diabetes.
Relying
on hospital stays of two or more days means that only those seniors who have
specific types of hospital stays provide the sole means of determining health
status for the entire enrolled population. Those for whom hospital stays are
shortened or avoided are assumed to be in better than average health.
The
proxy being implemented also creates a situation in which inpatient stays could
increase, driving up medical costs. The method presents problems because a key
objective of managed care is to focus on prevention and thereby minimize the
frequency of hospitalization. A hospital-based risk adjuster provides incentives
for increased and unnecessary hospitalization and provides disincentives for
plans that successfully minimize the need for hospitalization.
3A primary
goal of the health care system is to provide appropriate care at the appropriate
time to individuals. Much of the health services and clinical research of the
past 10 years has focused on excess capacity in the health care system and the
resulting overuse of health care services. Blue Cross and Blue Shield of Florida
is concerned with overuse of services. An appropriate risk
adjustment methodology, by providing appropriate reimbursement and
incentives, will aid our health care system by encouraging efficient use of
health care services. However, risk adjustment, which provides
incentives for increased hospitalization, will have the opposite effect.
The
penalty results from the absence of a risk adjustment "score"
for any member treated for a serious condition without a hospital admission of
two or more days. For example, a member who undergoes an angioplasty in an
outpatient clinic will not receive a "score" for having a serious condition,
even though his or her care was as effective as a fee-for-service (FFS)
beneficiary treated as an inpatient. The only way that a health plan gets
"credit" for enrolling a high-risk beneficiary is if the beneficiary is admitted
to a hospital.
Further heightening the incentive against appropriate care is
the exclusion of short-stay admissions from risk adjustment
scoring. Excluding one-day stays from the payment model is questionable. As an
example, an individual with a particular diagnosis who is enrolled in Medicare
FFS may be hospitalized for three days. An individual with the same diagnosis
enrolled in a M+C plan may be hospitalized for only one day, then moved to a
sub-acute facility (for which no "score" is credited). When short stay
admissions are eliminated from the risk adjustment process, M+C
plans may be penalized in that they receive no additional payment for treating
these patients because the patients did not have a qualifying inpatient
admission.
An additional problem is the exclusion of low frequency, but
potentially high-cost, admissions due to sample size limitations. The interim
risk adjustment method does not include diagnoses that occur
among fewer than 1,000 Medicare beneficiaries -- even if these conditions are
associated with extraordinary medical costs. Thus, a plan that enrolls a
beneficiary with one of these rare, high-risk conditions would not receive
credit for needed care.
Over the years managed care has capitalized on new
technologies and advancements in medical treatments to keep people out of the
hospital. Hospital stays have decreased substantially over this period. Rather
than move the trend in the opposite direction, we urge revising the current
risk adjustment plan to allow for full study, refinement, and
testing in a Medicare managed care environment.
There are two lessons which
we can learn from the current examples of systems which use risk
adjustment: 1) because they do not cover individuals over 65, they do
not provide complete models for the Medicare+Choice population; and 2) they all
either use or recognize the need to move to a full encounter model.
In
Washington State, the covered population includes public employees and
non-Medicare retirees, and uses a risk adjustment model that is
based on both inpatient hospital and ambulatory data. In Minneapolis, the
covered population includes those who are less than 65 and also uses a
risk adjustment model that is based on both inpatient hospital
and ambulatory data. In California, the covered population includes those less
than 65 and utilizes an inpatient only risk adjustment model,
but recognizes the need to move to a full encounter model as data becomes
available.
THE CURRENT RISK ADJUSTMENT APPROACH CONTAINS
UNRESOLVED IMPLEMENTATION PROBLEMS
Compounding the conceptual problems of
HCFA's current risk adjustment method are unresolved
implementation problems that stem largely from two issues:
(1) The limited
ability that health plans have to validate the risk adjustment
calculations or replicate the model; and(2) Data and systems complications,
particularly surrounding year 2000 compliance.
Limited
Validation/Replication ability
A major factor in an organization's decision
to offer a Medicare+Choice plan is the ability of the organization to forecast
revenues. Health plans face significant uncertainties because it is difficult to
validate or replicate HCFA's risk adjustment calculations.
Additionally, because HCFA has not yet disclosed the formulas used for
components of the risk adjustment process it is impossible to
replicate the analyses.
Data and Systems Complications
The most
important systems issues revolve around the Year 2000 (Y2K) problem. Plans are
currently making a major effort to ensure that "Y2K" does not disrupt services
for their Medicare and non-Medicare enrollees. Medicare sees Year 2000
compliance as so important that it has suspended a number of initiatives -
including initiatives mandated by Congress - to free resources to deal with Y2K
systems issues. At least 15 HCFA initiatives have been delayed or modified due
to Y2K concerns:
The implementation of SNF consolidated billing.
- The
implementation of new payment systems for ambulatory surgical centers and
hospital outpatient services.
- The implementation of new payment methods
for home health agencies.
- The purpose of these actions is to minimize the
number of system changes that might interfere with the ability of contractors to
make sure that information systems are ready for the Year 2000 and are able to
process claims without interruption. A similar problem exists for the data
needed to implement a risk adjustment system. We have not
received guidance from HCFA regarding the planned October submission of
ambulatory encounter data. It is vital to have information such as the required
fields, implementation instructions, and data format requirements with
sufficient time for system changes well before the data is required to be
submitted. The burden of system changes around these new requirements comes at a
particularly bad time in relation to system changes for Y2K.
A related issue
is what will happen in the event era computer systems failure. There is a
possibility of computer systems failure anywhere in the process - i.e., in the
transfer of data, in the processing of data, etc. Computer failures related to
the Year 2000, particularly for hospitals that must transfer data to plans or
directly to fiscal intermediaries are special concerns. As the HCFA
Administrator noted in recent testimony before the House Ways and Means
Subcommittee on Health:
"Health care providers must be Year 2000 compliant
in order to bill us properly and continue to provide high quality care and
service to Medicare beneficiaries... Our monitoring indicates that some..,
providers could well fail.. We are providing assistance to the extent that we
are able, but that likely will not be enough. This matter is of urgent concern,
and literally grows in importance with each passing day." The current
risk adjustment method contains unresolved data and information
systems issues. For example, it is unclear how plans will be able to check for
completeness of data arriving at HCFA for risk adjustment.
Plans will face challenges in checking for data completeness - they may have
trouble with fiscal intermediaries or with the editing process. In addition,
plans may have difficulty getting data on all services, particularly from
capitated providers. The detail of the data or the process at this time is
insufficient to provide confidence that all data are being transmitted, received
and used appropriately.
m. SIGNIFICANT REDUCTIONS IN PAYMENTS TO PLANS
HCFA estimates that this risk adjustment proposal will
produce five- year payment reductions for Medicare+Choice plans of $11.2
billion. Such reductions are likely to reduce the health plan choices available
to beneficiaries and the benefits that these plans can offer.
Even with
HCFA's proposed phase-in - in which only 10 percent of the risk
adjustment effect kicks in - some of the plans that are again capped at
2 percent could see their year 2000 payment increase entirely offset. In 1998
and 1999, virtually all Medicare beneficiaries lived in areas that receive 2
percent payment increases; we expect that millions of Medicare beneficiaries
will again see plans in their areas receive 2 percent in 2000. HCFA estimates
that this risk adjustment method could trim as much as 2
percent from some plans' payments. In addition, all Medicare+Choice plans are
required to pay a user fee to defray the costs of HCFA's informational campaign,
which will probably be about 0.4 percent. Thus, despite acceleration in private
sector health care costs in 2000, some M+C plans might actually see a decrease
if HCFA implements this risk adjustment method in 2000.
IV.
CONCLUSION
Congress created the Medicare+Choice program in the Balanced
Budget Act of 1997 (BBA) to expand the types and number of private health plans
offered to Medicare beneficiaries. However, as a result of constrained payments
and the business risks of the implementing regulations, health plan options and
choices have not expanded significantly; in fact, they have contracted in many
areas. The premature adoption, of a risk adjustment method will
only intensify the volatility of the Medicare+Choice program.
Blue Cross and
Blue Shield of Florida believes that a refined risk adjuster - without the
inherent bias of the inpatient-only approach - can further the objective of
expanding the choices available to Medicare beneficiaries. However, prematurely
implementing interim solutions could well work against this objective.
As
stated in the beginning of this testimony, we urge delaying the current
risk adjustment approach to give more time to study, refine,
and test a valid risk adjustment model in a
Medicare managed care environment. We look forward to a continued dialogue with
HCFA to ensure a proper approach to risk adjustment and, hence,
the viability of the Medicare+Choice program.Thank you for the opportunity to
speak with you on this important issue.
END
LOAD-DATE: February 27, 1999
