Copyright 2000 Federal News Service, Inc.
Federal News Service
July 25, 2000, Tuesday
SECTION: PREPARED TESTIMONY
LENGTH: 2867 words
HEADLINE:
PREPARED STATEMENT OF GEORGE RENAUDIN SENIOR VICE PRESIDENT OF ADMINISTRATION
OCHSNER HEALTH PLAN, METAIRIE, LOUISIANA, ON BEHALF OF THE AMERICAN ASSOCIATION
OF HEALTH PLANS
BEFORE THE HOUSE COMMITTEE ON
WAYS AND MEANS SUBCOMMITTEE ON HEALTH
SUBJECT - ADDITIONAL
MEDICARE REFINEMENTS TO THE BALANCED BUDGET ACT OF 1997
BODY:
Mr. Chairman and members of the
subcommittee, thank you for the opportunity to testify on the impact the
Balanced Budget Act of 1997 (BBA) has had on Medicare+Choice organizations and
the beneficiaries they serve. I am George Renaudin, Senior Vice President of
Administration for Ochsner Health Plan, which is the largest HMO in Louisiana
and the fifth largest provider-owned HMO in the nation. I oversee administrative
functions at Ochsner Health Plan, including the management of our
Medicare+Choice plan, Total Health 65, which currently serves 36,572 Medicare
beneficiaries. In January 2001, due to the problems I will discuss in my
testimony, we will be forced to withdraw from six parishes in Louisiana and
terminate coverage for 5,982 beneficiaries.
I am testifying today on
behalf of the American Association of Health Plans (AAHP), which represents more
than 1,000 health maintenance organizations (HMOs), preferred provider
organizations (PPOs), and other similar health plans that provide health care
coverage to more than 140 million Americans.
AAHP's membership includes
Medicare+Choice organizations that collectively serve more than 75 percent of
those beneficiaries who have chosen Medicare managed care over the
fee-for-service program. AAHP member plans have strongly supported efforts to
modernize Medicare and give beneficiaries the same health care choices that are
available to working Americans. AAHP member plans have had a longstanding
commitment to Medicare and to the mission of providing high quality, cost
effective services to beneficiaries.
To fully understand the impact the
BBA has had on Medicare+Choice plans and enrollees, I believe we should begin by
briefly reviewing the Medicare HMO program that existed before Congress
established the Medicare+Choice program in 1997. Under the original Medicare HMO
program, the government paid health plans a set amount per month to cover the
health benefits of each beneficiary. This amount was based on 95 percent of the
costs the government paid for beneficiaries served by the Medicare
fee-for-service system.
This Medicare HMO program offered important
advantages to both the government and Medicare beneficiaries. The government
paid less for beneficiaries who enrolled in Medicare HMOs; at the same time,
beneficiaries were well-served by a system that allowed Medicare HMOs to provide
high quality care while providing additional benefits-- beyond those covered by
the fee-for-service program--often at no additional cost to beneficiaries. By
delivering care in a more efficient way, Medicare HMOs achieved cost savings
that were passed along to beneficiaries in the form of increased benefits and
reduced out-of-pocket costs. As a result, beneficiaries in Medicare HMOs did not
have to purchase costly Medigap coverage to protect themselves from health care
expenses not covered by the old fee-for-service program.
The success of
the Medicare HMO program was evidenced by the fact that beneficiaries signed up
for Medicare HMO coverage in large numbers. From December 1993 through December
1997, enrollment in Medicare HMOs increased at an average annual rate of 30
percent. In states such as Louisiana, Pennsylvania, Ohio, and Texas, enrollment
in Medicare HMOs increased even more rapidly. In Louisiana, enrollment in
Medicare HMOs increased from 2,344 in 1994 to 80,756 in 1997, reflecting a
33-fold increase. In December 1997, shortly after the enactment of the BBA,
Medicare HMO enrollment stood at 5.2 million, accounting for 14 percent of the
total Medicare population--up from just 1.3 million enrollees and 3 percent of
the Medicare population in December 1990.
Beneficiaries valued this
important health care choice under the original Medicare HMO program--and still
value it today--because Medicare HMOs, when adequately funded, are able to
provide a more comprehensive package of benefits and lower out-of-pocket costs
than the old Medicare fee-for-service system. This is particularly important to
low-income beneficiaries. For many seniors and persons with disabilities who
live on fixed incomes, having access to a Medicare HMO means that they can spend
their limited resources on groceries and other daily essentials--instead of
"going without." Beneficiaries also like Medicare HMOs because they provide
coordinated care and place a strong emphasis on preventive services that help
them to stay healthy and avoid preventable diseases. According to a survey
conducted by HCFA, when Medicare managed care enrollees were asked to rate their
plans on a scale of 1 to 10 (with 10 being the highest score), 50 percent
assigned a "10" rating to their plan and another 34 percent assigned an "8" or a
"9" rating to their plan.
The success of the Medicare HMO program
inspired Congress to establish the Medicare+Choice program in 1997. The new
program was intended to further expand beneficiaries' health care choices by
establishing an even wider range of health plan options and by making such
options available in areas where Medicare HMOs were not yet available. Three
years later, however, the Medicare+Choice program has not fulfilled its promise
of expanding health care choices for Medicare beneficiaries. Instead, a large
number of beneficiaries have lost their Medicare+Choice plans or experienced an
increase in out-of- pocket costs or a reduction in benefits.
Two major
problems are responsible for this outcome: (1) the Medicare+Choice program is
significantly underfunded; and (2) the Health Care Financing Administration
(HCFA) has imposed excessive regulatory burdens on health plans participating in
the program. The funding problem has been caused by the unintended consequences
of the Medicare+Choice payment formula that was established by the BBA, as well
as the Administration's decision to implement risk adjustment
of Medicare+Choice payments on a non-budget neutral basis. Under this formula,
the vast majority of health plans, including Ochsner Health Plan, have been
receiving annual payment updates of only 2 percent in recent years--while the
cost of caring for Medicare beneficiaries has been increasing at a much higher
rate.
To underscore the inadequacy of the government's payments to
Medicare+Choice plans, I offer three examples for the subcommittee's
consideration:
1. Total premiums collected by health plans (from OPM and
from enrollees) participating in the Federal Employees Health Benefits Program
(FEHBP) have increased, for the average beneficiary, by a total of 29.1 percent
between January 1997 and December 2000. During this same time period, government
payments to Medicare+Choice plans have increased, for the average beneficiary,
by a total of only 8.6 percent. In 2001, government payments to Medicare+Choice
plans will again generally increase by just 2 percent--making this the third
time in four years that the annual update was 2 percent. In Louisiana, our
medical costs have increased at a rate of 5 to 7 percent per year, while we have
received less than a two percent increase in payment per year because of the
impact of the risk adjuster and because Medicare+Choice plans paid the entire
cost of the Medicare Beneficiary Information Campaign for the first three years
of the program. We have had to both withdraw from service areas and increase
beneficiary out- of-pocket costs in order to sustain participation in the
program.
2. In many geographic areas where large numbers of Medicare
beneficiaries are enrolled in Medicare+Choice plans, government payments for
Medicare fee-for-service beneficiaries will exceed government payments to plans
on behalf of Medicare+Choice beneficiaries by $1,000 or more
per beneficiary in 2004. These areas include--to name just a few--my home town
of New Orleans (which currently has 26,532 Medicare+Choice enrollees); Los
Angeles (314,000 Medicare+Choice enrollees); New York (174,000 Medicare+Choice
enrollees); Miami (134,000 Medicare+Choice enrollees); and Philadelphia (78,000
Medicare+Choice enrollees). This payment differential has challenged the ability
of health plans to offer beneficiaries the quality coverage they deserve and,
additionally, to maintain provider networks and expand into new geographic
areas.
3. By establishing a blend of local and national rates, the BBA
intended to reduce the variation in Medicare+Choice payments among counties. As
noted above, however, the blend has been funded in only one year and government
payments to Medicare+Choice plans continue to vary among geographic areas,
including neighboring geographic areas. For example, the monthly actual payment
from the government is $451 in Terrebonne parish, Louisiana and
$574 in Orleans parish, Louisiana--a difference of
$123 even though these areas are just a 40-minute drive apart.
These examples raise serious concerns about the adequacy of
Medicare+Choice payments. However, to fully appreciate the crisis in the
Medicare+Choice program, it is important for Congress to examine the impact it
has had on Medicare beneficiaries.
In January 1999, 407,000
beneficiaries were forced to change health plans or return to the Medicare
fee-for-service system because many health plans--faced with inadequate
government payments and excessively burdensome regulatory requirements--were
forced to curtail their participation in the Medicare+Choice program. In January
2000, 327,000 experienced similar disruptions in their health coverage.
Additionally, many other beneficiaries have lost important benefits and are
paying higher out-of-pocket costs even though they have been able to keep their
Medicare+Choice plans. To understand why beneficiaries are losing choices and
benefits, please consider that, in the six parishes from which we are being
forced to withdraw in January 2001, the ratio of medical costs to total
reimbursements is 111 percent for our Medicare+Choice members. No health plan
can survive while paying 11 percent more in health care benefits than it
receives in payments.
These disruptions have been particularly painful
for low-income Medicare beneficiaries. A recent analysis by AAHP indicates that
Medicare+Choice plans play an important role in providing supplemental coverage
(i.e., coverage that pays for services not covered by Medicare Part A and Part
B) to Medicare beneficiaries who are financially vulnerable. Our analysis
indicated that a very large proportion of Medicare+Choice enrollees are
"unsubsidized"--meaning that they do not receive any third party assistance
from, for example, a former employer or through Medicaid, in purchasing
supplemental coverage for prescription drugs and protection against
out-of-pocket expenses. For many of these individuals, affordable
Medicare+Choice plans may be the only alternative to going without supplemental
coverage.
For many vulnerable beneficiaries, returning to the
fee-for-service program, with its higher costs and reduced benefits, would
result in serious hardships. Changing plans and health care providers--plus
losing benefits such as prescription drug coverage and paying large supplemental
coverage premiums--can be a highly traumatic and disruptive experience for
low-income beneficiaries.
In an effort to address the crisis in the
Medicare+Choice program, Congress enacted the Balanced Budget Refinement Act of
1999 (BBRA). While this legislation was a step in the right direction, it
provided only a small fraction of the resources that are needed to fully
stabilize the program on a long-term basis. As a result, the Medicare+Choice
program will experience further disruptions in January 2001. I do not want to
downplay the significance of the BBRA, however, because the small increase
allowed us to stay in a parish--with 2,000 members--from which we otherwise
would have been forced to withdraw.
As the subcommittee knows, July 3
was the deadline by which Medicare+Choice organizations were required to notify
HCFA of their intention to participate in or withdraw from the Medicare+Choice
program during the 2001 contract year and, additionally, submit any proposed
changes affecting premiums or benefits. In the weeks leading up to this
deadline, Medicare+Choice organizations were forced to make extremely difficult
decisions on these matters. Those health plans that decided to curtail their
participation in the program did so only as an option of last resort. In many
cases, health plans reluctantly concluded that--because Medicare+Choice payments
are inadequate and because the program's regulatory requirements are so
burdensome--the Medicare+Choice program is not providing health plans a viable
framework for serving Medicare beneficiaries.
The Health Care Financing
Administration (HCFA) recently announced that 934,000 Medicare beneficiaries
will suffer the loss of their current health coverage in January 2001 because
Medicare+Choice organizations are being forced to exit the program. This number
is greater than the number who were similarly affected in the previous two years
combined. Moreover, among the 934,000 beneficiaries who will lose their health
plans in January 2001, approximately 159,000 will be left with no other
Medicare+Choice HMO options in their area.
This is unfortunate news for
hundreds of thousands of Medicare beneficiaries and it is disappointing to
Medicare+Choice plans that have done everything possible to avoid this
unfortunate outcome. The reality is that these withdrawals could have been
avoided. For two years, AAHP and our member plans have urged Congress and the
Administration to take bold action to address the crisis in the Medicare+Choice
program. Although Congress took an important first step to improve
Medicare+Choice payments last year, the need for more meaningful changes has not
been addressed. Beneficiaries are now paying a heavy price for this inaction.
Despite our disappointment, we remain committed to the success of the
Medicare+Choice program and we will continue to work with you to advance the
changes that are clearly needed to put the program on sound footing. We are
encouraged that there is bipartisan movement within Congress to enact such
changes. We also appreciate Congressman Bilbray's resolution--approved by the
House on June 29 by a strong bipartisan vote of 404 to 8--which acknowledged
that "inadequate reimbursement rates" are a problem in the Medicare+Choice
program and that action must be taken this year to address this critical issue.
I thank Congressmen McCrery and Jefferson and other members of the Louisiana
delegation, as well as the 11 members of this subcommittee, who voted for this
resolution.
We now urge you to take action this year on specific
legislation that follows through on the serious concerns you expressed when you
voted for Congressman Bilbray's resolution. We believe Congress must provide
$15 billion directly to Medicare+Choice plans over the next
five years to stabilize the Medicare+Choice program on a long-term basis. A
commitment of this magnitude is needed to assure that the Medicare+Choice
program fulfills it promise of preserving and expanding health care choices for
all Medicare beneficiaries. As you consider options for devoting more funds to
the program, we urge you to assure that resources are allocated in such a way as
to assure that the Medicare+Choice program is viable in areas where
beneficiaries have already selected health plan options and that the program can
expand in areas where such options are not yet widely available.
We also
urge you to combine this additional funding with meaningful regulatory reforms
so beneficiaries are receiving quality and value in their Medicare+Choice plans.
It is critically important to assure that the benefits of regulations outweigh
their costs. Currently, Medicare+Choice plans are being forced to devote
substantial human and financial resources toward compliance activities, thus
leaving fewer resources available for paying for health care services provided
to beneficiaries--resulting in higher premiums and reduced benefits for
beneficiaries. One example of a set of unnecessarily onerous requirements that
merit immediate attention can be found in the physician encounter data
requirements under the Medicare+Choice risk adjustment
initiative. Preparations for their implementation are requiring an enormous
commitment of resources by Medicare+Choice organizations, and this burden will
spill over to require similar efforts by their network providers. However, less
costly options are available that would meet HCFA's need for data for
risk adjustment purposes. We believe beneficiaries will be
better served by a regulatory environment that assures quality of care and, at
the same time, assures that the costs associated with regulations do not
unnecessarily divert resources away from patient care and benefits.
Recognizing that more than 6 million Medicare beneficiaries are relying
on the Medicare+Choice program to meet their health care needs, we believe this
is one of the most important issues facing Congress. We look forward to working
with the subcommittee to address this critically important issue in the
remaining months of the 2000 legislative session.
END
LOAD-DATE: July 26, 2000 
