Copyright 1999 Federal Document Clearing House, Inc.
Federal Document Clearing House Congressional Testimony
October 01, 1999
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 8574 words
HEADLINE:
TESTIMONY October 01, 1999 GAIL R. WILENSKY, PH.D CHAIR MEDICARE PAYMENT
ADVISORY COMMISSION HOUSE WAYS AND MEANS HEALTH MEDICARE
BALANCED BUDGET ACT REVISIONS
BODY:
Statement of
Gail R. Wilensky, Ph.D. Chair Medicare Payment Advisory Commission Before the
Committee on Ways and Means, Subcommittee on Health, U.S. House of
Representatives Good morning Chairman Thomas, Congressman Stark, members of the
Committee. I am Gail Wilensky, chair of the Medicare Payment Advisory Commission
(MedPAC), and I am pleased to participate in this hearing looking at refinements
to the Medicare provisions in the Balanced Budget Act (BBA) of 1997. My
testimony describes what we know and do not yet know about the implications of
the BBA for Medicare beneficiaries, health care providers, and Medicare+Choice
plans. I will also discuss recommendations that MedPAC has made this year and
other options you may wish to consider. The changes enacted in the BBA and
implemented by the Health Care Financing Administration (HCFA) reduced Medicare
payment rates relative to what they would have been otherwise for most providers
and for Medicare+Choice plans in many areas. Not surprisingly, these changes
have generated concerns among providers and health plans about their effects.
Providers' and plans' concerns frequently have been heightened by their
perception that the effects have been more harsh than the Congress intended, or
that the effects, while intended, have nonetheless imposed burdens, and that
there are specific problems with how HCFA has implemented the law. Summary A
greater than expected slowdown in Medicare spending began in fiscal year (FY)
1998 and has continued this year. Medicare spending rose only 1. 5 percent last
year, compared with a projection of 5.7 percent by the Congressional Budget
Office when BBA was enacted. Through the first I 1 months of FY 1999, outlays
ran about I percent below the FY 1998 rate for the same period. Unfortunately,
we cannot draw definitive conclusions about what the slowdown in spending means.
Almost two years have gone by since the first BBA policies were put in place,
but systematic data for this period are still extremely limited. Moreover, we
cannot easily isolate the effects of the BBA from other changes in policy or
market conditions. For example: - Hospitals have argued that the changes in
Medicare payments are reducing their margins and impinging on their ability to
provide quality care. But the most recent complete information we have for the
Medicare program is from FY 1997, the year before the BBA took effect. - For
home health services, we have seen lower than expected outlays, closures of home
health agencies, and declines in the use of services. But our interpretation of
these findings is clouded by other policy changes, notably efforts by HCFA and
the Department of Justice to cut down fraud and abuse and by the lack of clear
eligibility and coverage guidelines for home health care. - Widely publicized
withdrawals of plans from the Medicare+Choice program suggest that the program
is not achieving the goals its authors intended. But managed care enrollment has
continued to grow-albeit at a slower rate-since the BBA was enacted. Moreover,
the pattern of withdrawals suggests that factors in addition to Medicare's
payment rates are playing a role. The BBA had ambitious objectives. For
Medicare's fee-for-service program, it aimed to modernize payment systems and
slow the growth in spending, while preserving Medicare beneficiaries' access to
high-quality health care. For Medicare's managed care program, the BBA allowed
new types of plans to participate and instituted new requirements intended to
enable beneficiaries to choose more effectively among their health plan options.
To expect legislation this sweeping to achieve all of its objectives flawlessly
is unrealistic. In some cases, targeted changes in statute or regulation could
improve Medicare's payments and access to care for beneficiaries. But the
complaints of providers and health plans notwithstanding, we have no evidence
that wholesale changes in the BBA are either necessary or desirable. How did the
BBA change payments to providers? The BBA enacted the most far-reaching changes
to the Medicare program since its inception. The law reduced payment updates or
otherwise slowed the growth in payments to virtually all fee-for- service
providers. The law established, or directed to be established, new prospective
payment systems for services provided by hospital outpatient departments,
skilled nursing facilities, and home health agencies, and it revised the
mechanism for updating fees for physician services. Finally, the BBA changed the
way base payment rates are determined for health plans participating in the
Medicare+Choice program and directed HCFA to implement a new system of risk
adjustment that accounts for beneficiaries' health status. Inpatient hospital
services The BBA changed payments for inpatient hospital services in a number of
ways. For hospitals under Medicare's prospective payment system (PPS), the law
provided for no update to operating payments in FY 1998 and limited updates from
FY 1999 through FY 2002. It required phased reductions in the per-case
adjustments for the indirect costs of medical education (WE) and, temporarily,
for hospitals serving a disproportionate share (DSH) of low-income patients. And
it instituted a new transfer policy for 1 0 high-volume diagnosis related groups
(DRGs), reducing the payment rates when hospitals discharge patients in these
DRGs to post-acute care facilities following unusually short stays. By
themselves, lower updates would have slowed the growth in payment rates to
hospitals for inpatient services but would not have reduced them. in FY 1998,
however, the combined effect of the freeze on payment rates, smaller IME and DSH
payment adjustments, and a small decline in the case mix index reduced payment
rates in absolute terms. Payment rates should begin to increase again in FY
1999, albeit at a slower rate than would have occurred in the absence of the
BBA. Outpatient hospital services In addition to changes in payments for
inpatient services, the BBA also enacted major changes in Medicare's payments
for services provided in hospital outpatient departments. It eliminated the so-
called formula-driven overpayment under which Medicare's payments did not
correctly account for beneficiaries' cost-sharing and extended the reduction in
payments for services paid on a cost-related basis. The law also directed the
Secretary to establish a prospective payment system for services that have been
paid at least partially on the basis of incurred costs. Hospitals have not yet
felt the full impact of the BBA provisions affecting outpatient services. MedPAC
estimates that elimination of the formula-driven overpayment, which took effect
in 1998, reduced payments by about 8 percent. However, the PPS that was to have
gone into effect in January 1999 will not be put in place before next summer.
HCFA originally estimated that the PPS would reduce payment rates by 3.8
percent, on average, but has since revised its estimate of the reduction to 5.7
percent. These estimates likely overstate the ultimate reduction, however, as
hospitals will have an incentive to code outpatient services more accurately
than they do now. Services in skilled nursing facilities The BBA enacted a PPS
for services provided in skilled nursing facilities (SNFs). These services had
previouslybeenpaidonthebasisofcosts,subjecttolimitsonroutineservi ces. Under the
new system, payments are intended to cover the routine, ancillary, and capital
costs incurred in treating a SNF patient, including most items and services for
which payment was previously made under Part B of Medicare. Patients in SNFs are
classified under the Resource Utilization Group system, version In (RUG-In),
which groups patients by their clinical characteristics for determining per diem
payments. The new payment system slows spending growth for SNF services by
moving these facilities from cost- based reimbursement to federal rates that are
based on average allowable per them costs in FY 1995, trended forward using the
increase in the SNF market basket index less 1 percentage point. Because nursing
home spending-- particularly for ancillary services-grew rapidly between FY 1995
and FY 1997, using FY 1995 as the base for payment purposes reduced payments for
many nursing homes. The PPS is being phased in over a four-year period that
began in 1998. Payments in FY 1999 are based on a 50/50 blend of federal rates
and facility- specific rates and will be based entirely on the federal rates
beginning in FY 2001. Home health services Before the BBA, home health agencies
were paid on the basis of costs, subject to limits based on costs per-visit. The
BBA directed the Secretary to implement a prospective payment system effective
October 1999-since delayed by the Congress to October 2000-and established an
interim payment system (E?S) intended to control the growth in spending until
the PPS was in place. The IPS reduced the limits based on costs per visit and
introduced agency-specific limits on average costs per beneficiary based on a
blend of agency-specific costs and average per-patient costs for agencies in the
same region. Home health agencies are now paid the lower of their actual costs,
the aggregate per- beneficiary limit, and the aggregate per-visit limit.
Agencies per-beneficiary limits are based on their average costs per beneficiary
in FY 1994, trended forward using the home health market basket index. As with
nursing homes, home health spending grew rapidly in the mid- 1 990s. For this
reason, using FY 1994 as a base for payment led to substantial payment cuts for
some home health agencies. Physician services The BBA replaced the volume
performance standard system that had been used to update physicians' fees with a
new sustainable growth rate (SGR) system. It also introduced a single conversion
factor for all physician services that reduced payments for some services while
increasing them for others. Finally, the BBA established requirements for
payments to physicians for their practice costs. Unlike some of the other
provisions of the BBA, changes to Medicare's payments to physicians occurred
almost immediately. Starting on January 1, 1998, the single conversion factor
was implemented along with the first step toward revising practice cost
payments. The effects of these changes were largest for some surgical
procedures, such as cataract surgery and some orthopedic procedures, where
payment rates fell by 13 percent or more. Payment rates for other services went
up, however. Payments for office visits and some diagnostic services increased
by at least 7 percent. Medicare+Choice plans Before enactment of the BBA,
Medicare's payments to private health plans participating in the section 1876
risk contracting program were based on the average payments made on behalf of
beneficiaries in its traditional fee-for-service program living in the same
county. The BBA severed the link between county-level trends in fee-for-service
spending and payment updates to plans by instituting a floor under county
payment rates, blending local and national payment rates (subject to a so-called
budget- neutrality provision), and removing the component of base rates
attributable to spending for graduate medical education.
Overall, the law limited updates to payment rates in all counties by slowing the
rate of growth in national fee-for-service spending and by subtracting a
specified factor from that rate. The blending policy raised updates in some
counties but reduced updates in others. In addition to changes in base payment
rates, the BBA required HCFA to implement a new system of risk adjustment that
takes into account the health status of the beneficiaries that plans enroll. The
law laid out a very tight time schedule, requiring HCFA to implement the new
system by January 1, 2000. The system that HCFA has proposed will raise payments
for certain enrollees who were hospitalized in the year preceding the payment
year and will reduce payments for other enrollees. The amount of the higher
payments will depend on the principal diagnoses associated with hospital
admissions. HCFA has proposed to phase in the new system over a five-year period
and has estimated that other things being equal, the new system would reduce
payment rates by 7.6 percent on average at the end of the phase-in. What has
been the impact of these payment changes? Providers' and plans' concerns are
clearly relevant to any assessment of the BBA. But at the same time, we must
remember that the primary objective of the Medicare program is to maintain
access to high-quality care for beneficiaries. Assessing the implications of the
BBA should therefore focus on whether access to or quality of care has been
hampered and, if so, what can be done about it. In evaluating the potential
impact of the BBA on access and quality, two issues seem especially important.
One is how policies may interact to affect providers' ability and incentives to
furnish care. Hospitals, for example, often furnish many types of services and
must therefore face the combined effects of policy changes that have altered
payments for virtually every service they provide. Medicare+Choice plans face
changes in the way base payment rates are calculated, new requirements for
participation, and future changes in payments arising from the introduction of a
new risk adjustment system. A second issue is whether the new payment systems
adequately reflect predictable differences in patient care costs. Industry and
other analysts have raised this issue with regard to the IPS for home health
agencies and the prospective payment systems being developed for outpatient
hospital services and being phased in for SNFs. Where predictable differences in
costs are not taken into account, financial incentives are created for providers
to deny access to care or undertreat identifiable groups of patients. Sorting
out the effects of multiple changes in payment policies and the introduction of
new payment systems on beneficiaries' ability to obtain the medical services
they need is challenging in two important respects. First, many BBA changes have
not yet been fully phased in, and data to evaluate the impact of recent changes
are in many cases not yet available. Second, measuring access to care is
difficult. Because directly measuring appropriate beneficiary use of services is
hard to do with existing data, policymakers often look at determinants of
access, such as provider availability and willingness to serve Medicare
beneficiaries, as well as the nature and extent of other barriers to access that
beneficiaries face. Interpreting the findings of these analyses can be
difficult, however, because we cannot isolate the effects of changes in Medicare
policy from the effects of other changes in health care financing or delivery
arrangements. Financial impacts During the past year, various indicators have
been cited as measuring the financial impact that the BBA is having on
providers. The hospital industry, for example, has issued several reports
analyzing the impact of the BBA on hospital revenues and margins. A second
example is the closures of home health agencies since the IPS was put in place.
The home health industry and its observers claim that the IPS caused declines in
the number of agencies, putting beneficiaries' access to home health care
services at risk. Hospitals. There ports issued by the hospital industry contain
new projections, but they do not present new data. In response to congressional
requests, MedPAC staff has analyzed these projections and found that all of them
portray a more adverse impact of the BBA than we believe to be the case. Some
present a particularly inaccurate picture of the impact in FY 1998 by assuming a
rate of increase in costs that substantially exceeds what we already know to
have occur-red. Data from the American Hospital Association's National Hospital
Panel Survey suggest that when complete Medicare cost report data become
available later this year, we will again see a decline in Medicare cost per
discharge for FY 1998, the fifth year in succession. Although we believe that
industry reports somewhat overstate the impact of the BBA on hospital margins,
they do correctly present its overall direction. As it was intended to do, the
law has reversed a six-year trend of Medicare payments rising more rapidly than
the costs of treating Medicare beneficiaries. Still, two reasons make it
difficult to interpret what changes in total margins mean for Medicare policy.
First, the financial pressure that hospitals are currently experiencing reflects
both changes in Medicare's payment policies and continued strong downward
pressure on revenues from private managed care plans and other payers. In FY
1997, private payers' payments dropped by 4 percentage points relative to the
cost of treating their patients, while Medicare payments rose relative to costs.
Data for FY 1998 are not yet available, but we have every reason to believe that
the downward pressure from private payers continued as Medicare reduced its
payments. Second, because hospitals can be expected to continue responding to
financial pressures by slowing cost growth-the overall increase in costs per
case for all patients has been below 2.5 percent for five straight years-
projected margins serve only as a gauge of financial pressure, not as a
prediction of what will occur. MedPAC has seen no convincing evidence that the
changes to date have affected either quality or access in the inpatient sector,
but we will continue to monitor developments. Home health agencies. To examine
whether the closures of home health agencies may have affected beneficiaries'
access to services, the General Accounting Office (GAO) analyzed the
distribution of closures across urban and rural counties. The agency also
interviewed stakeholders-representatives of state agencies, beneficiary
advocates, hospital discharge planners, and managers of home health agencies-in
34 primarily rural counties that had experienced significant agency closures or
declines in the use of services. GAO concluded that the closures have had little
impact on Medicare beneficiaries to date. However, the agency noted that
beneficiaries who are more costly than average may face difficulty in obtaining
home health care in the future as agencies change their behavior in response to
the IPS. The GAO study found that while about 14 percent of agencies had closed
between October 1, 1997, and January 1, 1999, more home health agencies were in
existence at the beginning of FY 1999 than at the beginning of FY 1996. The
study found that most of the closures occurred in urban counties and that about
40 percent of the closures occurred in three states-Louisiana, Oklahoma, and
Texas-that had seen a large expansion in the number of agencies and that had
utilization rates well above the national average. Stakeholders interviewed by
the GAO reported few access problems currently. State survey agency
representatives, for example, indicated that adequate capacity continued to
exist despite the closures and reported that they had received few complaints
about access to Medicare home health care. Discharge planners and home health
agency managers reported that beneficiaries living in counties that had lost
agencies still had adequate access through agencies located in adjacent
counties. Willingness to serve beneficiaries Industry and policy analysts have
expressed concerns about the case-mix adjuster used in the new PPS for SNFs, the
lack of case- mix adjustment in the EPS for home health agencies, and about the
new system for determining physicians' fees. In the Medicare+Choice program,
questions center around whether the lack of participation by new plans and
withdrawals by existing plans reflect payment levels or other factors. Skilled
nursing facilities. In the case of SNFs, concerns have centered around the
payment weights used in conjunction with the RUG-HI system. Although SNF
patients can vary significantly in their use of ancillary services and supplies
such drugs and biologicals, payments for patients in different RUG-111
categories are based on estimates of the time providers staff spent finishing
nursing and therapy services. SNFs may be unwilling to serve patients in some
high-acuity RUG-111 groups for whom the costs of services may exceed the payment
rates. The Office of the Inspector General (OIG) of the Department of Health and
Human Services has undertaken a study to assess these concerns. The OIG surveyed
a random sample of 200 hospital
dischargeplannersresponsibleforarrangingnursinghomecareforpatient
sbeingdischarged from hospitals. The OIG report concluded that while serious
problems in placing Medicare beneficiaries in nursing homes are not apparent,
SNFs are changing their admitting practices in response to the new payment
system. Two-thirds of discharge planners responding to the survey reported no
difficulty in placing Medicare patients. At the same time, almost half of the
discharge planners surveyed reported that nursing homes have begun requesting
more detailed clinical information about patients and more often assessing
patients directly before making admissions decisions. The survey found that some
patients have become harder to place, including those who need extensive
services, such as intravenous feedings or medications, tracheotomy care, or
ventilator and respirator care. These findings are consistent with concerns that
payment weights under the PPS do not account adequately for certain medically
complex patients. Home health agencies. The IPS for home health agencies has
been criticized because the aggregate per-beneficiary limit is based on
historical patterns of use and does not account for changes in agencies' patient
mix. Industry and beneficiary representatives have asserted that this limitation
has made home health agencies unwilling to accept patients who are likely to
need extensive services. To assess these concerns, MedPAC contracted with AN
Associates, Inc., to survey about 1,000 home health agencies in early 1999 on
their experience under the IPS. We also convened a panel of experts familiar
with beneficiaries' problems accessing home health services. The results of our
survey of home health agencies are consistent with the preliminary information
we have on utilization. The agencies we surveyed generally reported that their
Medicare caseloads have fallen and that the number of visits per user they
provide has decreased. Almost half reported that they had changed the mix of
services they provide, with fewer aide visits being the most common response.
While virtually all of the agencies we surveyed reported that they are accepting
new patients, the share accepting all new Medicare patients was 75 percent,
compared with 85 percent before the IPS was implemented. About 40 percent of
agencies reported a change in admissions practices-refusing to admit patients
that they would have accepted before the IPS-and 30 percent reported discharging
patients because of the IPS. Agencies most frequently identified long-term or
chronic care patients as those they no longer admitted or have discharged. These
findings are consistent with the claim that the IPS has hampered access, but
they do not tell the whole story because the change in payment policy occurred
at the same time HCFA was implementing other policies intended to reduce fraud
and abuse, including stepping up oversight of home health care providers and
imposing a four-month moratorium on the certification of new agencies in early
1998. The agency also adopted a new procedure for processing claims for home
health care services. Assessing the effect on beneficiaries of changes in home
health agencies' willingness to serve them is further confounded because we
cannot determine whether the changes in use of home health services observed
during the past two years are appropriate. Medicare's standards for eligibility
for and coverage of home health services are too loosely defined for us to do
so. Physician services. Three aspects of the new mechanism for setting
physicians' fees have raised questions regarding their impact on access. First,
the introduction of a single conversion factor reduced payment rates for
surgical services, while payment rates for primary care and other nonsurgical
services generally increased. Second, the Secretary's lack of authority to
correct for projection errors and the potential for oscillations in fee updates
under the SGR system have raised questions about whether updates are
appropriate. Because the SGR is cumulative, uncorrected projection errors affect
all subsequent updates. This happened in 1999, when an unexpected slowdown in
Medicare+Choice enrollment growth led to a smaller than projected decline in
Part B fee-for-service enrollment. Third, the SGR system as currently designed
has the potential for oscillation in fee updates because of problems with the
data and methods used to calculate the updates. These problems are likely to
lead to extreme positive and negative updates. To assess the effects of the
payment changes introduced in 1998, MedPAC contracted with Project HOPE to
survey 1,300 physicians on their willingness to serve Medicare beneficiaries.
The survey data were reassuring. Among physicians accepting all or some new
patients, over 95 percent were accepting new Medicare fee-for-service patients
both in 1997, before the new payment policy changes were implemented, and in
early 1999. The survey also found that only about 10 percent of physicians,
reported changing the priority given to Medicare beneficiaries seeking an
appointment. Of those, the percentage giving Medicare patients a higher priority
was almost the same as the percentage giving Medicare patients a lower priority.
Medicare+Choice plans. The Congress intended the Medicare+Choice program to
expand beneficiaries' health plan options, but this has not occurred. Plan
participation has decreased from a year ago: of 347 contracts HCFA had with risk
plans in 1998, 99 of those plans withdrew from serving at least one county, and
many withdrew from the Medicare+Choice program altogether. This coming January,
another 99 contracts will either be canceled or modified to reduce service
areas. At the same time, however, enrollment in Medicare+Choice plans has
continued to grow. Despite a brief dip in growth earlier this year, enrollment
in these plans has grown by 6.5 percent (about 400,000 enrollees) since a year
ago. Payment levels are ultimately an important determinant of plan
participation. However, payment levels alone do not yet appear to have had much
impact either in encouraging new plans to enter the market, or inducing existing
plans to leave. For example, despite the introduction of the floor and blend
payments, we have not seen plan participation expand significantly in counties
that benefitted from those provisions. Similarly, plan withdrawals have been
disproportionately lower in counties where payment growth has been most
constrained. Instead, plans' reluctance to participate may stem from concerns
about regulatory issues and about the anticipated impact of risk adjustment on
payments in coming years. Where do we go from here? Although there is no
systematic evidence to date that beneficiaries' access to care has been
impaired, the vast number of changes to Medicare payment policy introduced by
the BBA make it more important than ever to monitor access. In our March and
June reports to the Congress, MedPAC noted where we believe policy changes are
not yet warranted and recommended specific targeted policies that could help to
alleviate some of the concerns that have been raised regarding access to care in
the future. Hospital inpatient services In our March report, MedPAC concluded
that the operating update for FY 2000 enacted in BBA-1. 8 percentage points less
than the increase in HCFA's operating market basket index or 1.1 percent- will
provide reasonable rates. In formulating our recommendation, MedPAC took into
account part, but not all, of the cumulative reduction in costs per case that
has occurred. We noted that hospitals have responded to an increasingly
competitive market by improving their productivity and by shifting services to
other sites of care. At the same time, we recognized factors pointing to the
need for caution in specifying future updates, including emerging evidence that
the decade-long trend in rising case mix complexity, which automatically
increases PPS payments, may be subsiding. We also questioned whether the
unusually low rate of hospital cost growth observed in recent years can be
sustained without adverse effects on quality of care. Hospital outpatient
services MedPAC has concerns about the PPS proposed by HCFA for hospital
outpatient services. hi basing payments on groups of services, instead of
individual services, the system is likely to overpay for some services and under
pay for others. This could lead to access problems in the future for
beneficiaries needing services whose payments fall short of costs. In our March
report, MedPAC recommended that the PPS be based on the costs of individual
services. Since that recommendation was made, HCFA has been collecting comments
on its PPS proposal, with the formal comment period ending July30,1999. HCFA
will review the comments with the assistance of a private contractor, 3M Health
Information Systems. HCFA then plans to issue a final regulation at least 90
days before the PPS is implemented. Implementing the outpatient PPS will reduce
payments for virtually all hospitals but could have much larger effects on
specific types of hospitals. For example, based on HCFA's original
estimates-which do not take into account improvements in coding that will lead
to smaller reductions-small rural hospitals would see a 17 percent decline in
payment rates, and cancer hospitals would see a drop of more than 30 percent.
Given these changes, MedPAC recommended that the Secretary closely monitor the
use of hospital outpatient services to ensure that beneficiaries' access to
appropriate care is not compromised. Consideration should also be given to
phasing in the new payment system to help us detect any problems before they
become severe. Skilled nursing facilities The OIG report on the willingness of
SNFs to continue accepting Medicare beneficiaries provides some comfort that
early anecdotal reports of access problems do not indicate a widespread problem.
Nonetheless, MedPAC remains concerned about the mismatch between payments and
costs for patients who require relatively high levels of nontherapy ancillary
services and supplies could hamper access in the future. in our March report, we
recommended that the Secretary continue to refine the classification system to
improve its ability to predict the use of nontherapy services and supplies. An
improved classification system would match payments more closely to
beneficiaries needs for services and help to avoid access problems among
medically complex patients. HCFA has indicated that it is researching the
adequacy of payments, under the PPS and will implement refinements next year if
that research indicates changes are wanted. Home health services Implementing a
PPS for home health care services that accounts for differences among
beneficiaries will help to ensure access for those who require extensive care.
MedPAC is concerned, however, that the timetable for implementing the PPS is
very tight. Accordingly, we recommended in our June report that the Congress
explore the feasibility of establishing a process for agencies to exclude a
small share of their patients-say 2 percent- from the aggregate per beneficiary
limits. Under our recommendation, Medicare would reimburse care for excluded
patients based on the lesser of actual costs or the aggregate per- visit limits.
MedPAC believes that such a policy should be implemented in a budget- neutral
manner. In the longer run, ensuring that Medicare beneficiaries have access to
appropriate home health care services will require clarifying the benefit. To
that end, MedPAC recommended that the Secretary speed the development of
regulations; that would outline home health care coverage and eligibility
criteria based on the clinical characteristics of beneficiaries and that she
recommend to the Congress the legislation needed to implement those regulations.
Physician services In part because of their technical nature, problems with the
sustainable growth rate system that determines updates to payments for
physicians' services have received less publicity than concerns about facility
payments. But because uncorrected projection errors and wideswings in payment
updates could raise access problems in the future, MedPAC recommends that the
Congress require the Secretary to correct estimates used in SGR system
calculations every year and that legislation be enacted to modulate swings in
updates. Further, we recommend that the Congress revise the SGR to include an
allowance for cost increases due to improvements in medical capabilities and
advancements in scientific technology. Medicare+Choice plans In our March
report, MedPAC recommended that the Secretary work with organizations offering
plans to identify specific regulations or program policies for which changes,
delays in implementation, or administrative flexibility could reduce the burden
of compliance without compromising the objectives of the Medicare+Choice
program. Two specific changes that we noted- moving back the deadline for filing
adjusted community rate proposals and giving Medicare+Choice organizations the
flexibility to tailor their benefit packages within their services-have already
been done. The Commission also made recommendations concerning HCFA's proposed
system of risk adjustment. Although the interim risk adjustment proposal has
important shortcomings, we believe it represents a substantial improvement over
the current method and that its benefits outweigh its costs. We support phasing
in the new system because doing so will avoid large abrupt changes in payments
to Medicare+Choice organizations and will give policymakers time to monitor and
evaluate the interim system's effects on organizations and beneficiaries. Given
its limitations, the interim risk adjustment method should be replaced as soon
as possible by a comprehensive method based on enrollees' encounters in all
settings, not just inpatient.
LOAD-DATE: October 5,
1999 
