Medicare+Choice:
Growing or Shrinking?
Robert A. Berenson, M.D.
February 1, 2001
M+C Enrollee Participation
(16%)
Enrollment in Thousands
7000
6347
6000
(14%)
6261
5599
5000
4000
3089
3000
2000
1263
1000
0
Dec-90 Dec-95 Dec-99 Dec-00 Jan-01
Source: HCFA/Center for Health Plans and Providers data
States with Highest Enrollee
Participation
Oregon
31%
Colorado
29%
Rhode Island
34%
Pennsylvania
25%
California
39%
Arizona
36%
Florida
25%
Recent Withdrawals
# of
Contracts
Affected
Beneficiaries
“Abandoned”
Beneficiaries
January 2001
118
934,000
159,000
January 2000
99
327,000
79,000
January 1999
99
407,000
51,000
1999-2001 Withdrawals -Affected Beneficiaries By
State
Texas -- 260,000
Florida -- 162,000
New York -- 158,000
California -- 113,000
Maryland -- 104,000
M+C Access
■ At
peak, 74% of Medicare
beneficiaries had M+C coordinated
care option
■ In
January 2001, 63% have such
an option
■ In
non-MSA counties, 14% with
option
New Plan Approvals Since July
1998
Over 60 new or expanded area approvals
■1
PSO
■ 1 Private FFS (Currently 4000 enrollees)
■ 0 PPOs
■ 0 MSAs
Benefit Trends
■ Zero
premium plans decreasing
(from 70% to 42%)
■ 2/3
provide Rx
■ 90%
of beneficiaries with an M+C
plan have access to Rx
Benefit Trends cont’d
■ Plans
using triple tier pricing with
tighter out of pocket caps
■ 5%
of enrollees have unlimited
generic and cap > $2000
Major BIPA 2000 Provisions
■ Increase
in minimum payment
amount per capita for 2001
– MSA with 250,000 population -- $525
– Other areas -- $475
■ Opportunity
to Reenter/Revise in
March 2001
■ Increase
in minimum percentage
increase from 2% to 3%
Major BIPA 2000 Provisions
cont’d
■ Confirmation
and Phase-In of Risk
Adjustment
– 10% until comprehensive R.A. in 2004
– Fully phased in by 2007
■ Permit
Part B Premium Reductions,
effective 2003
■ No
action on lock-in, scheduled for
January 2002
Reasons for Program
Instability
■ Costs
rising faster than government
contribution
– BBA fixes government contribution by formula
– HMOs can pass on premium increases easier in
commercial market
■ Difficulty
maintaining provider networks
– After BBA, providers cannot cost shift onto
Medicare as readily
Reasons for Program
Instability cont’d
■ Burden
of government requirements/
oversight
– Both statutory and regulatory
■ Uncertainty
– e.g. risk adjusted payments
■ Local
Market factors
– see Brown and Gold, Health Affairs, Nov/Dec 1999
Reasons for Program
Instability cont’d
■ The
Market, i.e. Wall Street
■ Strategic business decisions
– Aetna, CIGNA leaving
– Pacificare, Kaiser staying
■ HCFA
Hostility ???
■ Enrollment
based on extra benefits,
not service or quality
Are Plans Paid Enough?
GAO:
■ Paid too much for providing A and
B benefits, but…
■ Not
enough to continue level of
extra benefits
Are Plans Paid Enough?
cont’d
GAO:
■ Aggregate payment to plans
exceed FFS spending by 21% in
1998 ($1000 per enrollee)
– 60% of excess from favorable selection
– 40% from forecast errors and BBA
protections
■ New
“floor county” payments will
increase overpayments
Thoughts on Administered
Prices
■ Link
to FFS spending problematic
– Plans should have advantages where
delivery system excesses and inefficiencies
– Politically, hard to explain
■ Payment
updates do not capture
input price changes
Thoughts on Administered
Prices
cont’d
■ Alternative
could be competitive
pricing
– Demo of competitive pricing stopped 4Xs
– Conceptually straightforward
– Politically and administratively difficult