[Congressional Record Volume 143, Number 123 (Tuesday, September 16, 1997)]
[Extensions of Remarks]
[Page E1766]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 INTRODUCTION OF LEGISLATION TO SPEED RISK ADJUSTMENT OF MANAGED CARE 
                                 PLANS

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                      Tuesday, September 16, 1997

  Mr. STARK. Mr. Speaker, how many studies do we need before we act to 
correct a gross taxpayer overpayment of many health maintenance 
organizations?
  The GAO has just issued another report in the long line of papers 
demonstrating that the public is paying HMO's too much for the Medicare 
beneficiaries that they enroll. In its report entitled ``Fewer and 
Lower Cost Beneficiaries with Chronic Conditions enroll in HMOs'' (GAO/
HEHS-97-160) prepared for Ways and Means Health Subcommittee Chairman 
Bill Thomas, the GAO examined the mature California HMO market and 
found:

       About one in six 1992 California fee for service (FFS) 
     Medicare beneficiaries enrolled in an HMO in 1993 and 1994. 
     HMO enrollment rates differed significantly for beneficiaries 
     with selected chronic conditions compared with other 
     beneficiaries. Among those with none of the selected [5 
     chronic] conditions, 18.4% elected to enroll in an HMO 
     compared with 14.9% of beneficiaries with a single chronic 
     condition and 13.4% of those with two or more conditions.
       Moreover, we found that prior to enrolling in an HMO a 
     substantial cost difference, 29%, existed between new HMO 
     enrollees and those remaining in FFS because HMOs attracted 
     the least costly enrollees within each health status group. 
     Even among beneficiaries belonging to either of the groups 
     with chronic conditions, HMOs attracted those with less 
     severe conditions as measured by their 1992 average monthly 
     costs.
       Furthermore, we found that rates of early disenrollment 
     from HMOs to FFS were substantially higher among those with 
     chronic conditions. While only 6% of all new enrollees 
     returned to FFS within 6 months, the rates ranged from 4.5% 
     for beneficiaries without a chronic condition to 10.2% for 
     those with two or more chronic conditions. Also, disenrollees 
     who returned to FFS had substantially higher costs prior 
     to enrollment compared to those who remained in their HMO. 
     These data indicated that favorable selection still exists 
     in California Medicare HMOs because they attract and 
     retain the least costly beneficiaries in each health 
     status group.

  Since we pay Medicare managed care risk contractors [HMO's] 95 
percent of the average cost of treating Medicare patients in an area, 
it is obvious that if they do not sign up the average type of Medicare 
beneficiary, but sign up healthier people, then the taxpayer will end 
up paying the HMO's too much. Many HMO's, of course, make a fine art of 
finding the healthier people to enroll--and encouraging the unhealthy 
to disenroll. Because we do not adjust the payments to HMO's to reflect 
the true risk they face of providing needed health care services, risk 
adjustment, we overpay. We overpay HMO's billions of dollars--and as 
enrollment grows, the Medicare trust fund will lose an escalating 
amount.
  At the end of my statement I would like to include in the Record a 
recent summary from the Physician Payment Review Commission, a 
congressional advisory panel, that further documents the problem.
  The just-passed Balanced Budget Act requires HHS to begin to collect 
data to correct this problem and in the year 2000, implement a risk 
adjustment system to stop the abuse and overpayment that plagues the 
current program.
  The GAO report is just further proof that we need to move faster--and 
that even a partial risk adjustment program, which can be refined 
later, is better than the current hemorrhage of Medicare trust fund 
moneys. Therefore, I am introducing today--as part of our efforts to 
stop Medicare waste, and in some cases fraud, a bill to require that 
the risk adjustment changes be implemented January 1, 1999.
  This amendment will easily save $1 billion and probably more--and it 
will help force an end to the outrageous overpayment of those HMO's who 
have, for whatever reason, managed to avoid the average Medicare 
beneficiary.

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