[Congressional Record Volume 143, Number 132 (Monday, September 29, 1997)]
[Extensions of Remarks]
[Pages E1887-E1888]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                               HMO ABUSE

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                       Monday, September 29, 1997

  Mr. STARK. Mr. Speaker, there is a lot of talk about fraud, waste, 
and abuse in health care. One type of fraud that does not get mentioned 
much--but which cheats the taxpayers and the beneficiaries out of 
billions of dollars a year--is the overpayment of HMO's under Medicare.
  I would like to include in the Record a summary of a recent 
Prospective Payment Assessment Commission meeting, as prepared by Gray 
& Associates, a health consulting and reporting service. At the ProPAC 
meeting, the staff of this congressional advisory panel noted that the 
adjusted community rate data--the data that determines how much extra 
an HMO must provide its enrollees in benefits and services--is suspect.
  I also include a letter I have sent to the Acting Medicare 
Administrator regarding overpayments to HMO's. The recent Denver HMO 
bidding demonstration--blocked by Congress and the courts--would, if 
implemented nationwide, save Medicare approximately $2 billion a year 
while expanding the level of benefits to enrollees.
  Mr. Speaker, the current system must be reformed, ASAP.

                        Adjusted Community Rates

       The adjusted community rate (ACR) is used to establish a 
     risk contract's premium for Medicare, as well as the plan's 
     supplemental benefits. The form filled out by plans 
     demonstrates an actuarial equivalence between the plan's 
     benefits and fee for service benefits, and establishes the 
     difference that is to be returned to the Medicare program 
     either through waived premiums, extra benefits, or actual 
     payments back to Medicare (no one does the third option).
       Staff believes that the forms could be used to glean useful 
     cost information concerning the plans. This information could 
     be used to determine the fairness of Medicare payment rates. 
     However, the current reliability of the data is highly 
     suspect, mainly because the information contained therein is 
     not audited. In fact, staff states that some plans pick their 
     final benefit plans, and make the numbers on the form fit the 
     final plan. Other plans submit forms showing net losses per 
     Medicare patient, which intuitively one knows cannot be 
     accurate otherwise the plans would not be financially able to 
     participate year after year in Medicare.
       The BBA now requires that the ACRs be audited to ensue the 
     quality of the data contained in them. Staff wants to take 
     the now fairly reliable data and try to reconcile benefits 
     packages with particular ACRs. Staff also hopes its analysis 
     will reveal whether the new auditing requirements effect any 
     major changes in the ACRs, which might, in turn, effect 
     payment changes in the Medicare risk contract program.
                                                                    ____



                                      Committee on Ways and Means,


                                U.S. House of Representatives,

                               Washington, DC, September 23, 1997.
      Nancy-Ann Min DeParle,
     Acting Administrator, Health Care Financing Administration, 
         Washington, DC.
       Dear Nancy-Ann: Enclosed is a page from a health care 
     newsletter which I received today. It reports former 
     Administrator Vladeck as saying that before the Denver

[[Page E1888]]

     demonstration was blocked, HCFA had received four bids from 
     HMOs that would have saved Medicare 10-12% and which ``would 
     have expanded current Medicare HMO benefits without any 
     premium charge to enrollees.''
       Not every newspaper report is accurate, and I have 
     certainly been misquoted a number of times * * * but is this 
     generally accurate? Did HCFA receive four such bids?
       If so, during the Ways and Means Health Subcommittee's 
     anti-fraud hearing on September 30th, I would like to discuss 
     this issue as an example of waste and abuse, and I would urge 
     you to speed the implementation of risk adjustments and 
     audits of adjusted community rates. We need to make some 
     immediate adjustments in HMO payment rates and/or their 
     payment of benefits to enrollees--especially in light of the 
     August 18 GAO report (released September 16) on the non-
     enrollment of the chronically ill in HMOs.
       If the news report is accurate and the Denver experience 
     could be applied nationwide, we would save at least $2 
     billion dollars a year in managed care payments with no 
     decrease in benefits--or beneficiaries should be receiving 
     substantially more. Thank you for your help with this 
     inquiry.
           Sincerely,

                                                   Pete Stark,

                                               Member of Congress.


     
                                                                    ____
              [From the Managed Medicare & Medicaid News]

       Peter's PHO, Albany, N.Y.; Crouse Irving Memorial PHO, 
     Syracuse, N.Y.; Chester County PHO, West Chester, Pa.; the 
     PHO of Pennsylvania Hospital, Philadelphia; St. Barnabas 
     Health Care System Provider Partnership, Livingston, N.J. 
     (including St. Barnabas Medical Center, Newark Beth Israel 
     Medical Center and Monmouth Medical Center). HCFA still is 
     negotiating payment rates for the ``Provider Partnership'' 
     test but hopes Medicare will save 5% on fee-for-service rates 
     under the combined payments, which will be for all but a few 
     acute care admissions [Managed Med 7/28/97]. The agency also 
     expects bundling will help hospitals improve their Medicare 
     margins by permitting them better control of facility use by 
     physicians. [Info: HCFA, 202/690-6145]
       HCFA's Denver-area bidding test could have saved Medicare 
     10-12% on Denver-area capitation payments. The figure, 
     disclosed by ex-Administrator Bruce Vladeck, reflects four 
     bids received by the agency before the demonstration was 
     blocked by a federal court [Managed Med 7/14/97]. At a 
     farewell meeting with health reporters last week, Vladeck 
     also said that the four bids would have expanded current 
     Medicare HMO benefits without any premium charge to 
     enrollees. Vladeck advised that the seven competitive bidding 
     demonstrations authorized by Congress in the final balanced 
     budget bill [Managed Med 7/28/97] avoid markets that already 
     have at least ``a half-dozen plans and more pending'' and 
     ones where a single plan has an overwhelming market share. 
     Poor demonstration sties also include ill-defined HMO markets 
     in southern California and ``megalopolis'' centers of the 
     Northeast, he believes.

     

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