[Congressional Record Volume 145, Number 96 (Thursday, July 1, 1999)]
[Extensions of Remarks]
[Pages E1487-E1488]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




VA/DOD LEGISLATION INTRODUCED: USING ACCURACY TO ADJUST THE GEOGRAPHIC 
                         INEQUITY IN THE AAPCC

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                           HON. JIM McDERMOTT

                             of washington

                    in the house of representatives

                         Thursday, July 1, 1999

  Mr. McDERMOTT. Mr. Speaker, today I am introducing legislation to use 
accuracy as one way to address the geographic inequity of Medicare's 
adjusted average per capita cost (AAPCC) rate by ensuring that 
Medicare-eligible veterans are calculated in AAPCC updates.
  Until BBA 97, AAPCC rates were determined based on five year's worth 
of historical per-capita Medicare fee-for-service spending. Medicare 
AAPCC rates also included provisions for medical education payments and 
Medicare disproportionate share payments.
  BBA 97 de-linked AAPCC updates from local FFS spending and set a 
minimum 1998 AAPCC ``floor'' rate of $367. It also made a number of 
changes to guarantee minimum annual rate increases of 2%. BAA 97 also 
carved out the medical education component from the AAPCC over 5 years. 
Unfortunately, these changes do not address the fundamental inequity in 
the AAPCC calculations that Washington faces.
  The trouble with the AAPCC methodology is that it punishes cost-
efficient communities with low AAPCC increases while higher-priced 
inefficient markets receive increases well above average. In 1997, WA 
state health plans had an average payment rate increase of 3.8% while 
the national per capita cost rate increase was 5.9% Counties in other 
state across the nation had increases as high as 8.9%.
  Currently every Washington State County AAPCC is below the national 
average.


                     Use accuracy as a partial fix

  A simplified explanation of the new AAPCC calculation is that all 
fee-for-service costs in a given county are divided by all Medicare 
beneficiaries in that county to derive the payment rate.
  Medicare beneficiaries who are eligible for both Medicare and 
military Medicare coverage

[[Page E1488]]

sometimes receive care at military (VA & DoD) facilities. With the 
creation Medicare Subvention Demonstration sights, this will occur more 
often.
  The computation of the AAPCC includes all Medicare beneficiaries in 
the denominator. However, since the facilities providing care to 
military eligible beneficiaries do not report Medicare costs to HCFA, 
the numerator of the AAPCC excludes any costs Medicare beneficiaries 
received in these facilities. This results in an understatement of the 
AAPCC wherever there are military health care facilities. States or 
counties with a significant military medical presence receive 
disproportionately low rates due to this methodology lapse.
  While the national average military AAPCC understatement is 3%, in 
King County it is 4.3% and Pierce County it's 22.6%.
  My legislation will revise the methodology to include both the 
Medicare beneficiaries and the costs for all their Medicare services--
including those received in fee-for-service and at military 
facilities--in the AAPCC calculations.
  Using accuracy as a means to boost AAPCC rates is both a policy-
justified and a politically defensible way to begin addressing the 
geographic inequity in the Medicare system.

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