[House Report 105-165]
[From the U.S. Government Publishing Office]



105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                    105-165
_______________________________________________________________________


 
 WAIVER OF 75/25 MEDICAID ENROLLMENT RULE FOR BETTER HEALTH PLAN, INC.

                                _______
                                

  July 8, 1997.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

_______________________________________________________________________


  Mr. Bliley, from the Committee on Commerce, submitted the following

                              R E P O R T

                        [To accompany H.R. 2018]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Commerce, to whom was referred the bill 
(H.R. 2018) to waive temporarily the Medicaid enrollment 
composition rule for the Better Health Plan of Amherst, New 
York, having considered the same, report favorably thereon with 
an amendment and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     1
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Hearings.........................................................     3
Committee Consideration..........................................     3
Roll Call Votes..................................................     3
Committee Oversight Findings.....................................     3
Committee on Government Reform and Oversight.....................     4
New Budget Authority and Tax Expenditures........................     4
Committee Cost Estimate..........................................     4
Congressional Budget Office Estimate.............................     4
Federal Mandates Statement.......................................     5
Advisory Committee Statement.....................................     5
Constitutional Authority Statement...............................     5
Applicability to Legislative Branch..............................     5
Section-by-Section Analysis of the Legislation...................     5
Changes in Existing Law Made by the Bill, as Reported............     5

                               amendment

    The amendment is as follows:
    Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. WAIVER OF 75/25 MEDICAID ENROLLMENT RULE FOR BETTER HEALTH 
                    PLAN, INC.

    Effective July 1, 1997, the requirement of section 
1903(m)(2)(A)(ii) of the Social Security Act (42 U.S.C. 
1396b(m)(2)(A)(ii)) is waived, for contract periods through December 
31, 1998, with respect to the Better Health Plan, Inc., operating in 
New York.

                          Purpose and Summary

    Section 1903 (m)(2)(a)(ii) of the Social Security Act 
requires that Medicaid beneficiaries constitute less than 75 
percent of the membership of any prepaid health maintenance 
organization. H.R. 2018 extends an existing waiver of Section 
1903(m)(2)(A)(ii) granted to Better Health Plan, Inc. operating 
in the State of New York through December 31, 1998. The current 
waiver expired on June 30, 1997.

                  Background and Need for Legislation

    State experimentation with health maintenance organizations 
(HMOs) began shortly after the implementation of Medicaid. The 
origin of the 75/25 rule arose out of concerns relating to 
certain managed care companies. These concerns included 
inaccurate information dissemination to enrollees, restricted 
access to non-participating providers, inconsistent provision 
of benefits, and, in certain cases, financial instability of 
the enrolling plan.
    Reports of these irregularities led to Congressional action 
that has spanned the last twenty years. The first Federal 
action addressing Medicaid HMO contracts came with the Health 
Maintenance Organization Amendments of 1976 (P.L. 94-46). This 
measure, the predecessor of the current 75/25 rule, limited the 
percentage of Medicaid and Medicare beneficiaries enrolled in 
risk contracts to 50 percent. An exception applied to 
Federally-funded centers and pre-1970 contractors. New 
contractors had up to three years to meet the requirement if 
they could show that they were making satisfactory progress 
towards compliance. The 1976 measure also limited new State 
prepaid initiatives to established organizations which could 
meet the Federal qualifications.
    The 1976 measure had the unintended effect of sharply 
limiting managed care enrollment by Medicaid beneficiaries. As 
of 1981, scarcely more than 1 percent of the Medicaid 
population (281,926 beneficiaries) were enrolled in HMOs. Of 
that number, fully 85 percent were located in just four States: 
California, Maryland, Michigan, and New York.
    In light of this experience, Congress again addressed 
managed care enrollment by Medicaid beneficiaries in the 
Omnibus Budget Reconciliation Act of 1981. Among the changes 
made by OBRA 81 (P.L. 97-35) to Federal Medicaid HMO 
contracting rules were the following changes. The allowable 
percentage of Medicaid beneficiaries that could be enrolled in 
HMOs was increased to 75 percent from 50 percent. This 
permitted plans to tailor their services to Medicaid 
beneficiaries and the communities in which they reside. In 
addition, Medicaid contracts were no longer limited to 
Federally qualified HMOs, allowing States to determine the 
qualified status of plans if they demonstrated an ability to 
provide covered services and if they could protect 
beneficiaries from financial liability should the organization 
become insolvent.
    Despite these advances, current Medicaid law creates 
significant obstacles for plans that focus on the needs of low-
income communities. Although these plans have achieved notable 
success in enhancing the quality of care received by area 
Medicaid beneficiaries, they have been less successful in 
attracting commercial clients from outlying areas. The 
requirement that one-quarter of their enrolled population 
consist of such customers, therefore, often places them in the 
difficult position of having to choose between devoting 
resources to their Medicaid-funded enrollees or to the expense 
of competing against broader-based firms for commercial 
clients.
    In light of the burdens created by this situation, this 
measure extends the existing waiver of the 75/25 requirement of 
Section 1903(m)(2)(A)(ii) for Better Health Plan, Inc. 
operating in the State of New York.
    Better Health Plan, Inc. is a Medicaid Prepaid Health 
Services Plan approved by the New York State Department of 
Health which operates in the five boroughs of New York City as 
well as eleven counties. It serves over 41,500 individuals, of 
which 36,700 are Medicaid recipients. Better Health Plan has 
been a leader in providing prenatal and infant care. The 
``Better Health for Babies'' program was designed to improve 
the health of the mother and reduce infant morbidity and 
mortality. This program is one of the most successful in the 
State of New York.

                                Hearings

    The Committee on Commerce has not held hearings on the 
legislation.

                        Committee Consideration

    H.R. 2018, a bill to waive temporarily the Medicaid 
enrollment composition rule for the Better Health Plan of 
Amherst, New York, was introduced on June 24, 1997, by 
Congressmen Paxon, Towns, Engel, Lazio of New York, and Manton.
    On Wednesday, June 25, 1997, the Full Committee met in open 
markup session and ordered H.R. 2018 reported to the House, 
amended, by a voice vote, a quorum being present.

                             Rollcall Votes

    Clause 2(l)(2)(B) of rule XI of the Rules of the House 
requires the Committee to list the recorded votes on the motion 
to report legislation and on amendments thereto. There were no 
recorded votes taken in connection with ordering H.R. 2018 
reported or in adopting the amendment. An amendment offered by 
Mr. Paxon to insert an effective date of July 1, 1997, was 
adopted by a voice vote. A motion by Mr. Bliley to order H.R. 
2018 reported to the House, amended, was agreed to by a voice 
vote, a quorum being present.

                      Committee Oversight Findings

    Pursuant to clause 2(l)(3)(A) of rule XI of the Rules of 
the House of Representatives, the Committee has not held 
oversight or legislative hearings on this legislation.

              Committee on Government Reform and Oversight

    Pursuant to clause 2(l)(3)(D) of rule XI of the Rules of 
the House of Representatives, no oversight findings have been 
submitted to the Committee by the Committee on Government 
Reform and Oversight.

               New Budget Authority and Tax Expenditures

    In compliance with clause 2(l)(3)(B) of rule XI of the 
Rules of the House of Representatives, the Committee finds that 
H.R. 2018 would result in no new or increased budget authority 
or tax expenditures or revenues.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 403 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 2(l)(3)(C) of rule XI of the Rules of 
the House of Representatives, the following is the cost 
estimate provided by the Congressional Budget Office pursuant 
to section 403 of the Congressional Budget Act of 1974:
                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, July 3, 1997.
Hon. Tom Bliley,
Chairman, Committee on Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2018, a bill to 
waive temporarily the Medicaid enrollment composition rule for 
the Better Health Plan of Amherst, New York.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Jeanne De 
Sa (for federal costs), and John Patterson (for the state and 
local impact).
            Sincerely,
                                          Paul Van de Water
                                   (For June E. O'Neill, Director).
    Enclosure.

H.R. 2018.--To waive temporarily the Medicaid enrollment composition 
        rule for the Better Health Plan of Amherst, New York

    H.R. 2018 would extend a waiver of the enrollment 
composition requirement in Title XIX of the Social Security Act 
for the Better Health Plan of Amherst, New York. Under current 
law, public health maintenance organizations must have at least 
25 percent of their enrollment from the private sector and no 
more than 75 percent from Medicare and Medicaid. The Better 
Health Plan's waiver expired on June 30, 1997. H.R. 2018 would 
extend the waiver through December 31, 1998.
    The Better Health Plan has 41,500 enrollees, of whom 37,000 
are Medicaid recipients. In the absence of the waiver, the 
plan's Medicaid enrollment would be limited to 31,000 people. 
CBO estimates that extending the waiver would reduce federal 
Medicaid spending in 1998 and 1999, but the effect would not be 
significant.
    H.R. 2018 does not contain any intergovernmental mandates 
as defined in the Unfunded Mandates Reform Act of 1995 and 
would impose no costs on state, local, or tribal governments. 
Because the State of New York pays 50 percent of Medicaid 
costs, its Medicaid spending would also be reduced by extending 
the waiver.
    The CBO staff contacts for this estimate are Jeanne De Sa 
(federal costs), who can be reached at 226-9010, and John 
Patterson (state and local costs), who can be reached at 225-
3220. This estimate was approved by Paul N. Van de Water, 
Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 2(l)(4) of rule XI of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation

Section 1. Waiver of 75/25 Medicaid Enrollment Rule for Better Health 
        Plan, Inc.

    This section provides that effective July 1, 1997, the 
requirement of Section 1903(m)(2)(A)(ii) of the Social Security 
Act is waived with respect to the Better Health Plan, Inc. 
operating in New York, for contract periods through December 
31, 1998.

         Changes in Existing Law Made by the Bill, as Reported

    This legislation does not amend any existing Federal 
statute.