Medicare Managed Care: Program Growth Highlights Need to Fix HMO Payment
Problems (Testimony, 05/24/95, GAO/T-HEHS-95-174).

Rapid growth in the number of Medicare beneficiaries enrolled in health
maintenance organizations (HMO) increases the urgency of correcting
rate-setting flaws that undermine the cost-saving potential of managed
care for Medicare.  Medicare has paid HMOs much more than it would have
paid traditionally more expensive fee-for-service providers.  Two
lessons can be learned from GAO's review of ways to fix Medicare's HMO
capitation payments.  First, a multipronged approach to rate setting
makes sense.  The large disparities in market conditions between
states--from California to Maine--call for solutions keyed to market
conditions.  Second, with respect to achieving the promise of such
initiatives, details matter.  How these strategies are designed and
implemented could mean the difference between success and failure.  GAO
believes that in the short term, the Health Care Financing
Administration (HCFA) can overcome its capitation rate problem by
introducing a better health status risk adjuster.  HCFA should also
promptly test competitive bidding and other promising approaches to
setting HMO rates that reduce Medicare costs.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-HEHS-95-174
     TITLE:  Medicare Managed Care: Program Growth Highlights Need to 
             Fix HMO Payment Problems
      DATE:  05/24/95
   SUBJECT:  Health care cost control
             Health maintenance organizations
             Medicare programs
             Beneficiaries
             Medical services rates
             Payments
             Medical economic analysis
             Risk management
             Price adjustments
IDENTIFIER:  Arizona
             CalPERS Health Benefits Program (CA)
             Medicare Risk Contract Program
             California
             
------------------------------------------------------------------------

We regret that electronic text of GAO Testimony is not available at 
this time. 

See the GAO FAQ - Section 2.0 for printed copy ordering information.
The FAQ is automatically retrieved with all WAIS search results or 
can be obtained by sending e-mail to: [email protected]