Medicare Managed Care: Enrollment Growth Underscores Need to Revamp HMO
Payment Methods (Testimony, 07/12/95, GAO/T-HEHS-95-207).

Rapid growth in the number of Medicare beneficiaries in health
maintenance organizations (HMO) increases the urgency of correcting
rate-setting flaws that result in unnecessary Medicare spending. By not
tailoring its HMO capitation payment to how health or sick HMO enrollees
are, the Health Care Financing Administration (HCFA) cannot realize the
savings that private-sector payers capture from HMOs.  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 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, HCFA can overcome its
capitation problem by introducing a better health status risk adjustor.
HCFA should also promptly test competitive bidding and other promising
approaches to setting HMO rates that reduce Medicare costs.

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

 REPORTNUM:  T-HEHS-95-207
     TITLE:  Medicare Managed Care: Enrollment Growth Underscores Need 
             to Revamp HMO Payment Methods
      DATE:  07/12/95
   SUBJECT:  Health maintenance organizations
             Payments
             Beneficiaries
             Health care programs
             Medical services rates
             Risk management
             Health insurance cost control
             Health services administration
             Health care cost control
IDENTIFIER:  Medicare Risk Contract Program
             Medicare Health Care Prepayment Plan
             Medicare Program
             Arizona
             CalPERS Health Benefits Program (CA)
             
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