[Background Material and Data on Programs within the Jurisdiction of the Committee on Ways and Means (Green Book)]
[Program Descriptions]
[Section 2. Medicare]
[From the U.S. Government Printing Office, www.gpo.gov]
[1998 Green Book] SECTION 2. MEDICARE
CONTENTS
Overview
Eligibility and Coverage
Aged
Disabled
Number of Beneficiaries
Benefits and Beneficiary Cost Sharing
Part A
Part B
Financing
Hospital Insurance Trust Fund--Income
Supplementary Medical Insurance Trust Fund--Income
Financial Status of Hospital Insurance Trust Fund
Financial Status of Supplementary Medical Insurance Trust
Fund
Comparison of Medicare Lifetime Benefits with Beneficiary
Contributions
Part A Services--Coverage and Payments
Inpatient Hospital Services
Skilled Nursing Facility Services
Home Health Services
Hospice Services
Part B Services--Coverage and Payments
Physicians Services
Services of Nonphysician Practitioners
Clinical Laboratory Services
Durable Medical Equipment and Prosthetics and Orthotics
Hospital Outpatient Department Services
Ambulatory Surgical Center Services
Other Part B Services
End-Stage Renal Disease Services
Coverage
Reimbursement
Private Health Plans in Medicare
Plan Options and Rules for Enrollment Before the Balanced
Budget Act of 1997
Trends in Plan Availability and Enrollment
Plan Options and Rules for Enrollment in Medicare+ Choice
Payments to Plans Through 1997
Medicare+Choice Payments to Plans
County Payment Rates, 1997-2003
Adjusted Community Rate (ACR)
Required Noncovered Services
Additional Benefits and Premiums in the Medicare Risk Program
Beneficiary Protections
Plan Standards
Demonstrations Authorized by the Balanced Budget Act
Selected Issues
Utilization and Quality Control Peer Review Organizations
Secondary Payer
Supplementing Medicare Coverage
Qualified Medicare Beneficiaries (QMBs)
Legislative History, 1980-97
CBO Savings and Revenue Estimates for Budget Reconciliation
Acts, 1981-93
Medicare Historical Data
References
OVERVIEW
Medicare is a nationwide health insurance program for the
aged and certain disabled persons. The program consists of two
parts--part A; hospital insurance and part B, supplementary
medical insurance. Total program outlays were $194.2 billion in
fiscal year 1996. Net outlays after deduction of beneficiary
premiums were $174.2 billion.
Coverage
Almost all persons over age 65 are automatically entitled
to Medicare part A. Part A also provides coverage, after a 24-
month waiting period, for persons under age 65 who are
receiving Social Security cash benefits on the basis of
disability. Most persons who need a kidney transplant or renal
dialysis may also be covered, regardless of age. In fiscal year
1997, part A covered an estimated 38.1 million aged and
disabled persons (including those with chronic kidney disease).
Medicare part B is voluntary. All persons over age 65 and
all persons enrolled in part A may enroll in part B by paying a
monthly premium--$43.80 in 1997 and 1998. In fiscal year 1997,
part B covered an estimated 36.5 million aged and disabled
persons.
Benefits
Part A provides coverage for inpatient hospital services,
up to 100 days of posthospital skilled nursing facility (SNF)
care, home health services, and hospice care. Patients must pay
a deductible ($760 in 1997 and $764 in 1998) each time their
hospital admission begins a benefit period. (A benefit period
begins when a patient enters a hospital and ends when she has
not been in a hospital or SNF for 60 days.) Medicare pays the
remaining costs for the first 60 days of hospital care. The
limited number of beneficiaries requiring care beyond 60 days
are subject to additional charges. Patients requiring SNF care
are subject to a daily coinsurance charge for days 21-100 ($95
in 1997 and $95.50 in 1998). There are no cost-sharing charges
for home health care and limited charges for hospice care.
Part B provides coverage for physicians' services,
laboratory services, durable medical equipment, outpatient
hospital services, and other medical services. The program
generally pays 80 percent of Medicare's fee schedule or other
approved amount after the beneficiary has met the annual $100
deductible. The beneficiary is liable for the remaining 20
percent.
Payments for Services
Taken together, spending for inpatient hospital and
physicians' and related services accounts for close to 70
percent of Medicare benefit payments. Medicare makes payments
for inpatient hospital services under a prospective payment
system (PPS); a predetermined rate is paid for each inpatient
stay based on the patient's admitting diagnosis. Payment for
physicians' services is made on the basis of a fee schedule.
Specific payment rules are also used for other services.
Administration
Medicare is administered by the Health Care Financing
Administration (HCFA) within the Department of Health and Human
Services (DHHS). Much of the day-to-day work of reviewing
claims and making payments is done by intermediaries (for part
A) and carriers (for part B). These are generally commercial
insurers or Blue Cross Blue Shield plans.
Financing
Medicare part A is financed primarily through the hospital
insurance (HI) payroll tax levied on current workers and their
employers. Employers and employees each pay a tax of 1.45
percent on all earnings. The self-employed pay a single tax of
2.9 percent on earnings.
Part B is financed through a combination of monthly
premiums levied on program beneficiaries and Federal general
revenues. In 1997 and 1998, the premium is $43.80. Beneficiary
premiums have generally represented about 25 percent of part B
costs; Federal general revenues (that is, tax dollars) account
for the remaining 75 percent.
Federal Outlays
Total program outlays were $194.2 billion in fiscal year
1996. Net outlays (that is, net of premiums beneficiaries pay
for enrollment, largely for part B) were $174.2 billion.
Tables 2-1, 2-2, and 2-3 provide historical spending and
coverage data for Medicare. Table 2-4 provides State-by-State
information for fiscal year 1996.
TABLE 2-1.--MEDICARE OUTLAYS, FISCAL YEARS 1967-2007
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
Percent
Total Medicare Net increase
Fiscal year Part A Part B Medicare premium Medicare (over
outlays offsets outlays prior
year)
----------------------------------------------------------------------------------------------------------------
1967.......................................... $2,597 $798 $3,395 ($647) $2,748 .........
1968.......................................... 3,815 1,532 5,347 (698) 4,649 69.2
1969.......................................... 4,758 1,840 6,598 (903) 5,695 22.5
1970.......................................... 4,953 2,196 7,149 (936) 6,213 9.1
1971.......................................... 5,592 2,283 7,875 (1,253) 6,622 6.6
1972.......................................... 6,276 2,544 8,820 (1,340) 7,480 13.0
1973.......................................... 6,842 2,637 9,479 (1,427) 8,052 7.6
1974.......................................... 8,065 3,283 11,348 (1,708) 9,640 19.7
1975.......................................... 10,612 4,170 14,782 (1,907) 12,875 33.6
1976.......................................... 12,579 5,200 17,779 (1,945) 15,834 23.0
TQ............................................ 3,404 1,401 4,805 (541) 4,264 NA
1977.......................................... 15,207 6,342 21,549 (2,204) 19,345 NA
1978.......................................... 17,862 7,350 25,212 (2,443) 22,769 17.7
1979.......................................... 20,343 8,805 29,148 (2,653) 26,495 16.4
1980.......................................... 24,288 10,746 35,034 (2,945) 32,089 21.1
1981.......................................... 29,248 13,240 42,488 (3,340) 39,148 22.0
1982.......................................... 34,864 15,559 50,423 (3,856) 46,567 19.0
1983.......................................... 38,551 18,317 56,868 (4,253) 52,615 13.0
1984.......................................... 42,295 20,374 62,669 (4,942) 57,727 9.7
1985.......................................... 48,667 22,730 71,397 (5,562) 65,835 14.0
1986.......................................... 49,685 26,217 75,902 (5,739) 70,163 6.6
1987.......................................... 50,803 30,837 81,640 (6,520) 75,120 7.1
1988.......................................... 52,730 34,947 87,677 (8,798) 78,879 5.0
1989.......................................... 58,238 38,316 96,554 (11,590) 84,964 7.7
1990.......................................... 66,687 43,022 109,709 (11,607) 98,102 15.5
1991.......................................... 70,742 47,021 117,763 (12,174) 105,589 7.6
1992.......................................... 81,971 50,285 132,256 (13,232) 119,024 12.7
1993.......................................... 91,604 54,254 145,858 (15,305) 130,553 9.7
1994.......................................... 102,770 59,724 162,494 (17,747) 144,747 10.9
1995.......................................... 114,883 65,213 180,096 (20,241) 159,855 10.4
1996.......................................... 125,300 68,946 194,246 (20,088) 174,158 8.9
1997 \1\...................................... 136.1 72.7 208.8 (20.2) 188.6 8.3
1998 \1\...................................... 141.1 79.6 220.7 (21.2) 199.5 5.8
1999 \1\...................................... 144.6 88.8 233.4 (23.4) 210.0 5.3
2000 \1\...................................... 147.9 98.4 246.3 (25.8) 220.4 5.0
2001 \1\...................................... 156.7 112.8 269.5 (28.6) 241.0 9.3
2002 \1\...................................... 157.9 121.0 278.9 (31.8) 247.1 2.5
2003 \1\...................................... 168.6 138.5 307.0 (35.5) 271.6 9.9
2004 \1\...................................... 178.8 154.3 333.1 (39.8) 293.4 8.0
2005 \1\...................................... 195.6 174.2 369.8 (44.2) 325.6 11.0
2006 \1\...................................... 200.7 182.8 383.5 (48.7) 334.8 2.8
2007 \1\...................................... 219.8 207.7 427.5 (53.5) 374.0 11.7
----------------------------------------------------------------------------------------------------------------
\1\ CBO projections (excludes discretionary spending; in billions of dollars).
Note.--Totals may not add due to rounding. TQ = transitional quarter.
Source: Office of the President, 1997.
TABLE 2-2.--NUMBER OF AGED AND DISABLED ELIGIBLE ENROLLEES AND BENEFICIARIES, AND AVERAGE MEDICARE BENEFIT PAYMENTS PER ENROLLEE, SELECTED YEARS 1975-99
[Beneficiaries in thousands]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Projected
Average Average average
1975 1980 1985 1990 1994 1995 1996 1997 1998 1999 annual annual annual
Fiscal year (actual) (actual) (actual) (actual) (actual) (actual) (est.) \1\ (est.) \1\ (est.) \1\ (est.) \1\ growth growth growth
1975-85 1985-95 1995-99
(percent) (percent) (percent)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Part A
Persons enrolled (monthly average):
Aged........................................... 21,795 24,571 27,121 30,050 32,233 32,650 32,925 33,114 33,312 33,521 2.2 1.9 0.7
Disabled....................................... 2,047 2,967 2,943 3,313 4,181 4,489 4,750 5,003 5,249 5,504 3.7 4.3 5.2
--------------------------------------------------------------------------------------------------------------------------------------------
Total...................................... 23,842 27,538 30,064 33,363 36,414 37,139 37,675 38,117 38,561 39,025 2.3 2.1 1.2
============================================================================================================================================
Beneficiaries receiving reimbursed services:
Aged........................................... 4,906 5,943 6,168 6,314 7,010 7,080 7,170 7,250 7,340 7,430 2.3 1.4 1.2
Disabled....................................... 456 721 672 675 862 920 975 1,035 1.090 1,150 4.0 3.2 5.7
--------------------------------------------------------------------------------------------------------------------------------------------
Total...................................... 5,362 6,664 6,840 6,989 7,872 8,000 8,145 8,285 8,430 8,580 2.5 1.6 1.8
============================================================================================================================================
Average annual benefit per person enrolled: \2\ \3\
Aged........................................... $432 $853 $1,563 $1,947 $2,794 $3,078 $3,323 $3,616 $3,876 $4,151 13.7 7.0 7.8
Disabled....................................... 460 948 1,809 2,176 2,700 2,874 3,054 3,256 3,442 3,638 14.7 4.7 6.1
--------------------------------------------------------------------------------------------------------------------------------------------
Total...................................... 434 863 1,587 1,970 2,783 3,053 3,289 3,569 3,817 4,079 13.8 6.8 7.5
============================================================================================================================================
Part B
Persons enrolled (average):
Aged........................................... 21,504 24,422 27,049 29,426 31,335 31,622 31,891 32,177 32,361 32,547 2.3 1.6 0.7
Disabled....................................... 1,835 2,698 2,672 2,907 3,638 3,874 4,087 4,304 4,545 4,780 3.8 3.8 5.4
--------------------------------------------------------------------------------------------------------------------------------------------
Total...................................... 23,339 27,120 29,721 32,333 34,973 35,496 35,978 36,481 36,906 37,327 2.4 1.8 1.3
============================================================================================================================================
Beneficiaries receiving reimbursed services:
Aged........................................... 11,311 16,034 20,199 23,820 26,118 26,681 27,044 27,544 27,952 28,332 6.0 2.8 1.5
Disabled....................................... 797 1,669 1,933 2,184 2,867 3,093 3,289 3,503 3,733 3,962 9.3 4.8 6.4
--------------------------------------------------------------------------------------------------------------------------------------------
Total...................................... 12,108 17,703 22,132 26,004 28,985 29,774 30,333 31,047 31,685 32,294 6.2 3.0 2.1
============================================================================================================================================
Average annual benefit per person enrolled: \2\
Aged........................................... $153 $348 $705 $1,250 $1,601 $1,728 $1,797 $2,011 $2,197 $2,410 16.5 9.4 8.7
Disabled....................................... 259 610 1,022 1,603 2,154 2,282 2,408 2,370 2,500 2,657 14.7 8.4 3.9
--------------------------------------------------------------------------------------------------------------------------------------------
Total...................................... 161 374 734 1,282 1,658 1,788 1,867 2,054 2,234 2,441 16.4 9.3 8.1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Represents projections of current law. Does not include legislative proposals. \2\ Does not include administrative cost. \3\ Includes part A catastrophic benefits in fiscal year
1990.
Source: Health Care Financing Administration, Division of Budget.
TABLE 2-3.--BENEFIT PAYMENTS BY SERVICE UNDER MEDICARE PART A AND PART B, SELECTED FISCAL YEARS 1975-98
[Dollars in millions]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1975 1980 1985 1990 1995 1998 (est.) \1\ Average annual growth
--------------------------------------------------------------------------------------------------------------------- (percent)
--------------------------------
Percent Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent Amount 1975-85 1985-95 1995-98
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Part A
Inpatient hospital services............... 70.5 $9,947 67.4 $22,860 65.0 $45,218 55.3 $59,285 49.4 $87,441 47.6 $109,299 16.3 6.8 7.7
Skilled nursing facility services......... 1.9 273 1.2 392 0.8 550 2.6 2,821 5.1 9,104 6.0 13,779 7.3 32.4 14.8
Home health services...................... 0.9 133 1.5 524 2.7 1,908 3.1 3,297 8.5 14,995 9.5 21,879 30.5 22.9 13.4
Hospice services.......................... 0 0 0 0 0 34 0.3 318 1.0 1,854 1.0 2,214 NA 49.2 6.1
-----------------------------------------------------------------------------------------------------------------------------------------------------
Total benefit payments................ 73.3 10,353 70.1 23,776 68.6 47,710 61.3 65,721 64.1 113,394 64.1 147,171 16.5 9.0 9.1
=====================================================================================================================================================
Part B
Physician services \2\.................... 21.7 3,067 23.0 7,813 24.1 16,788 27.0 28,922 22.8 40,376 20.2 46,325 18.5 9.2 4.7
Outpatient services....................... 3.7 529 5.3 1,803 5.6 3,917 7.8 8,365 8.2 14,576 8.7 19,902 22.2 14.0 10.9
Other medical and health services......... 1.2 169 1.6 528 1.6 1,103 3.9 4,165 4.8 8,530 7.1 16,229 20.6 22.7 23.9
-----------------------------------------------------------------------------------------------------------------------------------------------------
Total benefit payments................ 26.7 3,765 29.9 10,144 31.4 21,808 38.7 41,452 35.9 63,482 35.9 82,456 19.2 11.3 9.1
=====================================================================================================================================================
Total parts A and B............... 100.0 14,118 100.0 33,920 100.0 69,518 100.0 107,173 100.0 176,876 100.0 229,627 17.3 9.8 9.1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Represents law in effect prior to enactment of the Balanced Budget Act of 1997. \2\ Includes other services.
NA--Not available.
Note.--Totals may not add due to rounding.
Source: Health Care Financing Administration, Division of Budget.
TABLE 2-4.--MEDICARE ESTIMATED BENEFIT PAYMENTS BY STATE, FISCAL YEAR 1996
----------------------------------------------------------------------------------------------------------------
Medicare Estimated
estimated HI and/or SMI benefit
State benefit Medicare payments per
payments \1\ enrollment \2\ enrollee
----------------------------------------------------------------------------------------------------------------
Alabama......................................................... $3,349,478 650,941 $5,146
Alaska.......................................................... 155,548 35,281 4,409
Arizona......................................................... 2,949,642 613,992 4,804
Arkansas........................................................ 1,749,406 426,645 4,100
California...................................................... 21,688,154 3,690,130 5,877
Colorado........................................................ 2,021,955 432,283 4,677
Connecticut..................................................... 2,810,930 506,169 5,553
Delaware........................................................ 474,232 103,216 4,595
District of Columbia............................................ 1,206,754 77,271 15,617
Florida......................................................... 16,046,099 2,654,681 6,044
Georgia......................................................... 4,444,248 848,854 5,236
Hawaii.......................................................... 612,461 152,948 4,004
Idaho........................................................... 522,788 152,673 3,424
Illinois........................................................ 7,792,373 1,623,430 4,800
Indiana......................................................... 3,770,224 829,586 4,545
Iowa............................................................ 1,641,893 475,130 3,456
Kansas.......................................................... 1,630,982 385,357 4,232
Kentucky........................................................ 2,610,256 595,583 4,383
Louisiana....................................................... 3,937,599 585,918 6,720
Maine........................................................... 791,042 205,132 3,856
Maryland........................................................ 3,005,428 609,601 4,930
Massachusetts................................................... 5,884,023 942,272 6,245
Michigan........................................................ 6,565,577 1,360,512 4,826
Minnesota....................................................... 2,593,008 635,709 4,079
Mississippi..................................................... 2,016,230 401,697 5,019
Missouri........................................................ 4,122,022 838,377 4,917
Montana......................................................... 469,724 131,847 3,563
Nebraska........................................................ 933,547 250,284 3,730
Nevada.......................................................... 1,003,697 202,347 4,960
New Hampshire................................................... 652,613 159,275 4,097
New Jersey...................................................... 5,958,095 1,177,159 5,061
New Mexico...................................................... 799,360 215,930 3,702
New York........................................................ 14,860,448 2,653,492 5,600
North Carolina.................................................. 4,688,836 1,048,981 4,470
North Dakota.................................................... 438,228 103,170 4,248
Ohio............................................................ 7,870,293 1,676,437 4,695
Oklahoma........................................................ 2,471,759 491,628 5,028
Oregon.......................................................... 1,801,354 472,197 3,815
Pennsylvania.................................................... 11,468,028 2,077,870 5,519
Rhode Island.................................................... 866,931 169,186 5,124
South Carolina.................................................. 2,144,121 520,408 4,120
South Dakota.................................................... 446,865 117,421 3,806
Tennessee....................................................... 4,486,558 783,385 5,728
Texas........................................................... 12,732,603 2,116,951 6,015
Utah............................................................ 812,811 191,387 4,247
Vermont......................................................... 306,150 84,454 3,625
Virginia........................................................ 3,277,225 833,145 3,934
Washington...................................................... 2,826,104 698,966 4,043
West Virginia................................................... 1,372,605 331,343 4,143
Wisconsin....................................................... 2,909,048 766,625 3,795
Wyoming......................................................... 197,719 61,465 3,217
Puerto Rico..................................................... 952,913 489,944 1,945
All other areas................................................. 36,142 321,269 112
-----------------------------------------------
Total all areas............................................. 191,176,132 37,979,904 5,034
----------------------------------------------------------------------------------------------------------------
\1\ In thousands of dollars.
\2\ As of September 30, 1996.
Note.--Benefit payments for all areas represent actual Department of Treasury (DOT) disbursements. Distribution
of benefit payments by State is based on a methodology which considered actual payments to HMOs and estimated
payments for other providers of Medicare services. Estimated payments were determined by applying the relative
weight of each State's share of total fee-for-service provider payments for fiscal year 1996 to the DOT
disbursements net of managed care payments.
Source: Health Care Financing Administration.
ELIGIBILITY AND COVERAGE
Aged
Part A
Most Americans age 65 or older are automatically entitled
to protection under part A. These individuals (or their
spouses) established entitlement during their working careers
by paying the HI payroll tax on earnings covered by either the
Social Security or Railroad Retirement Systems.
The HI tax was extended to Federal employment with respect
to wages paid on or after January 1, 1983. Beginning January 1,
1983, Federal employment is included in determining eligibility
for protection under Medicare part A. A transitional provision
allows individuals who were in the employ of the Federal
Government both before and during January 1, 1983, to have
their prior Federal employment considered as employment for
purposes of providing Medicare coverage. Employees of State and
local governments, hired after March 31, 1986, are also liable
for the HI tax.
Persons age 65 or older who are not automatically entitled
to part A may obtain coverage, providing they pay the full
actuarial cost. The 1997 monthly premium is $311 ($187 for
persons who have at least 30 quarters of covered employment).
The 1998 monthly premium is $309 ($170 for persons who have at
least 30 quarters of covered employment).
Part B
Part B of Medicare is voluntary. All persons age 65 or
older (even those not entitled to part A) may elect to enroll
in the SMI Program by paying the monthly premium. The 1997 and
1998 premium is $43.80 per month. Persons who voluntarily
enroll in part A are required to enroll in part B.
Disabled
Part A
Part A also covers, after a 2-year waiting period, people
under age 65 who are either receiving monthly Social Security
benefits on the basis of disability or receiving payments as
disabled Railroad Retirement System annuitants. (Dependents of
the disabled are not eligible.) In addition, most people who
need a kidney transplant or renal dialysis because of chronic
kidney disease are entitled to benefits under part A regardless
of age.
Part B
Persons eligible for part A by virtue of disability or
chronic kidney disease may also elect to enroll in part B.
Number of Beneficiaries
In fiscal year 1996, 32.9 million aged and 4.8 million
disabled had protection under part A. Of those, 7.2 million
aged and 1.0 million disabled actually received reimbursed
services. In fiscal year 1996, 31.9 million aged and 4.1
million disabled were enrolled in part B. About 27.0 million of
the aged and 3.3 million of the disabled actually received
reimbursed services (table 2-2).
BENEFITS AND BENEFICIARY COST SHARING
Part A
Part A coverage includes:
Inpatient hospital care.--The first 60 days of inpatient
hospital services in a benefit period are subject to a
deductible ($760 in calendar year 1997; $764 in 1998). A
benefit period begins when a patient enters a hospital and ends
when he has not been in a hospital or SNF for 60 days. For days
61-90 in a benefit period, a coinsurance amount ($190 in
calendar year 1997; $191 in 1998) is imposed. When more than 90
days are required in a benefit period, a patient may elect to
draw upon a 60-day lifetime reserve. A coinsurance amount ($380
in calendar year 1997; $382 in 1998) is imposed for each
reserve day.
Skilled nursing facility care.--SNF care is up to 100 days
(following hospitalization) in a skilled nursing facility for
persons in need of continued skilled nursing care and/or
skilled rehabilitation services on a daily basis. After the
first 20 days, there is a daily coinsurance ($95 in calendar
year 1997; $95.50 in 1998) amount.
Home health care.--Home health visits are provided to
persons who need skilled nursing care on an intermittent basis,
or physical therapy, or speech therapy. The Balanced Budget Act
of 1997 gradually transfers from part A to part B home health
visits that are not part of the first 100 visits following a
beneficiary's stay in a hospital or SNF (that is,
postinstitutional visits) and during a home health spell of
illness. The transfer will be phased in over 6 years, between
1998 and 2003, with the Secretary transferring one-sixth of the
aggregate expenditures associated with transferred visits in
1998; two-sixths in 1999; three-sixths in 2000; four-sixths in
2001; five-sixths in 2002; and six-sixths in 2003. Beginning
January 1, 2003, part A will cover only postinstitutional home
health services for up to 100 visits during a home health spell
of illness, except for those persons with part A coverage only,
who will be covered for services without regard to the
postinstitutional limitation.
Hospice care.--Hospice care services are provided to
terminally ill Medicare beneficiaries with a life expectancy of
6 months or less for two 90-day periods, followed by an
unlimited number of 60-day periods. The medical director or
physician member of the hospice interdisciplinary team must
recertify, at the beginning of 60-day periods, that the
beneficiary is terminally ill.
Part B
Part B of Medicare generally pays 80 percent of the
approved amount (fee schedule, reasonable charge, or reasonable
cost) for covered services in excess of an annual deductible
($100). Services covered include:
Doctor's services.--This category includes surgery,
consultation, and home, office and institutional visits.
Certain limitations apply for services rendered by dentists,
podiatrists, and chiropractors and for the treatment of mental
illness.
Other medical and health services.--Laboratory and other
diagnostic tests, x-ray and other radiation therapy, outpatient
hospital services, rural health clinic services, DME, home
dialysis supplies and equipment, artificial devices (other than
dental), physical and speech therapy, and ambulance services
are also required.
Specified preventive services.--These services include a
screening mammography once every 2 years for persons over age
65 and at specified intervals for the disabled; and effective
January 1, 1998 annual mammograms for all women over age 40. A
screening pap smear (and, effective January 1, 1998, a
screening pelvic exam) is authorized once every 3 years, except
for women who are at a high risk of developing cervical cancer.
Effective January 1, 1998, coverage is provided for specified
colorectal screening procedures. Effective July 1, 1998,
coverage is authorized for diabetes self-management training
services and bone mass measurements for high-risk persons.
Prostate cancer screenings are covered beginning January 1,
2000.
Drugs and vaccines.--Generally Medicare does not pay for
outpatient prescription drugs or biologicals. Part B pays for
immunosuppressive drugs for 30 months following an organ
transplant (extended to 36 months after 1997), erythropoietin
for treatment of anemia for persons with chronic kidney
failure, and certain specified oral cancer drugs. The program
also covers flu shots, pneumococcal pneumonia vaccines, and
hepatitis B vaccines for those at risk.
Home health services.--Home services include an unlimited
number of medically necessary home health visits for persons
not covered under part A. The 20-percent coinsurance and $100
deductible do not apply for such benefits. As noted above, the
Balanced Budget Act of 1997 gradually transfers some home
health costs from part A to part B, beginning in 1998.
Table 2-5 illustrates the deductible, coinsurance and
premium amounts for both part A and part B services from the
inception of Medicare.
TABLE 2-5.--PART A AND PART B DEDUCTIBLE, COINSURANCE AND PREMIUMS, \1\ 1966-98
--------------------------------------------------------------------------------------------------------------------------------------------------------
Inpatient hospital \2\ HI monthly premium \6\ SMI premium
------------------------------------------ Skilled ------------------------------- --------------------
60 lifetime nursing
Calendar year First 60 61st-90th reserve days facility 21st- SMI
days day (nonrenewable) 100th day Effective Full Reduced deductible Effective Amount
deductible coinsurance coinsurance per coinsurance date amount amount date
per day \3\ day \4\ per day \5\
--------------------------------------------------------------------------------------------------------------------------------------------------------
1966.......................... $40 $10 (\7\) (\7\) ......... ........ NA $50 7/66 $3.00
1967.......................... 40 10 (\7\) $5.00 ......... ........ NA 50 ......... 3.00
1968.......................... 40 10 $20 5.00 ......... ........ NA 50 4/68 4.00
1969.......................... 44 11 22 5.50 ......... ........ NA 50 ......... 4.00
1970.......................... 52 13 26 6.50 ......... ........ NA 50 7/70 5.30
1971.......................... 60 15 30 7.50 ......... ........ NA 50 7/71 5.60
1972.......................... 68 17 34 8.50 ......... ........ NA 50 7/72 5.80
1973.......................... 72 18 36 9.00 7/73 $33 NA 60 \8\ 9/73 6.30
1974.......................... 84 21 42 10.50 7/74 36 NA 60 7/74 6.70
1975.......................... 92 23 46 11.50 7/75 40 NA 60 ......... 6.70
1976.......................... 104 26 52 13.00 7/76 45 NA 60 7/76 7.20
1977.......................... 124 31 62 15.50 7/77 54 NA 60 7/77 7.70
1978.......................... 144 36 72 18.00 7/78 63 NA 60 7/78 8.20
1979.......................... 160 40 80 20.00 7/79 69 NA 60 7/79 8.70
1980.......................... 180 45 90 22.50 7/80 78 NA 60 7/80 9.60
1981.......................... 204 51 102 25.50 7/81 89 NA 60 7/81 11.00
1982.......................... 260 65 130 32.50 7/82 113 NA 75 7/82 12.20
1983.......................... 304 76 152 38.00 ......... 113 NA 75 ......... 12.20
1984.......................... 356 89 178 44.50 1/84 155 NA 75 1/84 14.60
1985.......................... 400 100 200 50.00 1/85 174 NA 75 1/85 15.50
1986.......................... 492 123 246 61.50 1/86 214 NA 75 1/86 15.50
1987.......................... 520 130 260 65.00 1/87 226 NA 75 1/87 17.90
1988.......................... 540 135 270 67.50 1/88 234 NA 75 1/88 24.80
1989.......................... \9\ 560 NA NA \10\ 25.50 1/89 156 NA 75 1/89 31.90
1990.......................... 592 148 296 74.00 1/90 175 NA 75 1/90 28.60
1991.......................... 628 157 314 78.50 1/91 177 NA 100 1/91 29.90
1992.......................... 652 163 326 81.50 1/92 192 NA 100 1/92 31.80
1993.......................... 676 169 338 84.50 1/93 221 NA 100 1/93 36.60
1994.......................... 696 174 348 87.00 1/94 245 184 100 1/94 41.10
1995.......................... 716 179 358 89.50 1/95 261 183 100 1/95 46.10
1996.......................... 736 184 368 92.00 1/96 289 188 100 1/96 42.50
1997.......................... 760 190 380 95.00 1/97 311 187 100 1/97 43.80
1998.......................... 764 191 382 95.50 1/98 309 170 100 1/98 43.80
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ For services furnished on or after January 1, 1982, the coinsurance amounts are based on the inpatient hospital deductible for the year in which the
services were furnished. For services furnished prior to January 1, 1982, the coinsurance amounts are based on the inpatient hospital deductible
applicable for the year in which the individual's benefit period began.
\2\ For care in psychiatric hospital there is a 190-day lifetime limit.
\3\ Always equal to one-fourth of inpatient hospital deductible through 1988 and for 1990 and later; eliminated for 1989.
\4\ Always equal to one-half of inpatient hospital deductible through 1988 and for 1990 and later; eliminated for 1989.
\5\ Always equal to one-third of inpatient hospital deductible through 1988 and for 1990 and later. For 1989 it was equal to 20 percent of estimated
Medicare covered average cost per day.
\6\ Not applicable prior to July 1973. Applies to aged individuals who are not fully insured, and to certain disabled individuals who have exhausted
other entitlement. The reduced amount is available to aged individuals who are not fully insured but who have, or whose spouse has or had, at least 30
quarters of coverage under title II of the Social Security Act. The reduced amount is 75 percent of the full amount in 1994, 70 percent in 1995, 65
percent in 1996, 60 percent in 1997, and 55 percent in 1998 and thereafter.
\7\ Not covered.
\8\ For August 1973 the premium was $6.10.
\9\ In 1989, the HI deductible was applied on an annual basis, not a benefit period basis (unlike the other years).
\10\ In 1989, the SNF coinsurance was on days 1-8 of the 150 days allowed annually; for the other years it is on days 21-100 of 100 days allowed per
benefit period.
NA--Not available.
Note.--In addition to the deductible and coinsurance amounts shown in the table, the first three pints of blood are not reimbursed by Medicare.
Currently there is no deductible or coinsurance on home health benefits. From January 1973 to June 30, 1982, there was a $60 annual deductible and
prior to July 1, 1981, benefits were limited to 100 visits per benefit period under part A and 100 visits per calendar year under part B. Special
limits apply to certain benefits: (1) Outpatient physician services for mental illness; 50 percent of approved charges, up to a maximum of $250 in
benefits per year; July 1, 1966, through December 31, 1987; $450 in benefits per year, January 1, 1988, through December 31, 1988; $1,100 in benefits
per year, January 1, 1989, through December 31, 1989; beginning January 1, 1990, the limit was removed; (2) physical and occupational therapy services
furnished by physical therapists in independent practice: maximum annual approved charges July 1, 1973 through December 31, 1981, $80 per year;
January 1, 1982 through December 31, 1982, $400 per year; January 1, 1983 through December 31, 1989, $500 per year; January 1, 1990 through December
31, 1993, $750 per year; and January 1, 1994 and thereafter, $900 per year.
Source: Health Care Financing Administration, Office of the Actuary.
FINANCING
The Medicare Hospital Insurance Trust Fund (HI) finances
services covered under Medicare part A. The Supplementary
Medical Insurance Trust Fund (SMI) finances services covered
under Medicare part B. The trust funds are maintained by the
Department of the Treasury. Each trust fund is actually an
accounting mechanism; there is no actual transfer of money into
and out of the fund. Income to each trust fund is credited to
the fund in the form of interest-bearing government securities.
The securities represent obligations that the government has
issued to itself. Expenditures for services and administrative
costs are recorded against the fund.
Hospital Insurance Trust Fund--Income
The primary source of income to the HI fund is HI payroll
taxes. This source accounted for $106.9 billion (88.3 percent)
of the total $121.1 billion in income for fiscal year 1996.
Additional income sources include premiums paid by voluntary
enrollees, government credits, interest on Federal securities,
and taxation of a portion of Social Security benefits.
Payroll taxes
The HI Trust Fund is financed primarily through Social
Security payroll tax contributions paid by employees and
employers. Each pays a tax of 1.45 percent on all earnings in
covered employment. The self-employed pay 2.9 percent. Prior to
1994, there was an upper limit on earnings subject to the tax.
An upper limit of $68,400 in 1998 continues to apply under
Social Security. Table 2-6 shows the history of the
contribution rates and maximum taxable earnings base for the HI
Programs.
Other income
The following are additional sources of income to the HI
fund:
1. Railroad retirement account transfers.--In fiscal year
1996, $401 million was transferred from the railroad
retirement fund. This is the estimated amount that
would have been in the fund if railroad employment had
always been covered under the Social Security Act.
2. Reimbursements for uninsured persons.--HI benefits are
provided to certain uninsured persons who turned 65
before 1968. Persons who turned 65 after 1967 but
before 1974 are covered under transitional provisions.
Similar transitional entitlement applies to Federal
employees who retire before earning sufficient quarters
of Medicare-qualified Federal employment provided they
were employed before and during January 1983. Payments
for these persons are made initially from the HI Trust
Fund, with reimbursement from the general fund of the
Treasury for the costs, including administrative
expenses, of the payments. In fiscal year 1996, $419
million was transferred to HI on this basis.
TABLE 2-6.--CURRENT LAW SOCIAL SECURITY PAYROLL TAX RATES FOR EMPLOYERS AND EMPLOYEES AND TAXABLE EARNINGS
BASES, 1977-98
----------------------------------------------------------------------------------------------------------------
Employee and employer rates,
each (percent) HI taxable
Calendar year ------------------------------ earnings Maximum HI
OASDI OASDHI base tax
combined HI combined
----------------------------------------------------------------------------------------------------------------
1977...................................................... 4.95 0.90 5.85 $16,500 $148.50
1978...................................................... 5.05 1.10 6.05 17,700 194.70
1979...................................................... 5.08 1.05 6.13 22,900 240.45
1980...................................................... 5.08 1.05 6.13 25,900 271.95
1981...................................................... 5.35 1.30 6.65 29,700 386.10
1982...................................................... 5.40 1.30 6.70 32,400 421.20
1983...................................................... 5.40 1.30 6.70 35,700 464.10
1984...................................................... 5.70 1.30 7.00 37,800 491.40
1985...................................................... 5.70 1.35 7.05 39,600 534.60
1986...................................................... 5.70 1.45 7.15 42,000 609.00
1987...................................................... 5.70 1.45 7.15 43,800 635.10
1988...................................................... 6.06 1.45 7.51 45,000 652.50
1989...................................................... 6.06 1.45 7.51 48,000 696.00
1990...................................................... 6.20 1.45 7.65 51,300 743.85
1991...................................................... 6.20 1.45 7.65 \1\ 125,00
0 1,812.50
1992...................................................... 6.20 1.45 7.65 130,200 1,887.90
1993...................................................... 6.20 1.45 7.65 135,000 1,957.50
1994...................................................... 6.20 1.45 7.65 \2\ none no limit
1995...................................................... 6.20 1.45 7.65 none no limit
1996...................................................... 6.20 1.45 7.65 none no limit
1997...................................................... 6.20 1.45 7.65 none no limit
1998...................................................... 6.20 1.45 7.65 none no limit
----------------------------------------------------------------------------------------------------------------
\1\ Prior to 1991, the upper limit on tax earnings was the same as for Social Security. The Omnibus Budget
Reconciliation Act of 1990 raised the limit in 1991 to $125,000. Under automatic indexing provisions, the
maximum was increased to $130,200 in 1992 and $135,000 in 1993.
\2\ The Omnibus Budget Reconciliation Act of 1993 eliminated the indexing provision entirely beginning in 1994.
Source: Health Care Financing Administration.
3. Premiums from voluntary enrollees.--Certain persons not
eligible for HI protection either on an insured basis
or on the uninsured basis described above may obtain
protection by enrolling in the program and paying a
monthly premium ($311 in 1997; for persons who have at
least 30 quarters of covered employment, $187 in 1997).
This accounted for an estimated $1,107 million of
financing in fiscal year 1996.
4. Payments for military wage credits.--Sections 217(g) and
229(b) of the Social Security Act, prior to
modification by the Social Security Amendments of 1983,
authorized annual reimbursement from the general fund
of the Treasury to the HI Trust Fund for costs arising
from the granting of deemed wage credits for military
service prior to 1957, according to quinquennial
determinations made by the Secretary of Health and
Human Services. These sections, as modified by the
Social Security Amendments of 1983, provided for a
lump-sum transfer in 1983 for costs arising from such
wage credits. In addition, the lump-sum transfer
included combined employer-employee HI taxes on the
noncontributory wage credits for military service after
1965 and before 1984. After 1983, HI taxes on military
wage credits are credited to the fund on July 1 of each
year. The Social Security Amendments of 1983 also
provided for: (1) quinquennial adjustments to the lump-
sum amount transferred in 1983 for costs arising from
pre-57 deemed wage credits; and (2) adjustments as
deemed necessary to any previously transferred amounts
representing HI taxes on noncontributory wage credits.
In fiscal year 1996, this adjustment, including the
quinquennial adjustment, was $2.3 billion.
5. Tax on Social Security benefits.--Beginning in 1994, the
trust fund acquired an additional funding source. The
Omnibus Budget Reconciliation Act of 1993 (OBRA 1993)
increased the maximum amount of Social Security
benefits subject to income tax from 50 to 85 percent
and provided that the additional revenues would be
credited to the HI Trust Fund. Revenue from this source
totaled $4.1 billion in fiscal year 1996.
6. Interest.--The remaining income to the trust fund consists
almost entirely of interest on the investments of the
trust fund. Interest amounted to an estimated $10.5
billion in fiscal year 1996.
Supplementary Medical Insurance Trust Fund--Income
Part B is financed from premiums paid by the aged, disabled
and chronic renal disease enrollees and from general revenues.
The premium rate is derived annually based on the projected
costs of the program for the coming year. The monthly premium
amount in calendar years 1997 and 1998 is $43.80.
When the program first went into effect in July 1966, the
part B monthly premium was set at a level to finance one-half
of part B program costs. Legislation enacted in 1972 limited
the annual percentage increase in the premium to the same
percentage by which Social Security benefits were adjusted for
changes in cost of living (that is, cost-of-living adjustments
or COLAs). Under this formula, revenues from premiums soon
dropped from 50 to below 25 percent of program costs because
part B program costs increased much faster than inflation as
measured by the Consumer Price Index on which the Social
Security COLA is based.
Since the early 1980s, Congress has regularly voted to set
part B premiums at a level to cover 25 percent of program
costs, in effect overriding the COLA limitation. The 25-percent
provisions first became effective January 1, 1984. General
revenues covered the remaining 75 percent of part B program
costs. Congress took this general approach again in OBRA 1990.
However, OBRA 1990 set specific dollar figures, rather than a
percentage, in law for 1991-95. These dollar figures reflected
the Congressional Budget Office's (CBO) estimates of what 25
percent of program costs would be over the 5-year period.
Program costs grew at a slower rate than anticipated, in part
due to subsequent legislative changes. As a result, the 1995
premium of $46.10 covered an estimated 31.5 percent of program
costs.
OBRA 1993 extended the policy of setting the part B premium
at a level to cover 25 percent of program costs for 1996-98. As
was the case prior to 1991, a percentage rather than a fixed
dollar figure was used. As a result, the 1996 premium was
$42.50, a full $3.60 less than the 1995 premium. The 1997 and
1998 premiums are $43.80. The Balanced Budget Act of 1997
permanently sets the part B premium equal to 25 percent of
program costs.
Financial Status of Hospital Insurance Trust Fund
The Hospital Insurance Trust Fund balance is dependent on
total income to the HI Trust Fund exceeding total outlays from
the fund. Tables 2-7 and 2-8 show historical information from
the 1997 Trustees' Report on the operation of the trust fund.
The Trustees' Report also included projections. However, the
Congress subsequently passed the Balanced Budget Act of 1997
which substantially changed the expected operations of the
fund. Tables 2-7, 2-8, and 2-9 show preliminary projections for
the 1997-2007 period made following the enactment of the
Balanced Budget Act.
The 1997 Trustees' Report (Board of Trustees, Hospital
Trust Fund, 1997) stated that the program failed to meet both
short-range and long-range tests of financial adequacy.
Disbursements began to exceed income in 1995. Under the
trustee's 1997 intermediate assumptions, the fund would have
become insolvent in 2001. The Trustees' Report had projected
that the fund's shortfall would be $23.4 billion at the end of
calendar 2001. The shortfall would continue to build each year,
rising to $429.8 billion at the end of fiscal year 2006 and
$471.6 billion at the end of calendar year 2006.
The projections included in the 1997 Trustees' Reports
have been substantially modified as a result of the enactment
of the Balanced Budget Act (table 2-9). This legislation
provides for the transfer of a portion of home health spending
(currently the fastest growing part A expenditure) from part A
to part B. It also includes additional provisions designed to
stem the growth in part A expenditures. These provisions
include the implementation of prospective payment systems for
home health services and skilled nursing facility services and
limits on the increases in hospital payments. When the Balanced
Budget Act of 1997 was enacted, CBO projected that the
insolvency date would be postponed from 2001 to fiscal year
2007. Subsequently, the administration estimated that the year
of exhaustion would be 2010 (see table 2-9).
Despite short-term improvements, the fund still faces
insolvency. Beginning in fiscal year 1996, HI costs began to
rise faster than income. The CBO expects this trend to
continue, though at a somewhat slower pace as the result of the
Balanced Budget Act of 1997. The administration projects that
income will still slightly exceed costs over the short term and
costs will again exceed income after 2007. Historically, the
shortfall has been primarily attributable to the increase in
hospital payments which have accounted for over 65 percent of
HI benefit payments.
Beginning in 2011, the program will begin to experience the
impact of major demographic changes. First, baby boomers
(persons born between 1946 and 1964) begin turning age 65.
Second, there will be a shift in the number of covered workers
supporting each HI enrollee. In 1996, there were 3.9 workers
for every beneficiary; in 2030 there will only be an estimated
2.3.
TABLE 2-7.--OPERATIONS OF THE HOSPITAL INSURANCE TRUST FUND, SELECTED FISCAL YEARS 1970-2007
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Income Disbursements Trust fund
----------------------------------------------------------------------------------------------------------------------------------------------------------------
Income Payments
Fiscal year \1\ from Railroad Reimbursement Premiums for Interest Net Fund at
Payroll taxation retirement for uninsured from military and other Total Benefits Administrative Total increase end of
taxes of account persons voluntary wage income \2\ income payments \3\ expenses \4\ disbursements in fund year
benefits transfers enrollees credits
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Historical data (in millions of dollars):
1970....................... $4,785 ........ $64 $617 ......... $11 $137 $5,614 $4,804 $149 $4,953 $661 $2,677
1975....................... 11,291 ........ 132 481 $6 48 609 12,568 10,353 259 10,612 1,956 9,870
1980....................... 23,244 ........ 244 697 17 141 1,072 25,415 23,790 497 24,288 1,127 14,490
1985....................... 46,490 ........ 371 766 38 86 3,182 50,933 47,841 813 48,654 \5\ 4,103 21,277
1986....................... 53,020 ........ 364 566 40 \6\ -714 3,167 56,442 49,018 667 49,685 \7\ 17,370 38,648
1987....................... 57,820 ........ 368 447 40 94 3,982 62,751 49,967 836 50,803 11,949 50,596
1988....................... 61,901 ........ 364 475 42 80 5,148 68,010 52,022 707 52,730 15,281 65,877
1989....................... 67,527 ........ 379 515 42 86 6,567 75,116 57,433 805 58,238 16,878 82,755
1990....................... 70,655 ........ 367 413 113 107 7,908 79,563 65,912 774 66,687 12,876 95,631
1991....................... 74,655 ........ 352 605 367 \8\ -1,011 8,969 83,938 68,705 934 69,638 14,299 109,930
1992....................... 80,978 ........ 374 621 484 86 10,133 92,677 80,784 1,191 81,974 10,703 120,633
1993....................... 83,147 ........ 400 367 622 81 \9\ 12,484 97,101 90,738 866 91,604 5,497 126,131
1994....................... 92,028 $1,639 413 506 852 80 10,676 106,195 101,535 1,235 102,770 3,425 129,555
1995....................... 98,053 3,913 396 462 998 61 10,963 114,847 113,583 1,300 114,883 -36 129,520
1996....................... 106,934 4,069 401 419 1,107 3 10,496 121,135 124,188 1,229 125,317 -4,182 125,338
Preliminary projections made following enactment of the Balanced Budget Act of 1997 (in billions of
dollars):
1997....................... ........ ........ .......... ............. ......... .......... .......... 128.8 ............ .............. 138.1 -9.3 116.0
1998....................... ........ ........ .......... ............. ......... .......... .......... 125.6 ............ .............. 131.5 -5.9 110.1
1999....................... ........ ........ .......... ............. ......... .......... .......... 129.3 ............ .............. 131.5 -2.2 107.9
2000....................... ........ ........ .......... ............. ......... .......... .......... 137.6 ............ .............. 134.3 3.3 111.2
2001....................... ........ ........ .......... ............. ......... .......... .......... 146.0 ............ .............. 139.3 6.7 117.9
2002....................... ........ ........ .......... ............. ......... .......... .......... 155.4 ............ .............. 146.8 8.6 126.5
2003....................... ........ ........ .......... ............. ......... .......... .......... 165.5 ............ .............. 156.8 8.7 135.2
2004....................... ........ ........ .......... ............. ......... .......... .......... 173.8 ............ .............. 166.9 6.9 142.1
2005....................... ........ ........ .......... ............. ......... .......... .......... 183.6 ............ .............. 177.2 6.3 148.4
2006....................... ........ ........ .......... ............. ......... .......... .......... 191.4 ............ .............. 188.2 3.2 151.6
2007....................... ........ ........ .......... ............. ......... .......... .......... 200.9 ............ .............. 200.5 0.4 152.1
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Fiscal years 1970 and 1975 consist of the 12 months ending on June 30 of each year; fiscal years 1980 and later consist of the 12 months ending on September 30 of each year.
\2\ Other income includes recoveries of amounts reimbursed from the trust fund which are not obligations of the trust fund and a small amount of miscellaneous income.
\3\ Includes costs of peer review organizations (beginning with the implementation of the prospective payment system on October 1, 1983).
\4\ Includes costs of experiments and demonstration projects.
\5\ Includes repayment of loan principal from the OASI Trust Fund of $1,824 million.
\6\ Includes the lump-sum general revenue adjustment of -$805 million, as provided for by section 151 of Public Law 98-21.
\7\ Includes repayment of loan principal from the OASI Trust Fund of $10,613 million.
\8\ Includes the lump-sum general revenue adjustment of -$1,100 million, as provided for by section 151 of Public Law 98-21.
\9\ Includes $1,805 million transfer from the SMI catastrophic coverage reserve fund, as provided for by Public Law 102-394.
Note.--Fiscal years 1997-2007 reflect estimated operations of fund under present law with effects of the Balanced Budget Act of 1997 on the basis of the midsession review of the fiscal year
1998 budget assumptions.
Source: Board of Trustees, Federal Hospital Insurance Trust Fund (1997) and Social Security Administration unpublished tables.
TABLE 2-8.--OPERATIONS OF THE HOSPITAL INSURANCE TRUST FUND, SELECTED CALENDAR YEARS 1970-2007
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Income Disbursements Trust fund
----------------------------------------------------------------------------------------------------------------------------------------------------------------
Income Payments
Calendar year from Railroad Reimbursement Premiums for Interest Net Fund at
Payroll taxation retirement for uninsured from military and other Total Benefits Administrative Total increase end of
taxes of account persons voluntary wage income \1\ income payments \2\ expenses \3\ disbursements in fund year
benefits transfers enrollees credits
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Historical data (in millions of dollars):
1970....................... $4,881 ........ $66 $863 ......... $11 $158 $5,979 $5,124 $157 $5,281 $698 $3,202
1975....................... 11,502 ........ 138 621 $7 48 664 12,980 11,315 266 11,581 1,399 10,517
1980....................... 23,848 ........ 244 697 18 141 1,149 26,097 25,064 512 25,577 521 13,749
1985....................... 47,576 ........ 371 766 41 \4\ -719 3,362 51,397 47,580 834 48,414 \5\ 4,808 20,499
1986....................... 54,583 ........ 364 566 43 91 3,619 59,267 49,758 664 50,422 \6\ 19,458 39,957
1987....................... 58,648 ........ 368 447 38 94 4,469 64,064 49,496 793 50,289 13,775 53,732
1988....................... 62,449 ........ 364 475 41 80 5,830 69,239 52,517 815 53,331 15,908 69,640
1989....................... 68,369 ........ 379 515 55 86 7,317 76,721 60,011 792 60,803 15,918 85,558
1990....................... 72,013 ........ 367 413 122 \7\ -993 8,451 80,372 66,239 758 66,997 13,375 98,933
1991....................... 77,851 ........ 352 605 432 89 9,510 88,839 71,549 1,021 72,570 16,269 115,202
1992....................... 81,745 ........ 374 621 522 86 10,487 93,836 83,895 1,121 85,015 8,821 124,022
1993....................... 84,133 ........ 400 367 675 81 \8\ 12,531 98,187 93,487 904 94,391 3,796 127,818
1994....................... 95,280 $1,639 413 506 907 80 10,745 109,570 103,282 1,263 104,545 5,025 132,844
1995....................... 98,421 3,913 396 462 954 61 10,820 115,027 116,368 1,236 117,604 -2,577 130,267
1996....................... 110,585 4,069 401 419 1,199 \9\ 2,293 10,222 124,603 128,632 1,297 129,929 -5,325 124,942
Preliminary projections made following enactment of the Balanced Budget Act of 1997 (in billions of
dollars):
1997....................... ......... ........ .......... ............. ......... ......... .......... 129.1 ............ .............. 138.2 -9.1 115.8
1998....................... ......... ........ .......... ............. ......... ......... .......... 124.5 ............ .............. 128.2 -3.7 112.1
1999....................... ......... ........ .......... ............. ......... ......... .......... 131.1 ............ .............. 131.4 -0.3 111.8
2000....................... ......... ........ .......... ............. ......... ......... .......... 139.6 ............ .............. 134.6 5.0 116.8
2001....................... ......... ........ .......... ............. ......... ......... .......... 148.8 ............ .............. 140.2 8.6 125.5
2002....................... ......... ........ .......... ............. ......... ......... .......... 158.1 ............ .............. 148.1 10.0 135.4
2003....................... ......... ........ .......... ............. ......... ......... .......... 169.5 ............ .............. 158.2 11.3 146.8
2004....................... ......... ........ .......... ............. ......... ......... .......... 177.8 ............ .............. 168.4 9.5 156.2
2005....................... ......... ........ .......... ............. ......... ......... .......... 186.7 ............ .............. 178.8 7.9 164.2
2006....................... ......... ........ .......... ............. ......... ......... .......... 195.7 ............ .............. 190.0 5.7 169.9
2007....................... ......... ........ .......... ............. ......... ......... .......... 205.7 ............ .............. 203.3 2.3 172.2
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Other income includes recoveries of amounts reimbursed from the trust fund which are not obligations of the trust fund and a small amount of miscellaneous income.
\2\ Includes cost of peer review organizations (beginning with the implementation of the prospective payment system on October 1, 1983).
\3\ Includes costs of experiments and demonstration projects.
\4\ Includes the lump-sum general revenue adjustment of -$805 million, as provided for by section 151 of Public Law 98-21.
\5\ Includes repayment of loan principal from the OASI Trust Fund of $1,824 million.
\6\ Includes repayments of loan principal from the OASI Trust Fund of $10,613 million.
\7\ Includes the lump-sum general revenue adjustment of -$1,100 million, as provided for by section 151 of Public Law 98-21.
\8\ Includes $1,805 million transfer from the SMI catastrophic coverage reserve fund, as provided for by Public Law 102-394.
\9\ Includes the lump-sum general revenue adjustment of -$2,366 million provided for by section 151 of Public Law 98-21.
Note.--Fiscal years 1997-2007 reflect estimated operations of the fund under present law with effects of the Balanced Budget Act of 1997 on the basis of the midsession review of the fiscal
year 1998 budget assumptions.
Source: Board of Trustees, Federal Hospital Insurance Trust Fund (1997) and Social Security Administration, unpublished tables.
TABLE 2-9.--PROJECTIONS MADE FOLLOWING PASSAGE OF THE BALANCED BUDGET ACT OF 1997 FOR THE HOSPITAL INSURANCE TRUST FUND OF INCOME AND OUTLAYS, FISCAL
YEARS 1997-2007, UNDER CBO AND ADMINISTRATION ASSUMPTIONS
[In billions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
--------------------------------------------------------------------------------------------------------------------------------------------------------
CBO projections:
Income........................................ $127.7 $131.0 $136.5 $142.3 $147.9 $154.2 $160.6 $166.9 $173.6 $180.4 $187.2
Outlays....................................... 137.4 142.3 145.9 149.3 158.2 159.4 170.1 180.4 197.3 202.4 221.6
-------------------------------------------------------------------------------------------------------
Net increase in fund........................ -9.7 -11.3 -9.4 -7.0 -10.3 -5.2 -9.5 -13.6 -23.7 -22.1 -34.4
-------------------------------------------------------------------------------------------------------
Balance at end of year..................... 115.6 104.3 94.9 87.9 77.6 72.4 62.9 49.3 25.7 3.6 -30.8
=======================================================================================================
Administration projections:
Income........................................ 128.8 125.6 129.3 137.6 146.0 155.4 165.5 173.8 183.6 191.4 200.9
Outlays....................................... 138.1 131.5 131.5 134.3 139.3 146.8 156.8 166.9 177.2 188.2 200.5
-------------------------------------------------------------------------------------------------------
Net increase in fund........................ -9.3 -5.9 -2.2 3.3 6.7 8.6 8.7 6.9 6.3 3.2 0.4
-------------------------------------------------------------------------------------------------------
Balance at end of year..................... 116.0 110.1 107.9 111.2 117.9 126.5 135.2 142.1 148.4 151.6 152.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Congressional Budget Office, August 1997, and Social Security Administration, October 1997, unpublished tables.
The combination of expenditure and demographic factors is
also reflected in the increasing size of the HI Program
relative to other sectors of the economy. According to the 1997
Trustees' Report, the program's cost is expected to rise from
1.7 percent of gross domestic product (GDP) in 1996 to about 5
percent of GDP in 2070. This estimate was made prior to
enactment of the Balanced Budget Act of 1997.
Financial Status of Supplementary Medical Insurance Trust Fund
Because the SMI Trust Fund is financed through beneficiary
premiums and Federal general revenues, it does not face the
prospect of depletion, as does the HI Trust Fund. However, the
rising cost of the program is placing a burden on the trust
fund, and by extension on beneficiaries (in the form of
premiums) and Federal general revenues. Table 2-10 shows
historical information from the 1997 Trustees' Report (Board of
Trustees, Federal Hospital Insurance Trust Fund, 1997).
Comparison of Medicare Lifetime Benefits with Beneficiary Contributions
Medicare beneficiaries typically get back considerably more
in Medicare benefits than they contribute in payroll taxes and
premiums over their lifetimes. CBO has estimated (based on the
1996 Trustees' Report) the extent to which Medicare enrollees'
contributions (through the HI payroll tax and the SMI premium)
cover the expected value of their benefits under the program.
Results are presented only for self-insured men and women (that
is, those who obtain benefits on the basis of their own work
history) who worked each year at an average wage from 1966
until retirement at age 65. Three groups of persons are shown--
persons who reach 65 as of 1985, 1995, and 2005. All estimates,
which were made prior to the enactment of the Balanced Budget
Act of 1997, are dependent on uncertain projections of future
health spending.
For a self-insured man who worked continuously at an
average wage from 1966 (when Medicare began) until retirement
in 1985, the present discounted value of their contributions is
about 29 percent of the expected value of lifetime Medicare
benefits. For men retiring in 1995, contributions represent
about 37 percent of benefits; for those retiring in 2005,
contributions represent about 41 percent. Contributions through
HI payroll taxes increases relative to HI benefits for later
retirees because the HI payroll tax (which began in 1966) was
paid for a greater proportion of their working years.
Conversely, contributions through SMI premiums relative to SMI
benefits decline because, under the law in effect prior to the
Balanced Budget Act of 1997, after 1998 annual premium
increases were limited by the percentage increase in the Social
Security COLA (see table 2-11).
TABLE 2-10.--OPERATIONS OF THE SUPPLEMENTARY MEDICAL INSURANCE TRUST FUND (CASH BASIS), SELECTED FISCAL YEARS 1970-96
[In millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Income Disbursements
------------------------------------------------------------------------------------------------------- Balance at
Fiscal year \1\ Interest end of
Premium from Government and other Total Benefit Administrative Total year \4\
enrollees contributions \2\ income \3\ income payments expenses disbursements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Historical data:
1970............................. $936 $928 $12 $1,876 $1,979 $217 $2,196 $57
1975............................. 1,887 2,330 105 4,322 3,765 405 4,170 1,424
1980............................. 2,928 6,932 415 10,275 10,144 593 10,737 4,532
1985............................. 5,524 17,898 1,155 24,577 21,808 922 22,730 10,646
1986............................. 5,699 18,076 1,228 25,003 25,169 1,049 26,218 9,432
1987............................. 6,480 20,299 1,018 27,797 29,937 900 30,837 6,392
1988............................. 8,756 25,418 828 35,002 33,682 1,265 34,947 6,447
1989............................. \5\ 11,548 30,712 \5\ 1,022 \5\ 43,282 36,867 \5\ 1,450 \5\ 38,317 \5\ 11,412
1990............................. \5\ 11,494 33,210 \5\ 1,434 \5\ 46,138 41,498 \5\ 1,524 \5\ 43,022 \5\ 14,527
1991............................. 11,807 34,730 1,629 48,166 45,514 1,505 47,019 15,675
1992............................. 12,748 38,684 1,717 53,149 48,627 1,661 50,288 18,535
1993............................. 14,683 44,227 1,889 60,799 \6\ 54,214 1,845 56,059 23,276
1994............................. 16,895 38,355 2,118 57,368 58,006 1,718 59,724 20,919
1995............................. 19,244 36,988 1,937 58,169 63,491 1,722 65,213 13,874
1996............................. 18,731 61,702 1,392 82,025 67,176 1,771 68,946 26,953
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ For 1970 and 1975, fiscal years cover the interval from July 1 through June 30; fiscal years 1980-2005 cover the interval from October 1 through
September 30.
\2\ General fund matching payments, plus certain interest-adjustment items.
\3\ Other income includes recoveries of amounts reimbursed from the trust fund which are not obligations of the trust fund and other miscellaneous
income.
\4\ The financial status of the program depends on both the total net assets and the liabilities of the program.
\5\ Includes the impact of the Medicare Catastrophic Coverage Act of 1988 (Public Law 100-360).
\6\ Includes the impact of the transfer to the HI Trust Fund of the SMI catastrophic coverage reserve fund on March 31, 1993 as specified in Public Law
102-394. Actual benefit payments for 1993 were $52,409 million and the amount transferred was $1,805 million.
Source: Board of Trustees, Federal Supplementary Medical Insurance Trust Fund (1997).
TABLE 2-11.--CONTRIBUTIONS AS A PERCENT OF EXPECTED LIFETIME BENEFITS
UNDER MEDICARE FOR SELECTED SELF-INSURED ENROLLEES REACHING AGE 65 AS OF
1985, 1995, OR 2005
------------------------------------------------------------------------
Year
Category -----------------------------
1985 1995 2005
------------------------------------------------------------------------
Self-insured men who earned average wages:
Hospital insurance.................... 31.6 50.4 66.2
Supplementary medical insurance....... 24.3 17.8 11.5
-----------------------------
Medicare total.................... 28.9 37.3 41.0
=============================
Self-insured women who earned average
wages:
Hospital insurance.................... 26.0 42.7 56.9
Supplementary medical insurance....... 24.5 16.9 11.8
-----------------------------
Medicare total.................... 25.5 31.8 36.0
------------------------------------------------------------------------
Note.--Contributions include employers' and employees' hospital
insurance (HI) payroll taxes, interest, and supplementary medical
insurance (SMI) premiums. Any other taxes paid by enrollees are not
included. Estimates are for beneficiaries with sufficient work history
to qualify for benefits. However, up to 20 percent of Medicare
beneficiaries qualify on the basis of their spouse's work history, not
their own. For spouse-insured beneficiaries, contributions as a
percent of benefits are lower because spouse-insured beneficiaries
paid little or no HI payroll taxes. Estimates assume an expected
lifetime at age 65 of 15 years for men (to age 80) and 19 years for
women (to age 84). Present discounted values for expected benefits
were obtained using the average interest rate projected for HI Trust
Fund earnings over the same years.
Source: Congressional Budget Office.
Contributions by self-insured women as a percentage of
expected benefits are smaller than they are for men. Actual
contributions by men and women are the same in the illustrative
calculations. However, a woman's lifetime benefits are larger
because a woman's lifetime expectancy is 4 years longer at age
65 (table 2-11).
In 1995 dollars, the present discounted value of Medicare
benefits net of contributions (that is the net transfer or
subsidy value) is estimated at $32,222 for men and $41,355 for
women who retired in 1985. For those retiring in 1995, the
value is estimated at $51,813 for men and $68,777 for women.
CBO projects that values will continue to increase in the
future, reaching $71,868 for men and $91,594 for women by 2005
(table 2-12).
TABLE 2-12.--PRESENT DISCOUNTED VALUE OF LIFETIME BENEFITS,
CONTRIBUTIONS, AND NET TRANSFER UNDER MEDICARE FOR SELECTED SELF-INSURED
ENROLLEES REACHING AGE 65 IN 1985, 1995, OR 2005
[In constant 1995 dollars]
------------------------------------------------------------------------
Year
Category --------------------------------------
1985 1995 2005
------------------------------------------------------------------------
Self-insured men who earned
average wages:
Benefits..................... $45,305 $82,599 $121,898
Contributions................ 13,083 30,787 50,030
--------------------------------------
Net transfer............. 32,222 51,813 71,868
======================================
Self-insured women who earned
average wages
Benefits..................... 55,483 100,862 143,036
Contributions................ 14,128 32,084 51,442
--------------------------------------
Net transfer............. 41,355 68,777 91,594
------------------------------------------------------------------------
Note.--Contributions include employers' and employees' HI payroll taxes,
interest, and SMI premiums. Any other taxes paid by enrollees are
included. Net transfer is benefits net of contributions. Estimates are
for beneficiaries with sufficient work history to qualify for
benefits. However, up to 20 percent of Medicare beneficiaries qualify
on the basis of their spouse's work history, not their own. For spouse-
insured beneficiaries qualify on the basis of their spouse's work
history, not their own. For spouse-insured beneficiaries,
contributions as a percent of benefits are lower and the net transfer
is larger because spouse-insured beneficiaries paid little or no HI
payroll taxes. Estimates assume an expected lifetime at age 65 to 15
years for men (to age 80) and 19 years for women (to age 84). Present
discounted values for unexpected benefits were obtained using the
average interest rate projected for HI Trust Fund earnings over the
same years. The CPI-U was used to get constant 1995 dollars.
Source: Congressional Budget Office.
PART A SERVICES--COVERAGE AND PAYMENTS
Inpatient Hospital Services
Medicare part A provides reimbursement for inpatient
hospital care through the prospective payment system (PPS),
established by Congress in the Social Security Amendments of
1983 (Public Law 98-21). Before the enactment of PPS, Medicare
paid hospitals retrospectively for the full costs they
incurred, subject to certain limits and tests of
reasonableness. Congress had previously acted to contain
growing hospital costs by placing certain limits on routine
inpatient care operating costs. However, medical costs
continued to grow faster than the rate of inflation in the
early 1980s, so PPS was enacted to constrain the growth of
Medicare's inpatient hospital costs by providing incentives for
hospitals to provide care more efficiently (see appendix D for
further information about hospital services).
Under PPS, fixed hospital payment amounts are established
in advance of the provision of services on the basis of a
patient's diagnosis. Hospitals that are able to provide
services for less than the fixed PPS payment may keep the
difference. Hospitals with costs that exceed the fixed PPS
payment lose money on the case. The system's fixed prices are
determined in advance on a cost-per-case basis, using a
classification system of over 500 diagnosis-related groups
(DRGs). Each Medicare case is assigned to one of the DRGs based
on the patient's medical condition and treatment. DRGs are
assigned relative weights to reflect the variation in the costs
of treating a particular diagnosis. The DRG-based payment rate
is designed to represent the national average cost per case for
treating a patient with a particular diagnosis. Payments for a
particular DRG will vary among different hospitals depending on
the hospital's location and certain other characteristics. In a
particular hospital, all cases assigned to the same DRG are
reimbursed at the same predetermined rate.
The PPS payment rates are updated each year using an update
factor which is determined, in part, by the projected increase
in the hospital market basket index (MBI). The hospital MBI
measures the cost of goods and services that are purchased by
hospitals, yielding one price inflator for all hospitals in a
given year.
In addition to the basic DRG payment for each case, PPS
hospitals may also receive certain supplemental Medicare
payments. Additional hospital payments include indirect medical
education costs, disproportionate-share hospital payments,
outlier payments, and payments for inpatient dialysis provided
to end-stage renal disease beneficiaries. Certain categories of
hospital expenses are not included in the PPS rates and are
reimbursed in some other way, including direct medical
education costs and capital-related costs. Certain facilities
receive special treatment under PPS, particularly certain types
of isolated or essential hospitals in rural areas, including
regional referral centers (RRCs), sole community hospitals
(SCHs), and Medicare-dependent small rural hospitals.
Specialized facilities are excluded from PPS and are paid
on the basis of reasonable costs subject to rate of increase
limits. PPS-exempt facilities include psychiatric hospitals,
rehabilitation hospitals, children's hospitals, cancer research
centers, and long-term care hospitals. States are also allowed
to apply for a waiver from PPS and establish a prospective
system for setting hospital rates instead of what would be paid
under PPS; Maryland is the only State that continues to operate
under such a waiver.
Table 2-13 provides 1995 data on the utilization of
inpatient hospital services by type of enrollee and type of
hospital.
Skilled Nursing Facility Services
Coverage
The Medicare Program covers extended care services provided
in nursing homes for beneficiaries who require additional
skilled nursing care and rehabilitation services following a
hospitalization. These extended care services, commonly known
as skilled nursing facility (SNF) benefits, are covered under
part A of the program for up to 100 days per spell of illness
and must be provided in a skilled nursing facility certified to
participate in Medicare. A spell of illness is that period
which begins when a beneficiary is furnished
TABLE 2-13.--USE OF INPATIENT HOSPITAL SERVICES BY MEDICARE ENROLLEES, BY TYPE OF ENROLLEE AND TYPE OF HOSPITAL,
CALENDAR YEAR 1995 \1\
----------------------------------------------------------------------------------------------------------------
Bills \2\ Covered days of care Reimbursement
-----------------------------------------------------------------------------------
Type of enrollee and type of Amount
hospital Number in Per 1,000 Number in Per bill Per 1,000 in Per bill Per
thousands enrollees thousands enrollees millions enrollee
----------------------------------------------------------------------------------------------------------------
All enrollees:
All hospitals............. 12,474 336 86,041 6.9 2,317 $76,519 $6,134 $2,061
Short stay.............. 11,260 303 72,124 6.4 1,942 69,261 6,151 1,865
Long stay............... 1,214 33 13,917 11.5 375 7,258 5,979 195
Psychiatric........... 302 8 2,688 8.9 72 937 3,103 25
All other............. 912 25 11,229 12.3 302 6,321 6,931 170
Aged:
All hospitals............. 10,610 324 73,165 6.9 2,235 65,980 6,219 2,015
Short stay.............. 9,848 301 63,695 6.5 1,945 60,572 6,151 1,850
Long stay............... 762 23 9,470 12.4 289 5,408 7,097 165
Psychiatric........... 90 3 902 10.0 28 342 3,800 10
All other............. 672 21 2,295 3.4 70 5,066 7,539 155
Disabled:
All hospitals............. 1,864 424 12,876 6.9 2,931 10,539 5,654 2,399
Short stay.............. 1,412 321 8,429 6.0 1,919 8,689 6,154 1,978
Long stay............... 452 103 4,447 9.8 1,012 1,850 4,093 421
Psychiatric........... 213 48 1,787 8.4 407 596 2,798 136
All other............. 239 54 2,660 11.1 605 1,254 5,247 285
----------------------------------------------------------------------------------------------------------------
\1\ Preliminary data. Totals may not add due to rounding.
\2\ Discharges not available by type of hospital.
Note.--Only services rendered by inpatient hospitals are included.
Source: Health Care Financing Administration, Bureau of Management and Strategy.
inpatient hospital or SNF care and ends when the beneficiary
has been neither an inpatient of a hospital nor an SNF for 60
consecutive days. A beneficiary may have more than one spell of
illness per year.
In order to be eligible for SNF care, the beneficiary must
have been an inpatient of a hospital for at least 3 consecutive
days and must be transferred to a SNF, usually within 30 days
of discharge from the hospital. Furthermore, a physician must
certify that the beneficiary is in need of skilled nursing care
or other skilled rehabilitation services, which as a practical
matter can only be provided on an inpatient basis and which are
related to the condition for which the beneficiary was
hospitalized.
Covered SNF services include the following:
--Nursing care provided by or under the supervision of a
registered nurse;
--Room and board;
--Physical or occupational therapy or speech-language
pathology;
--Medical social services;
--Drugs, biologicals, supplies, appliances, and equipment
ordinarily furnished by a SNF for the care of patients;
--Medical services of interns and residents in training under
an approved teaching program of a hospital with which
the SNF has a transfer agreement; and
--Other services necessary to the health of patients that are
generally provided by SNFs.
Reimbursement
Medicare has reimbursed the great bulk of skilled nursing
facility (SNF) care on a retrospective cost-based basis. This
has meant that SNFs have been paid after services were
delivered for the reasonable costs (as defined by program) they
incurred for the care they provided. For these purposes, the
costs SNFs incurred for providing services to beneficiaries
were divided into three major categories: (1) routine service
costs--nursing, room and board, administrative, and other
overhead costs; (2) ancillary services, such as therapy
services, laboratory, radiology procedures, supplies and other
equipment; and (3) capital-related costs, including net
depreciation expense, taxes, lease and rental payments,
improvements that extend the life of or increase productivity
of assets, net interest expense, and so forth.
Routine costs have been subject to national average per
diem limits, adjusted to reflect differences in wage levels
from area to area. Ancillary service and capital costs have
been paid on the basis of reasonable costs and neither have
been subject to limits.
Beginning July 1, 1998, the Balanced Budget Act of 1997
phases in a prospective payment system for SNFs that will pay a
Federal per diem rate for covered SNF services. Covered
services will include part A SNF as well as all services for
which payment may be made under part B during the period when
the beneficiary is provided covered SNF care (excluding,
however, physician services, certain nurse practitioner and
physician assistant services, certified nurse-midwife services,
qualified psychologist services, services of a certified
registered nurse anesthetist, certain dialysis services and
drugs, and in 1998 only, the transportation costs of
electrocardiogram equipment).
The Federal per diem payment will cover routine service
costs, ancillary costs, and capital-related costs, but will not
include costs associated with approved educational activities.
The actual per diem rate received by a facility will include
adjustments for case mix based on a resident classification
system established by the Secretary to account for relative
resource utilization of different patient types. The labor-
related portion of the rate will also include budget-neutral
adjustments to reflect the relative levels of wages and wage-
related cost for the geographic area in which the facility is
located.
The resident classification system used by the Secretary
for the new SNF prospective payment system is expected to be
similar to that developed under a Health Care Financing
Administration demonstration known as resource utilization
groups (RUGs)-III. Under RUGs-III, classification is based on
residents' clinical conditions; extent of services needed, such
as nursing care, rehabilitation, respiratory/ventilator care of
tube feedings; and functional status, such as the amount of
support needed to eat or toilet. This new system pays, for
example, three times more for bedridden, severely ill patients
needing a variety of therapies than for ambulatory patients who
need only posthospital monitoring and surgical wound treatment.
For a beneficiary residing in a SNF (or a part of a
facility that includes a SNF) but no longer eligible for part A
SNF care, payments for part B covered services will have to be
made to the facility whether or not the item or service was
furnished by the facility, by others under arrangement, or
under any other contracting or consulting arrangement. This
requirement is often referred to as the ``consolidated
billing'' provision of the new law. Payment for part B items
and services must include a code identifying the items or
services delivered. In addition, bills submitted by physicians
must include the SNFs provider number.
Growth in payments
For the past several years, SNF care has been one of
Medicare's fastest growing benefits. SNF spending in calendar
year 1990 stood at $2.5 billion; by calendar year 1996 it had
increased to $11.7 billion, for an average annual growth rate
of 29 percent (see table 2-14). Because spending for SNF care
has been growing at a faster rate than other benefits, both its
share of total Medicare spending as well as its share of total
part A expenditures have increased significantly, actually
doubling during this same period. Table 2-14 presents
historical SNF spending data on a calendar year basis.
Table 2-15 shows that since 1990 the number of Medicare
beneficiaries receiving SNF care grew from 638,000 to 1,145,000
in 1996 or by 79.5 percent; the number of covered days grew
from 25.1 million to 40.2 million or by 60 percent. Payment per
day, however, tripled, increasing by 198 percent during the
period, and reached $292 per day.
TABLE 2-14.--ESTIMATED MEDICARE PAYMENTS FOR SKILLED NURSING FACILITY
CARE BY TYPE OF SERVICE, 1983-96 \1\
------------------------------------------------------------------------
Payments
(in Percent
billions) change \2\
------------------------------------------------------------------------
Calendar year:
1983...................................... $0.5 ...........
1984...................................... 0.6 6.9
1985...................................... 0.6 2.9
1986...................................... 0.6 0.2
1987...................................... 0.6 8.8
1988...................................... 0.9 47.1
1989...................................... 3.5 275.7
1990...................................... 2.5 -29.0
1991...................................... 2.9 18.4
1992...................................... 4.5 55.3
1993...................................... 6.5 44.4
1994...................................... 8.4 29.2
1995 \1\.................................. 10.4 23.8
1996 \1\.................................. 11.7 12.5
------------------------------------------------------------------------
\1\ Estimated.
\2\ Rounding in payments may not reflect actual change.
Note.--Payments reported here are incurred expenditures, net of
beneficiary copayments.
Source: Health Care Financing Administration, Office of the Actuary, and
Prospective Payment Assessment Commission (1995, 1996).
TABLE 2-15.--MEDICARE SKILLED NURSING FACILITY UTILIZATION AND PAYMENTS PER PERSON SERVED, 1983-96
----------------------------------------------------------------------------------------------------------------
People served Days Payment per day
-----------------------------------------------------------------
Calendar year Number Per
Number Per 1,000 (in person Amount Percent
enrollees millions) served change
----------------------------------------------------------------------------------------------------------------
1983.......................................... 265,000 9 9.3 35.1 $56 .........
1984.......................................... 299,000 10 9.6 32.2 58 3.2
1985.......................................... 314,000 10 8.9 28.4 65 11.1
1986.......................................... 304,000 10 8.2 26.8 71 9.6
1987.......................................... 293,000 9 7.4 25.4 84 19.3
1988.......................................... 384,000 12 10.7 27.8 87 2.6
1989.......................................... 636,000 19 29.8 46.8 117 34.6
1990.......................................... 638,000 19 25.1 39.5 98 -16.1
1991.......................................... 671,000 20 23.7 35.3 123 25.9
1992.......................................... 785,000 22 29.0 36.9 157 27.1
1993.......................................... 908,000 25 34.4 37.9 188 20.1
1994.......................................... 1,068,000 29 37.1 39.7 226 20.1
1995.......................................... 1,110,000 30 39.8 35.1 267 18.1
1996 \1\...................................... 1,145,000 30 40.2 35.1 242 9.3
----------------------------------------------------------------------------------------------------------------
\1\ Estimated.
Source: Health Care Financing Administration, Office of the Actuary.
Tables 2-14 and 2-15 also show that SNF utilization and
spending first began to increase significantly in 1988 and
1989. These increases can be traced to significant changes that
occurred in the benefit at that time. First HCFA issued new
coverage guidelines that became effective early in 1988. The
guidelines provided SNFs a great deal more information than had
previously existed about criteria that must be met for a
beneficiary to receive Medicare coverage. Prior to this time,
studies had pointed to a lack of adequate written guidance on
coverage criteria that led to inconsistencies in coverage
decisions for a benefit that was intended to be uniform across
the country. As a result, many SNFs were reluctant to accept
Medicare beneficiaries because of the possibility that a
submitted claim would be retroactively denied. The 1988
guidelines clarified coverage criteria by providing numerous
examples of covered and noncovered care. Furthermore, the
guidelines explained that even when a patient's full or partial
recovery is not possible, care could be covered if it were
needed to prevent deterioration or to maintain current
capabilities. Previously, some care had been denied because
patients' health status was not expected to improve.
The second major, though temporary, change in Medicare's
SNF benefit came in 1988 with the enactment of the Medicare
Catastrophic Coverage Act (MCCA). Effective beginning in 1989,
this legislation: eliminated the SNF benefit's prior
hospitalization requirement; revised the coinsurance
requirement to be equal to 20 percent of the national average
estimated per diem cost of SNF services for the first 8 days of
care; and authorized coverage of up to 150 days of care per
calendar year (rather than 100 days per spell of illness).
These changes were repealed in 1989, and the SNF benefit's
structure assumed its prior form. Table 2-14 shows that
spending for SNF care decreased by 29 percent between 1989 and
1990, but did not drop back to 1988 levels. Studies have
suggested that the coverage guidelines and MCCA changes
together might have caused a long-run shift in the nursing home
industry toward Medicare patients that would not end with the
repeal of MCCA. This trend is reflected in data showing a 65-
percent increase, from 8,638 to 14,219, in facilities
participating in Medicare between 1989 and 1996.
As noted above, large average annual rates of growth in
Medicare SNF spending can be explained not only by increases in
volume of services covered, but also by significant increases
in reimbursements per day of care. Prospective Payment
Assessment Commission analysis has shown that Medicare
reimbursement policies may explain this increase. While routine
care costs are subject to per diem limits, ancillary services
are not. Higher ancillary service use, therefore, results in
greater Medicare payments. In addition, a SNF may claim high
ancillary service use as a justification for an exemption from
routine service cost limits, thereby increasing those payments.
In 1990, charges for physical, occupational, speech, and
respiratory therapy services were approximately 15 percent of
total Medicare SNF charges. By 1994, these services represented
over 30 percent of charges. Although final payments for therapy
and other ancillary services are based on costs rather than
charges, these estimates reveal the relative importance of
these services in the overall growth of Medicare Program
payments for SNF services. This growth is expected to be
controlled in the future by the new SNF prospective payment
system mandated by the Balanced Budget Act of 1997.
Home Health Services
Coverage
Both parts A and B of Medicare cover home health visits for
persons who need skilled nursing care on an intermittent basis
or physical therapy or speech therapy. Persons must also be
homebound and under the care of a physician who establishes and
periodically reviews a plan of care for the patient. While a
beneficiary cannot become eligible for home health on the basis
of needing only occupational therapy, this need can continue
eligibility for home health care coverage, even if intermittent
skilled nursing care or physical or speech therapy are no
longer needed.
Medicare's home health benefit is intended to serve
beneficiaries needing acute medical care that must be provided
by skilled health care personnel, and was never envisioned as
providing coverage for the nonmedical supportive care and
personal care assistance needed by chronically impaired
persons. If beneficiaries meet the required eligibility
criteria, they become entitled to an unlimited number of home
health visits. Home health visits are not subject to
deductibles or coinsurance.
For beneficiaries meeting the qualifying criteria,
Medicare's home health benefit covers the following services:
--Part-time or intermittent nursing care provided by or under
the supervision of a registered nurse;
--Physical or occupational therapy or speech-language
pathology services;
--Medical social services;
--Part-time or intermittent services of a home health aide
who has successfully completed a training program
approved by the Secretary;
--Medical supplies (excluding drugs and biologicals) and
durable medical equipment;
--Medical services provided by an intern or resident in
training under an approved training program with which
the agency may be affiliated; and
--Certain other outpatient services which involve the use of
equipment that cannot readily be made available in the
beneficiary's home.
In 1989, as a result of an agreement reached in a class
action lawsuit, Duggan v. Bowen, HCFA published new manual
instructions that clarified the criteria which must be met for
Medicare coverage of home health services. The coverage
guidelines, for example, specify that to meet the requirement
of needing ``intermittent'' skilled nursing care, an individual
must have a medically predictable recurring need for skilled
nursing services. This need can be met in most instances if the
individual requires these services at least once every 60 days.
The guidelines further provide that a service is not considered
a skilled nursing service merely because it is performed by or
under the direct supervision of a licensed nurse; instead the
inherent complexity of the service, the condition of the
patient, and accepted standards of medical and nursing practice
must be considered. Skilled nursing services may be justified
for such purposes as treatment of illness or injury;
observation and assessment of a patient's condition when only
the specialized skills of a medical professional can determine
a patient's status; management and evaluation of a patient care
plan to ensure that essential nonskilled care is achieving its
purpose; and teaching and training activities for the patient
and the patient's family or care givers.
The Balanced Budget Act included several provisions which
clarified coverage criteria for home health care:
--Persons will no longer be able to qualify for Medicare's
home health benefit on the basis of needing skilled
nursing care for venipuncture for the purpose of
obtaining a blood sample.
--Effective for services furnished on or after October 1,
1997, the Medicare statute includes definitions for
part-time and intermittent skilled nursing and home
health aide services. For purposes of receiving skilled
nursing and home health aide services, ``part-time or
intermittent'' is defined as skilled nursing and home
health aide services furnished any number of days per
week as long as they were furnished (combined) less
than 8 hours each day and 28 or fewer hours each week
(or, subject to review on a case-by-case basis as to
the need for care, less than 8 hours each day and 35 or
fewer hours per week). For purposes of qualifying for
Medicare's home health benefit because of a need for
intermittent skilled nursing care, ``intermittent'' is
defined as skilled nursing care that is either provided
or needed on fewer than 7 days each week, or less than
8 hours of each day for periods of 21 days or less
(with extensions in exceptional circumstances when the
need for additional care is finite and predictable).
--The Secretary of Health and Human Services is required to
conduct a study on the criteria that should be applied
for determining whether an individual should be
considered homebound for purposes of qualifying for
Medicare's home health benefit. The criteria should
include the extent and circumstances under which a
person may be absent from the home but nonetheless
qualify. The Secretary is required to report to
Congress by October 1, 1998, and make specific
recommendations on such criteria.
--Effective for services furnished on or after October 1,
1997, the Secretary is required to establish normative
guidelines for the frequency and duration of home
health services. Payments will be denied for visits
that exceed the normative standards. The Secretary is
also authorized to establish a process for notifying a
physician when the number of home health visits
furnished according to a prescription or certification
of the physician significantly exceeds the threshold
normative guidelines. The Secretary may adjust the
thresholds to reflect demonstrated differences in the
need for home health services among different
beneficiaries.
Reimbursement
Home health care agencies have been reimbursed on the basis
of reasonable costs, up to specified limits. Cost limits are
determined separately for each type of covered home health
service (skilled nursing care, physical therapy, speech
pathology, occupational therapy, medical social services, and
home health aide), and according to whether an agency is
located in an urban or rural area. Cost limits, however, have
been applied to aggregate agency expenditures; that is, an
aggregate cost limit is set for each agency that equals the
limit for each type of service multiplied by the number of
visits of each type provided by the agency.
The Balanced Budget Act reduces the per visit cost limits
from 112 percent of the mean labor-related and nonlabor per
visit cost to 105 percent of the national median of labor-
related and nonlabor costs for freestanding home health
agencies, effective for cost-reporting periods beginning
October 1, 1997 (in effect, delaying the cycle for updating the
limits).
In addition, home health agencies, for cost-reporting
periods beginning on or after October 1, 1997, will be paid the
lesser of: (1) their actual costs (that is, allowable
reasonable costs); (2) the per visit limits, reduced to 105
percent of the national median, applied in the aggregate; or
(3) a new blended agency-specific per beneficiary annual limit
applied to the agency's unduplicated census count of patients.
The blended per beneficiary limit will be based 75 percent on
an agency's own costs per beneficiary and 25 percent on the
average cost per beneficiary for agencies in the same census
region (adjusted for differences in labor costs). These costs
will be calculated from cost reports for cost-reporting periods
ending in fiscal year 1994, recognizing 98 percent of
reasonable costs for that period and updating them by the home
health market basket. The costs associated with nonroutine
medical supplies would be included in this calculation. For new
providers and those providers without a 12-month cost-reporting
period ending in fiscal year 1994, the per beneficiary limit
will equal the median of these limits (or the Secretary's best
estimates) applied to home health agencies. Home health
agencies that have altered their corporate structure or name
will not be considered new providers for these purposes. For
beneficiaries using more than one home health agency, the per
beneficiary limitation will be prorated among the agencies.
The Secretary is required to establish the per visit
limits in effect for fiscal year 1998 by January 1, 1998, and
the per beneficiary limits by April 1, 1998. For subsequent
fiscal years (beginning October 1), the Secretary will be
required to establish limits by the prior August 1.
Prospective payment for home health care
Beginning October 1, 1999, the Secretary is required to
establish a prospective payment system (PPS) for home health
and implement the system. All services covered and paid on a
reasonable cost basis at the time of enactment of the Balanced
Budget Act including medical supplies, must be paid on a
prospective basis. For the new prospective system, the
Secretary will consider an appropriate unit of service and the
number, type, and duration of visits provided within that unit,
potential changes in the mix of services provided within that
unit and their cost, and a general system design that provides
for continued access to quality services. In implementing the
system, the Secretary can provide for a transition of not
longer than 4 years during which a portion of the payment will
be based on agency-specific costs, but only if aggregate
payments are not greater than they would have been if a
transition had not occurred.
Under the new system, the Secretary will compute a
standard prospective payment amount (or amounts) that will
initially be based on the most current audited cost report data
available to the Secretary. For fiscal year 2000, payment
amounts under the prospective system must be computed in such a
way that total payments will equal amounts that would have been
paid had the system not been in effect, but will also reflect a
15-percent reduction in cost limits and per beneficiary limits
in effect September 30, 1999. To assure savings from this
reduction, the Secretary will be required to reduce cost limits
and per beneficiary limits in effect September 30, 1999, by 15
percent, even if the Secretary is not prepared to implement the
new system on October 1.
The payment amount for a unit of home health service will
be adjusted by a case-mix adjustor factor established by the
Secretary to explain a significant amount of the variation in
the cost of different units of service. The labor-related
portion of the payment amount will be adjusted by an area wage
adjustment factor that reflects the relative level of wages and
wage-related costs in a particular geographic area as compared
to the national average.
Claims for home health services furnished on or after
October 1, 1998, will have to contain an appropriate identifier
for the physician prescribing home health services or
certifying the need for care. Claims will also be required to
include information on the length of time of a service unit, as
measured in 15-minute increments. The categories of services
for which time information must be included on a claim are
skilled nursing care; physical and occupational therapy and
speech-language pathology; medical social services; and home
health aide services.
In order for home health services to be considered covered
care, home health care agencies will be required to submit
claims for all services, and all payments will have to be made
to a home health agency without regard to whether the item or
service was furnished by the agency, by others under
arrangement, or under any other contacting or consulting
arrangement.
Transfer of some home health payments to part B
Under current law, both parts A and B of Medicare cover
home health. Neither part of the program applies deductibles or
coinsurance to covered visits, and beneficiaries are entitled
to an unlimited number of visits as long as they meet
eligibility criteria. Section 1833(d) of Medicare law prohibits
payments under part B for covered services to the extent that
individuals are also covered under part A for the same
services. As a result, the comparatively few persons who have
no part A coverage are the only beneficiaries for whom payments
have been made under part B.
The Balanced Budget Act of 1997 gradually transfers from
part A to part B home health visits that are not part of the
first 100 visits following a beneficiary's stay in a hospital
or SNF (that is, postinstitutional visits) and during a home
health spell of illness.
The transfer will be phased in over a period of 6 years,
between 1998 and 2003, with the Secretary transferring one-
sixth of the aggregate expenditures associated with transferred
visits in 1998 and an additional one-sixth each year thereafter
until fully implemented in 2003. Beginning January 1, 2003,
part A will cover only postinstitutional home health services
for up to 100 visits during a home health spell of illness,
except for those persons with part A coverage only, who will be
covered for services without regard to the postinstitutional
limitation.
The increase in the part B premium attributable to
transferred expenditures will be phased in over a period of 7
years, between 1998 and 2004. For 1998, the part B premium will
be increased by one-seventh of the extra costs due to the
transfer; for 1999, the part B premium will be increased by
two-sevenths of the extra costs; for 2000, three-sevenths; for
2001, four-sevenths; for 2002, five-sevenths; for 2003, six-
sevenths; and for 2004, the total of the extra costs due to the
transfer.
Postinstitutional home health services are defined for
these purposes as services furnished to a Medicare beneficiary:
(1) after an inpatient hospital or rural primary care hospital
stay of at least 3 consecutive days, initiated within 14 days
after discharge; or (2) after a stay in a SNF, initiated within
14 days after discharge. Home health spell of illness is
defined as the period beginning when a patient first receives
postinstitutional home health services and ending when the
beneficiary had not received inpatient hospital, SNF, or home
health services for 60 days.
Claims administration for transferred visits will continue
to be done by part A fiscal intermediaries.
In related Medicaid provisions, States will receive
allotments to cover under their Medicaid Programs that portion
of the Medicare part B premium attributable to the transfer of
visits to part B for Medicare beneficiaries with incomes
between 135 and 175 percent of poverty. The Federal Government
will pay 100 percent of these costs, just so long as a State
does not exceed its allotment. (See Specified Low-Income
Beneficiaries, below.)
The Balanced Budget Act also includes a provision
requiring the Secretary, not later than October 1, 1997, to
report to the Commerce, Ways and Means, and Finance Committees
on an estimate of Medicare home health outlays under parts A
and B during each of fiscal years 1998-2002. Not later than the
end of each of the years 1999-2002, the Secretary is also
required to submit a report that compares actual outlays with
estimated outlays. If the Secretary finds for a fiscal year
that actual outlays were greater than estimated outlays, the
report is also required to include recommendations regarding
beneficiary copayments or such other methods as will reduce the
growth in outlays for Medicare home health services.
Growth in payments
For the past several years, the home health benefit has
been Medicare's fastest growing benefit. As table 2-16
indicates, spending for home health began to increase in 1989
when the total stood at $2.5 billion. By 1996, spending had
increased to $18.1 billion, for an average annual rate of
growth of 33 percent. Because spending for home health has been
growing at a faster rate than other benefits, its share of
total net Medicare spending has also increased. Almost all home
health claims have been paid out of the Medicare Part A
Hospital Insurance Trust Fund, but beginning with fiscal year
1998, this will change as explained above.
TABLE 2-16.--MEDICARE PAYMENTS FOR HOME HEALTH, 1983-96 \1\
------------------------------------------------------------------------
Payments
Calendar year (in Percent
billions) change \2\
------------------------------------------------------------------------
1983.......................................... $1.6 NA
1984.......................................... 1.8 17.5
1985.......................................... 1.9 4.0
1986.......................................... 1.9 -0.5
1987.......................................... 1.9 -1.2
1988.......................................... 2.0 8.3
1989.......................................... 2.5 23.3
1990.......................................... 3.9 53.2
1991.......................................... 5.6 43.6
1992.......................................... 7.9 41.1
1993.......................................... 10.3 30.4
1994.......................................... 13.3 30.1
1995.......................................... 16.2 21.8
1996 \3\...................................... 18.1 11.7
------------------------------------------------------------------------
\1\ Includes both part A and part B expenditures.
\2\ Rounding in payments may not reflect actual change.
\3\ Estimated.
NA--Not applicable.
Note.--Payments reported here are incurred expenditures rather than
outlays.
Source: Health Care Financing Administration, Office of the Actuary and
Prospective Payment Assessment Commission (1995, 1996).
Table 2-17 shows that most of the growth in home health
spending has been the result of an increasing volume of
services being covered under the program, both in terms of
increasing numbers of users and an increasing number of covered
visits per user. The number of persons served per 1,000
enrollees increased from 50 in 1989 to 99 in 1996, an increase
of 98 percent over the period. Average number of visits per
person served increased from 27 in 1989 to 76 in 1996, an
increase of 181 percent.
Increasing per-visit costs for home health services have
accounted for comparatively little spending growth. Payments
per visit increased at a relatively low rate, from $54 per
visit in 1989 to $62 in 1996, a 14.8-percent increase for the
period.
Some portion of growth in the volume of covered visits may
represent a delayed response to an increasing need for skilled
home care resulting from incentives, contained within
Medicare's hospital prospective payment system, to discharge
patients more quickly to their homes. During early years of
hospital prospective payment, HCFA had in place medical review
and claims processing policies that had resulted in high denial
rates for home health care. These policies were relaxed by
1989. In addition, the 1989 revised home health guidelines are
believed to have liberalized coverage policies, increasing the
number of allowed visits per week and duration of eligibility.
Furthermore, the revised guidelines may have opened the door to
eligibility for persons who have ongoing medical problems that
require personal care assistance associated more with long-term
care rather than acute care. Other factors that explain growth
in spending include aging of the population, technological
advances that have made possible a level of care in the home
that previously was only available in hospitals and other
institutions, and increased supply of services because of the
expanding number of agencies participating in Medicare (9,939
in 1996 compared to 5,686 in 1989).
TABLE 2-17.--MEDICARE HOME HEALTH CARE UTILIZATION AND PAYMENTS PER VISIT, 1983-96
----------------------------------------------------------------------------------------------------------------
People served Visits
-------------------------------------------------------
Calendar year of service Number Per Payment Percent
Number Per 1,000 (in Per 1,000 person per visit change \1\
enrollees millions) enrollees served
----------------------------------------------------------------------------------------------------------------
1983.............................. 1,318,000 45 36.9 1,234 28 $43 NA
1984.............................. 1,498,000 50 40.4 1,330 27 46 7.3
1985.............................. 1,549,000 50 39.4 1,274 25 49 6.5
1986.............................. 1,571,000 50 38.0 1,204 24 50 3.4
1987.............................. 1,544,000 48 35.6 1,104 23 53 5.2
1988.............................. 1,582,000 48 37.1 1,130 23 55 3.8
1989.............................. 1,685,000 50 46.2 1,379 27 54 -0.9
1990.............................. 1,940,000 57 69.5 2,038 36 56 2.2
1991.............................. 2,223,000 64 100.2 2,875 45 56 -1.8
1992.............................. 2,523,000 72 134.9 3,863 54 58 3.8
1993.............................. 2,868,000 80 169.1 4,742 59 61 4.1
1994.............................. 3,175,000 87 220.7 6,090 70 60 -0.3
1995.............................. 3,570,000 96 266.4 7,158 75 61 0.7
1996 \2\.......................... 3,735,000 99 285.7 7,578 76 62 3.8
----------------------------------------------------------------------------------------------------------------
\1\ Rounding in payments may not reflect actual change.
\2\ Estimated.
NA--Not applicable.
Source: Health Care Financing Administration, Office of the Actuary and Prospective Payment Assessment
Commission (1995, 1996).
Hospice Services
Coverage and benefits
Medicare covers hospice care, in lieu of most other
Medicare benefits, for terminally ill beneficiaries. Hospice
care emphasizes palliative medical care, that is, relief from
pain, and supportive social and counseling services for the
terminally ill and their families. Services are provided
primarily in the patient's home. The Tax Equity and Fiscal
Responsibility Act of 1982 (TEFRA), Public Law 97-248, first
authorized Medicare part A coverage for hospice care (for the
period November 1, 1983 to October 1, 1986); in 1986, Congress
made the hospice benefit a permanent part of the Medicare
Program, effective April 7, 1986.
For a person to be considered terminally ill and eligible
for Medicare's hospice benefit, the beneficiary's attending
physician and the medical director of the hospice (or physician
member of the hospice team) must certify that the individual
has a life expectancy of 6 months or less. As a result of an
amendment in the Balanced Budget Act, persons electing hospice
are covered for two 90-day periods, followed by an unlimited
number of 60-day periods. The medical director or physician
member of the hospice team must recertify at the beginning of
each new election period that the beneficiary is terminally
ill. Services must be provided under a written plan of care
established and periodically reviewed by the individual's
attending physician and by the medical director of the hospice.
Covered hospice services include the following: (1) nursing
care provided by or under the supervision of a registered
nurse; (2) physical or occupational therapy or speech-language
pathology services; (3) medical social services; (4) services
of a home health aide who has successfully completed a training
program approved by the Secretary of DHHS; (5) homemaker
services; (6) medical supplies (including drugs and
biologicals) and the use of medical appliances; (7) physician
services; (8) short-term inpatient care (including both respite
care and procedures necessary for pain control and acute and
chronic symptom management); (9) counseling, including dietary
counseling, for care of the terminally ill beneficiary and for
adjustment to the patient's death (bereavement counseling is
not a reimbursable service); and (10) any other item or service
which is specified in a patient's plan of care and which
Medicare may pay for (effective April 1, 1998).
Medicare's hospice benefit is intended to be principally an
in-home benefit. For this reason, Medicare law prescribes that
respite care, or relief for the primary care giver of the
terminally ill patient, may be provided only on an
intermittent, nonroutine, and occasional basis and may not be
provided consecutively over longer than 5 days. In addition,
the aggregate number of inpatient care days provided in any 12-
month period to Medicare beneficiaries electing hospice care
can not exceed 20 percent of the total number of days of
hospice coverage provided to these persons.
Only two covered hospice services--outpatient drugs or
biologicals and respite care--are subject to coinsurance.
Outpatient drugs and biologicals are subject to a coinsurance
amount that approximates 5 percent of the cost of the drug to
the hospice program, except that the amount may not exceed $5
per prescription. For respite care, coinsurance equals 5
percent of program payments for respite, but may not exceed
Medicare's inpatient hospital deductible during a hospice
coinsurance period (defined as the period when hospice election
is not broken by more than 14 days).
Covered services must be provided by a Medicare-certified
hospice. Certified hospices must be either public agencies or
private organizations primarily engaged in providing covered
hospice services and must make services available on a 24-hour
basis, in individuals' homes, on an outpatient basis, and on a
short-term inpatient basis. Hospices must routinely directly
provide substantially all of the following ``core'' services:
nursing care, medical social services, and counseling services.
The remaining hospice services may be provided either directly
by the hospice or under arrangements with others. If services
are provided through arrangements with other providers, the
hospice must maintain professional management responsibility
for all such services, regardless of the facility in which the
services are furnished.
The hospice program must also have an interdisciplinary
group of personnel which includes at least one registered
professional nurse and one social worker employed by the
hospice; one physician employed by or under contract with the
hospice; plus at least one pastoral or other counselor.
Reimbursement
In implementing Medicare's hospice benefit, HCFA
established a prospective payment methodology. Under this
methodology, hospices are paid one of four prospectively
determined rates, which correspond to four different levels of
care, for each day a Medicare beneficiary is under the care of
the hospice. Reimbursement will thus vary by the length of the
patient's period in the hospice program as well as by the
characteristics of the services (intensity and site) furnished
to the beneficiary.
The four rate categories for reimbursing hospices are:
1. Routine home care day.--Routine home care day is a day on
which an individual is at home and is not receiving
continuous home care. The routine home care rate is
paid for every day a patient is at home and under the
care of the hospice regardless of the volume or
intensity of the services provided on any given day as
long as less than 8 hours of care are provided. This
rate is $95.77 for services provided between October 1,
1997 and September 30, 1998.
2. Continuous home care day.--A continuous home care day is a
day on which an individual receives hospice care
consisting predominantly of nursing care on a
continuous basis at home. Home health aide or homemaker
services or both may also be provided on a continuous
basis. Continuous home care is furnished only during
brief periods of crisis and only as necessary to
maintain the terminally ill patient at home. Home care
must be provided for a period of at least 8 hours
before it would be considered to fall within the
category of continuous home care. Payment for
continuous home care will vary depending on the number
of hours of continuous services provided. Currently
this rate is $558.99 for 24 hours or $23.29 per hour.
3. Inpatient respite care day.--An inpatient respite care day
is one on which the individual who has elected hospice
care receives care in an approved facility on a short-
term (not more than 5 days at a time) basis for the
respite of his caretakers. Currently this rate is
$99.07.
4. General inpatient care day.--A general inpatient care day
is one on which an individual receives general
inpatient care in an inpatient facility for pain
control or acute or chronic symptom management which
cannot be managed in other settings. Care may be
provided in a hospital, skilled nursing facility, or
inpatient unit of a freestanding hospice. Currently
this rate is $426.05.
To reflect differences in wage levels from area to area,
each of these four payment rates is adjusted by the hospital
area wage index used by Medicare for adjusting payments to
hospitals, skilled nursing facilities, and home health
agencies. HCFA separates each of the national payment rates for
hospice care into components which reflect the estimated
proportion of the rate attributable to wage and nonwage costs.
The wage component of each rate is then adjusted by the index
applicable to the area in which the hospice is located.
The Omnibus Budget Reconciliation Act (OBRA) of 1989
required that the payment rates be increased by the hospital
market basket percentage increase each fiscal year. OBRA 1993,
however, reduced the updates for the prospective rates as
follows: for fiscal year 1994, the hospital market basket
percentage increase minus 2.0 percentage points; for fiscal
years 1995 and 1996, the hospital market basket minus 1.5
percentage points; and for fiscal year 1997, market basket
minus 0.5 percentage points.
The Balanced Budget Act of 1997 reduces the hospice payment
update to market basket minus 1 percentage point for each of
fiscal years 1998-2002.
Medicare law requires that payments to a hospice for care
furnished over the period of a year be limited to a ``cap
amount.'' The cap amount is applied on an aggregate rather than
a case-by-case basis. Therefore, each individual hospice's cap
amount is calculated by multiplying the yearly cap amount by
the number of Medicare beneficiaries who received hospice care
from the hospice during the cap period. Medicare defines a cap
year as the period from November 1 through October 31 of the
following year. The cap amount for the period November 1, 1996
through October 31, 1997, is $14,394. Cap amounts are updated
annually by the percentage change in the medical care component
of the Consumer Price Index (CPI-U) for Urban Consumers.
Hospice program data
Table 2-18 shows that the number of hospices participating
in Medicare has grown from 553 in 1988 to 2,090 in 1996. Table
2-19 indicates that spending for the benefit has increased
signifi-
TABLE 2-18.--NUMBER OF HOSPICES BY PROVIDER TYPE WITH PERCENTAGE OF TOTAL, 1988-96
----------------------------------------------------------------------------------------------------------------
Month and year
Provider type -----------------------------------------------------------------------
7/88 7/89 5/90 9/91 1/92 5/93 8/94 6/95 10/96
----------------------------------------------------------------------------------------------------------------
Freestanding............................ 191 220 260 394 404 499 608 656 762
Hospital based.......................... 138 182 221 282 291 341 401 447 507
Skilled nursing facility based.......... 11 13 12 10 10 10 12 18 21
Home health agency based................ 213 286 313 325 334 438 583 674 800
-----------------------------------------------------------------------
Total............................... 553 701 806 1,011 1,039 1,288 1,604 1,795 2,090
----------------------------------------------------------------------------------------------------------------
Source: Health Care Financing Administration, Bureau of Program Operations.
TABLE 2-19.--SELECTED MEASURES OF MEDICARE HOSPICE CARE, FISCAL YEARS 1988-95
[By claim approved]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal year
Measure ------------------------------------------------------------------------------------------
1988 1989 1990 1991 1992 1993 1994 1995
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cash outlays by provider type:
Freestanding............................................. $52.1 $87.1 $130.7 $219.2 $444.2 $620.4 $724.2 $977.1
Hospital based........................................... 13.5 33.0 57.0 92.0 168.0 205.3 226.1 319.3
Skilled nursing facility based........................... 4.8 5.9 7.6 8.6 17.1 22.6 17.7 26.0
Home health agency based................................. 47.8 79.3 113.5 125.7 224.3 303.7 348.7 508.1
------------------------------------------------------------------------------------------
Total................................................ 118.4 205.4 308.8 445.4 853.6 1,151.9 1,316.7 1,830.5
==========================================================================================
Cash outlays by care type:
Routine home care........................................ 95.7 175.2 262.8 376.6 720.0 1,004.9 1,158.6 1,611.6
Continuous home care..................................... 2.5 2.6 3.1 3.9 10.4 12.2 14.5 25.6
Inpatient respite care................................... 0.3 0.6 0.9 1.3 2.5 2.6 2.7 4.4
General inpatient care................................... 18.9 25.5 39.6 59.7 114.0 125.5 134.1 179.1
Physicians............................................... 0.9 1.4 2.4 3.9 6.7 6.7 6.8 9.8
------------------------------------------------------------------------------------------
Total................................................ 118.4 205.4 308.8 445.4 853.6 1,151.9 1,316.7 1,830.5
==========================================================================================
Average dollar amount per beneficiary:
Freestanding............................................. 2,837 3,436 4,237 4,121 5,668 6,085 6,355 6,451
Hospital based........................................... 3,129 3,217 3,832 4,234 5,296 5,361 5,631 5,740
Skilled nursing facility based........................... 3,247 3,260 3,231 4,198 5,538 5,344 5,426 6,079
Home health agency based................................. 2,965 3,395 3,994 3,993 5,169 5,239 5,408 5,509
------------------------------------------------------------------------------------------
Total................................................ 2,935 3,378 4,037 4,108 5,452 5,681 5,935 8,049
==========================================================================================
Number of beneficiaries:
Freestanding............................................. 18,396 25,351 30,861 53,184 78,374 102,283 113,959 151,466
Hospital based........................................... 4,315 10,269 14,870 21,717 31,734 38,295 40,156 55,631
Skilled nursing facility based........................... 1,494 1,818 2,353 2,040 3,084 4,221 3,262 4,272
Home health agency based................................. 16,151 23,364 28,407 31,472 43,391 57,969 64,472 91,238
------------------------------------------------------------------------------------------
Total................................................ 40,356 60,802 76,491 108,413 156,583 202,768 221,849 302,608
==========================================================================================
Average number of days a beneficiary elects hospice care:
Freestanding............................................. 39.26 48.40 52.41 46.15 59.11 62.0 63.7 62.9
Hospital based........................................... 37.70 41.24 45.85 44.19 54.57 53.8 55.4 56.7
Skilled nursing facility based........................... 31.05 37.10 34.51 37.59 44.45 42.7 45.5 49.3
Home health agency based................................. 35.26 43.14 46.46 42.45 52.59 52.2 53.3 63.8
------------------------------------------------------------------------------------------
Total \1\............................................ 37.19 44.83 48.38 44.52 56.09 57.2 58.9 68.3
==========================================================================================
Number of units by care type:
Routine home care--days.................................. 1,460,414 2,677,170 3,600,407 4,667,703 8,564,904 11,324,524 12,699,617 17,257,734
Continuous home care--hours.............................. 154,989 160,056 166,039 199,309 442,968 565,903 654,667 1,129,697
Inpatient respite care--days............................. 4,223 8,398 12,573 14,867 28,495 27,887 28,769 45,932
General inpatient care--days............................. 58,346 83,750 117,989 161,211 297,190 303,245 299,823 418,093
Physicians--procedures................................... 19,257 24,442 39,587 53,491 111,716 115,560 110,790 165,066
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Weighted by the number of beneficiaries in each hospice type.
Note.--Totals may not add due to rounding.
Source: Health Care Financing Administration.
cantly, rising from $118.4 million in fiscal year 1988 to $1.8
billion in fiscal year 1995. The number of beneficiaries
electing Medicare's hospice benefit has increased from about
40,000 in fiscal year 1988 to almost 303,000 in fiscal year
1995. The average number of days a beneficiary spends in
hospice care has risen from 37 to 68 days during this period,
and the average amount spent per beneficiary has increased from
$2,935 to $8,049. The vast majority of care paid for by the
program is routine home care.
PART B SERVICES--COVERAGE AND PAYMENTS
Physicians Services
Medicare pays for physicians services on the basis of a fee
schedule which went into effect in 1992. The fee schedule
assigns relative values to services. Relative values reflect
three factors: physician work (time, skill, and intensity
involved in the service), practice expenses, and malpractice
costs. These relative values are adjusted for geographic
variations in the costs of practicing medicine. Geographically-
adjusted relative values are then converted into a dollar
payment amount by a dollar figure known as the conversion
factor. In 1997, there are three conversion factors--one for
surgical services, one for primary care services, and one for
other services. The conversion factors in 1997 are $40.96 for
surgical services, $35.77 for primary care services, and $33.85
for other services (for a further discussion of physician
payment issues, see appendix E).
The conversion factors have been updated each year by a
formula called the default formula. However, Congress may elect
to reduce the update that would otherwise apply. The default
formula has been based on two factors: (1) inflation as
measured by the Medicare economic index (MEI); and (2) a
comparison of actual physician spending in a base period
compared to an expenditure goal known as the Medicare volume
performance standard (MVPS). Specifically, the update has been
equal to the MEI, plus or minus the difference between the MVPS
for the second preceding fiscal year and actual expenditures
for that year. (Thus fiscal year 1995 data were used in
determining the calendar year 1997 update.) However, regardless
of actual performance during the base period, there has been a
limit on the actual reduction (but not increase).
The Balanced Budget Act of 1997 specified that there will
be a single conversion factor beginning in 1998. The 1998
amount--$36.69 is the 1997 primary care conversion factor,
updated to 1998 by the average of the three separate updates
that would occur in the absence of the legislation. Beginning
in fiscal year 1998, the MVPS is replaced with a cumulative
``sustainable growth rate'' based on real GDP growth. The 1998
rate is 1.5 percent. This new target will begin affecting
updates in 1999. An upper limit is placed on allowable fee
increases--3 percentage points above inflation. The lower limit
on decreases is changed from inflation minus 5 percentage
points to inflation minus 7 percentage points.
Anesthesiologists are paid under a separate fee schedule
which uses base and time units. A separate conversion factor
($16.68 in 1997) applies. The Balanced Budget Act of 1997
specifies that beginning in 1998, the conversion factor equals
46 percent of the single conversion factor, except as adjusted
for changes in work, practice expense, or malpractice relative
value units. The 1998 factor is $16.88.
Medicare payments are made for physicians' services after
the annual deductible requirement of $100 has been satisfied.
Payment is set at 80 percent of the fee schedule with
beneficiaries responsible for the remaining 20 percent, which
is referred to as coinsurance.
Medicare payment is made either on an ``assigned'' or
``unassigned'' basis. By accepting assignment, physicians agree
to take the Medicare fee schedule amount as payment in full.
Thus, if assignment is accepted, beneficiaries are not liable
for any out-of-pocket costs other than standard deductible and
coinsurance payments. In contrast, if assignment is not
accepted, beneficiaries may be liable for charges in excess of
the Medicare approved charge, subject to limits. This procedure
is known as balance billing.
Medicare's Participating Physician Program was established
to provide beneficiaries with the opportunity to select
physicians (designated as ``participating physicians'') who
have agreed to accept assignment on all services provided
during a 12-month period. Nonparticipating physicians continue
to be able to accept or refuse assignment on a claim-by-claim
basis. There are a number of incentives for physicians to
become participating physicians, the chief of which is that the
fee schedule payment amount for nonparticipating physicians is
only 95 percent of the recognized amount paid to participating
physicians. Additional incentives include more rapid claims
payment and widespread distribution of participating physician
directories.
Nonparticipating physicians may not charge more than 115
percent of Medicare's allowed amount for any service.
Medicare's allowed amount for nonparticipating physicians is
set at 95 percent of that for participating physicians. Thus,
nonparticipating physicians are only able to bill 9.25 percent
(115 percent times 95 percent) over the approved amount for
participating physicians.
Services of Nonphysician Practitioners
The physician fee schedule is also used for calculating
payments made for certain services provided by nonphysician
practitioners.
Physician assistants and nurse practitioners
Currently, separate payments are made for physician
assistant services, when provided under the supervision of a
physician: (1) in a hospital, skilled nursing or nursing
facility; (2) as an assistant at surgery; or (3) in a rural
area designated as a health manpower shortage area. Payments
equal a percentage of what would be paid if the services were
performed by a physician, namely 65 percent of the fee schedule
amount for services performed as an assistant-at-surgery, 75
percent for other hospital services, and 85 percent for other
services, including services ``incident to'' physicians
services.
Currently, separate payments are made for nurse
practitioner services, provided in collaboration with a
physician, which are furnished in a nursing facility. Payments
equal 85 percent of the physician fee schedule amount. Nurse
practitioners and clinical nurse specialists are paid directly
for services provided in collaboration with a physician in a
rural area. Payments equal 75 percent of the physician fee
schedule amount for services furnished in a hospital and 85
percent of the fee schedule amount for other services.
The Balanced Budget Act of 1997 removes the restriction on
settings for these practitioners, effective January 1, 1998.
Payment for services can only be made if no facility or other
provider charges are paid in connection with the service.
Payment will equal 80 percent of the lesser of either the
actual charge or 85 percent of the fee schedule amount for the
same service if provided by a physician. For assistant-at-
surgery services, payment will equal 80 percent of the lesser
of either the actual charge or 85 percent of the amount that
would have been recognized for a physician serving as an
assistant-at-surgery. The physician assistant may be in an
independent contractor relationship with the physician.
Certified nurse midwife services
Certified nurse midwife services are paid at 65 percent of
the physician fee schedule amount.
Certified registered nurse anesthetists (CRNAs)
CRNAs are paid under the same fee schedule used for
anesthesiologists (see above). Payments for services furnished
by an anesthesia care team composed of an anesthesiologist and
a CRNA are capped at a percentage of the amount that would be
paid if the anesthesiologist were practicing alone. The
percentage is 105 percent in 1997 and 100 percent in 1998 and
thereafter. The payments are evenly split between each
practitioner.
Clinical psychologists and clinical social workers
Diagnostic and therapeutic services provided by clinical
psychologists are paid under the physician fee schedule.
Payments for services provided by clinical social workers are
equal to 75 percent of the amount allowed for clinical
psychologists. Some services are subject to the psychiatric
services limitation which limits Medicare payments for some
services to 50 percent of incurred expenses.
Physical or occupational therapists
Payments for physical or occupational therapists in
independent practice are made under the physician fee schedule,
subject to an annual limit of $900 per patient in billed
charges for each type of therapist. Beginning in 1999, BBA
places a $1,500 per patient limit on all physical therapy
services and a separate $1,500 limit on all occupational
therapy services. The limits do not apply to services provided
by hospitals.
Clinical Laboratory Services
Medicare provides coverage for diagnostic clinical
laboratory services. These services may be provided by an
independent laboratory, a physician's office laboratory, or a
hospital laboratory to outpatients. Since 1984, Medicare has
paid for clinical laboratory services on the basis of a fee
schedule. Fee schedules have been established on a carrier
service area basis. The law set the initial payment amount for
services performed in physicians' offices or independent
laboratories at the 60th percentile of the prevailing charge
established for the fee screen year beginning July 1, 1984.
Similarly, the initial fee schedule payment amount for services
provided by hospital-based laboratories serving hospital
outpatients was set at the 62d percentile of the prevailing
charge level. Subsequent amendments to the payment rules
limited application of the hospital fee schedule to ``qualified
hospitals.'' A qualified hospital is a sole community hospital
(as that term is used for payment purposes under Medicare's
hospital prospective payment system) which provides some
clinical diagnostic tests 24 hours a day in order to serve a
hospital emergency room which is available to provide services
24 hours a day, 7 days a week.
The fee schedule payment amounts have been increased
periodically since 1984 to account for inflation. The updates
have generally occurred on January 1 of each year. Allowable
increases in 1991, 1992, and 1993 were limited to 2 percent per
year. There were no increases in 1994 and 1995. The increase in
1996 was 2.9 percent. The increase in 1997 is 2.7 percent. The
Balanced Budget Act of 1997 freezes the fee schedule for the
1998-2002 period.
Beginning in 1988, the law established national ceilings on
payment amounts. Initially the ceiling was set at 115 percent
of the median for all fee schedules for that test. This
percentage has been lowered several times. In 1997, the ceiling
is 76 percent of the median. The Balanced Budget Act sets the
ceiling at 74 percent of the median beginning in 1998.
As of January 1, 1998, HCFA is eliminating the use of old
codes for certain automated panel/profile tests and replacing
them with revised codes. The Balanced Budget Act of 1997 makes
several changes with respect to the administration of the lab
benefit. It requires the Secretary to divide the country into
no more than five regions and designate a single carrier for
each region to process lab claims (excluding those for services
provided to inpatients of hospitals and skilled nursing
facilities) no later than July 1, 1999. The allocation of
claims to a particular carrier would be based on whether the
carrier serves the geographic area where the specimen is
collected or other method selected by the Secretary. The
requirement will not apply to those physicians office labs that
the Secretary determines would be unduly burdened by the
application of billing responsibilities with respect to more
than one carrier.
The Balanced Budget Act also requires the Secretary, by
January 1, 1999, to adopt uniform coverage, administration, and
payment policies for lab tests using a negotiated rulemaking
process. The policies would be designed to eliminate variation
among carriers and to simplify administrative requirements. The
use of interim regional policies are permitted in cases where a
uniform national policy has not been established.
Payment for clinical laboratory services (except for those
provided by a rural health clinic) may only be made on the
basis of assignment. The law specifically applies the
assignment requirement to clinical laboratory services provided
in physicians' offices. Payment for clinical laboratory
services equals 100 percent of the fee schedule amount; no
beneficiary cost sharing is imposed.
Laboratories must meet the requirements of the Clinical
Laboratory Improvement Amendments of 1988. This legislation,
which focused on the quality and reliability of medical tests,
expanded Federal oversight to virtually all laboratories in the
country, including physician office laboratories.
Durable Medical Equipment and Prosthetics and Orthotics
Medicare covers a wide variety of durable medical equipment
(DME). Medicare law specifies that DME includes, but is not
limited to, iron lungs, oxygen tents, hospital beds, and
wheelchairs used in a patient's home. A patient's home can
include an institution, such as a home for the aged, so long as
the institution is not a hospital or skilled nursing facility.
Health Care Financing Administration (HCFA) guidelines
implementing the law provide a definition for DME that allows
additional items to be covered. The guidelines define DME as
equipment which: (1) can withstand repeated use; (2) is
primarily and customarily used to serve a medical purpose; (3)
generally is not useful to a person in the absence of an
illness or injury; and (4) is appropriate for use in the home.
Each of these requirements must be met before an item can be
considered covered DME. Medicare also covers related supplies
that are necessary for the effective use of DME; such supplies
include drugs and biologicals which must be put directly into
equipment in order for it to achieve its therapeutic benefit or
to assure its proper functioning. With these definitions, HCFA
has issued coverage guidelines for numerous DME items.
Medicare law defines prosthetic devices as items that
replace all or part of an internal body organ (including
colostomy bags and intraocular lenses) and prosthetics and
orthotics such as leg, arm, back and neck braces, and
artificial legs, arms and eyes. Program guidelines give
additional examples of covered prosthetic devices. These
include cardiac pacemakers, breast prostheses for
postmastectomy patients, and a urinary collection and retention
system that replaces bladder function. Examples of prosthetics
and orthotics include rigid and semirigid back braces, special
corsets, and terminal limb devices, such as artificial hands
and hooks.
Reimbursement for durable medical equipment
Medicare pays for DME on the basis of a fee schedule
originally enacted in the Omnibus Budget Reconciliation Act
(OBRA) of 1987 and modified on several occasions since then.
Prior to OBRA 1987, reimbursement for DME was generally made on
the basis of reasonable charges. The fee schedule first became
effective January 1, 1989.
Under the DME fee schedule, reimbursement is the lesser of
either 80 percent of the actual charge for the item or the fee
schedule amount. Covered DME items are classified into five
groups for determining the fee schedule amounts: (1)
inexpensive or other routinely purchased durable medical
equipment (defined as equipment costing less than $150 or which
is purchased at least 75 percent of the time); (2) items
requiring frequent and substantial servicing; (3) customized
items (defined as equipment constructed or modified
substantially to meet the needs of an individual patient); (4)
other items of durable medical equipment (frequently referred
to as the ``capped rental'' category); and (5) oxygen and
oxygen equipment.
In general, the fee schedules establish national payment
limits for DME. The limits have floors and ceilings. The floor
is equal to 85 percent of the weighted median of local payment
amounts and the ceiling is equal to 100 percent of the weighted
median of local payment amounts.
Prosthetics and orthotics are also paid according to a fee
schedule that is based on principles similar to the DME fee
schedule. The fee schedule establishes regional payment limits
for covered items. The payment limits have floors and ceilings.
The floor is equal to 90 percent of the weighted average of
regional payment amounts; the ceiling is 120 percent. Fee
schedule amounts are updated annually by the Consumer Price
Index for all Urban Consumers.
The Balanced Budget Act freezes payments for DME at the
1997 level for 1998-2002. It limits the update for prosthetics
and orthotics to 1 percent for those years.
In addition, under the Balanced Budget Act, payments for
oxygen are reduced in 1998 to 75 percent of the 1997 payment
limits. Beginning in fiscal year 1999 and continuing through
subsequent years, oxygen payments are limited to 70 percent of
the 1997 levels. The Secretary is also authorized to establish
separate classes of oxygen and oxygen equipment and establish
separate national monthly payment limits for each class, as
long as expenditures are neither more nor less than what would
have been made without the separate classes. In addition, the
Secretary is required to establish service standards for home
oxygen providers. The General Accounting Office is required to
submit a report to Congress, including recommendations for
legislation, by February 1999 regarding beneficiary access to
home oxygen equipment.
The Balanced Budget Act of 1997 also permits the Secretary
to establish fee schedules for certain items of medical
equipment which are currently paid on a reasonable charge
basis.
Medicare payments for DME are intended to pay for items
which are reasonable and medically necessary. Upgraded or
deluxe items of DME purchased or rented for a beneficiary's
convenience or other purposes do not meet these criteria. A
beneficiary who wants an upgraded item must purchase it from
the supplier and then seek Medicare reimbursement. The
reimbursement will be based on the amount paid for the kind of
item normally used to meet the intended purpose. The Balanced
Budget Act authorizes (but does not require) the Secretary to
publish regulations allowing reimbursement for upgraded DME.
The regulations must include consumer protection safeguards and
a determination of fair market prices for upgraded items of
DME. If the regulations are released, a beneficiary could rent
or purchase an upgraded item and Medicare would pay the
supplier the standard fee for the item; the beneficiary would
be responsible for paying the additional cost of the upgrade.
The supplier's charge for the upgraded item could not exceed
the established fee schedule amount (if any).
Table 2-20 shows total Medicare allowed payment amounts in
calendar year 1995 for DME, prosthetics and orthotics, and
other covered items that are not paid according to the fee
schedule, as well as non-DME items that are paid according to
the fee schedule.
TABLE 2-20.--ALLOWED AMOUNTS FOR DURABLE MEDICAL EQUIPMENT, PROSTHETICS,
ORTHOTICS, AND CERTAIN OTHER ITEMS, CALENDAR YEAR 1994
[In millions of dollars]
------------------------------------------------------------------------
Allowed
Category amounts
------------------------------------------------------------------------
Inexpensive/routinely purchased \1\.......................... $367.0
Items with frequent maintenance \2\.......................... 71.4
Customized items \3\......................................... 0.2
Capped rental \4\............................................ 886.1
Oxygen \5\................................................... 1,654.9
Prosthetics/orthotics \6\.................................... 802.6
Other \7\.................................................... 922.0
----------
Total.................................................. 4,704.2
------------------------------------------------------------------------
\1\ Inexpensive defined as equipment for which the purchase price does
not exceed $150. Routinely purchased defined as equipment that is
acquired 75 percent of the time by purchase. These items include
commode chairs, electric heat pads, bed rails, and blood glucose
monitors.
\2\ Paid on a rental basis until medical necessity ends; includes such
items as ventilators and continuous and intermittent positive
breathing machines.
\3\ Includes such items as wheelchairs adapted specifically for an
individual. Payment based on individual determination.
\4\ Items of DME on a monthly rental basis not to exceed a period of
continuous use of 15 months. Includes such items as hospital beds and
wheelchairs.
\5\ Payment for oxygen and oxygen equipment based on a monthly rate per
beneficiary. Payment not made for purchased equipment except where
installment payments continue.
\6\ These items include covered prosthetic and orthotic devices (except
for items included in the categories ``customized items'' and ``items
requiring frequent maintenance,'' and transcutaneous electrical nerve
stimulators, parenteral/enteral nutritional supplies and equipment,
and intraocular lenses).
\7\ This category includes other covered items, such as enteral formulae
and enteral medical supplies, that are not paid according to the fee
schedules. It also includes non-DME items that are paid according to
the DME fee schedule, such as surgical dressings.
Source: Health Care Financing Administration, Bureau of Data Management
and Strategy. Data from the part B Medicare Annual Data System.
Administration of the fee schedule
Consolidation of administration.--On June 18, 1992, the
Health Care Financing Administration (HCFA) published a final
rule regarding DME claims payments. The rule established four
regional carriers to process all claims for DME and prosthetics
and orthotics. HCFA argued that, as a result of this
consolidation, greater efficiency in claims processing would be
achieved, and variance in coverage policy and utilization
parameters would be greatly reduced.
In addition, the rule also required that the responsibility
for processing claims for beneficiaries residing within each
regional area would fall to the regional carrier for that area.
This change was made in order to eliminate ``carrier
shopping,'' that is, filing claims in those carrier areas that
have higher payment rates.
Overused items.--OBRA 1990 required the Secretary to
develop a list of DME items frequently subject to unnecessary
utilization; the list must include seat-lift mechanisms;
transcutaneous electrical nerve stimulators (TENS); and
motorized scooters. Carriers are directed to determine, in
advance, whether payment will be made for items on the
Secretary's list. DME suppliers must obtain carriers' approval
before providing items on the list to Medicare beneficiaries.
Certificates of medical necessity.--All DME must be
prescribed by a physician in order to be reimbursed by
Medicare. Instead of a physician's prescription, carriers may
require the physician to submit a certificate of medical
necessity to document that an item is reasonable and medically
necessary. OBRA 1990 prohibited DME suppliers from distributing
completed or partially completed certificates and established
penalties for suppliers who knowingly and willfully distribute
forms in violation of the prohibition. The purpose of this
provision was to prohibit DME suppliers from directly marketing
items to Medicare beneficiaries by providing them with
completed certificates that could then be submitted to their
physicians. It was hoped that requiring physicians to complete
the certificates would encourage them to take a more active
role in considering their patients' needs for DME, while
simultaneously reducing suppliers' ability to influence DME
acquisition.
The Social Security Amendments of 1994 modified this
prohibition to allow suppliers to distribute forms to
physicians or beneficiaries with some limited information such
as the supplier's identification number, a description of the
item, or payment information.
Inherent reasonableness.--The Secretary is permitted to
increase or decrease Medicare payments in cases where the
payment amount is ``grossly excessive or grossly deficient and
not inherently reasonable.'' The Secretary's authority to make
these payment adjustments is generally referred to as
``inherent reasonableness authority.''
In order to make a payment adjustment, the Secretary must
demonstrate that the payment meets several criteria of inherent
reasonableness specified by law. In addition, the Secretary
must publish a notice in the Federal Register outlining his
proposal to reduce or increase payment amounts, the proposed
methodology for adjusting the payment amount, and the potential
impact of the payment adjustment. The Secretary is also
required to meet with representatives of the affected
suppliers, to provide a 60-day public comment period, and to
publish a final determination in the Federal Register. The
final determination must include an explanation of the factors
and data the Secretary took into consideration in making the
determination.
According to HCFA, the Secretary rarely uses inherent
reasonableness authority because the requirements are too
stringent and the notice requirements too burdensome.
Competitive bidding
Investigations have shown that Medicare pays higher prices
for certain medical supplies than those paid by other health
care insurers and other government agencies, including the
Department of Veterans Affairs (VA). In order to lower
payments, the Secretary currently must initiate the inherent
reasonableness process or rely on congressional legislation.
Thus, critics suggested granting the Secretary the authority to
engage in a competitive bidding arrangement similar to the one
used by the VA. The Balanced Budget Act provided such authority
on a limited basis by authorizing not more than five 3-year
competitive bidding demonstration projects. Within established
competitive acquisition areas, providers of part B services
(excluding physician services) will compete for contracts to
supply items or services. At least one of the projects must
include oxygen and oxygen equipment. The Secretary may limit
the number of suppliers within an area to that number necessary
to meet the projected demand for items and services covered
under the contract. The Secretary will evaluate the effect of
these projects on Medicare payments, access, quality, and
diversity of product selection and report these evaluations
annually to Congress. All projects must terminate by December
31, 2002.
Requirements for participation in Medicare
The Social Security Amendments of 1994 established
requirements for suppliers of medical equipment. Some of the
requirements codified regulations proposed by HCFA in 1992. In
order to be paid under Medicare, suppliers must be issued a
supplier number. To obtain this number, the supplier must
receive and fill orders from its own inventory or inventory in
other companies with which it has contracted. Suppliers must
also deliver Medicare covered items to beneficiaries, honor any
warranties, answer any questions or complaints, maintain and
repair rental items, and accept returns of substandard or
unsuitable items. The law further required that the supplier
must comply with all State and Federal regulations, must
maintain an appropriate physical plant, and must have proof of
insurance coverage.
The Secretary is not permitted, except under specific
circumstances, to issue multiple supplier numbers to one
supplier.
The law also addressed marketing and sales activities of
suppliers. Except under specified conditions, a supplier is
prohibited from making unsolicited telephone calls to Medicare
beneficiaries to sell them equipment. If such a sale is made,
the supplier will not be paid by Medicare and costs paid by the
beneficiary must be refunded by the supplier. Penalties were
established for suppliers that violate this provision.
Hospital Outpatient Department Services
Medicare hospital outpatient department (OPD) services are
reimbursed under Medicare part B. Services provided in
outpatient hospital settings and included in expenditure data
for this service setting are: emergency room services, clinic,
laboratory, radiology, pharmacy, physical therapy, ambulance,
operating room services, end-stage renal disease services,
durable medical equipment, and other services such as computer
axial tomography and blood. Services rendered by physicians in
OPD settings are not included in these expenditure data.
Prior to 1983, hospital outpatient services, excluding
physicians' services, were paid for on a reasonable cost basis.
Some services, such as emergency services, are still reimbursed
on a reasonable cost basis. However, Congress has enacted a
number of provisions that have altered the ways hospital OPDs
are paid for many of their services and has placed limits on
payments for others. For example, outpatient dialysis services
are paid on the basis of a fixed composite rate; clinical
laboratory services are paid on the basis of a fee schedule; x-
ray services are subject to a limit on payments; and ambulatory
surgical facility fees for surgeries performed in hospital
outpatient departments are based on a weighted average of the
hospital's costs and the prevailing fee that would be paid to a
freestanding ambulatory surgical facility in the area.
The aggregate payment to hospital OPDs and hospital-
operated ambulatory surgical centers (ASCs) for covered ASC
procedures is equal to the lesser of the following two amounts:
(1) the lower of the hospital's reasonable costs or customary
charges less deductibles and coinsurance; or (2) the amount
determined based on a blend of the lower of the hospital's
reasonable costs or customary charges, less deductibles and
coinsurance, and the amount that would be paid to a
freestanding ASC in the same area for the same procedures. For
cost-reporting periods beginning on or after January 1, 1991,
the hospital cost portion and the ASC cost portion are 42 and
58 percent, respectively.
Payments for services delivered in hospital OPDs were $12.9
billion in calendar year 1995. Payments to hospital OPDs
constituted approximately 20 percent of all Medicare part B
payments in 1995 and about 8 percent of total parts A and B
Medicare payments. Table 2-21 provides information on the
number of part B enrollees, covered charges, aggregated
reimbursements and reimbursements per enrollee for hospital
outpatient services from 1974 to 1995. Table 2-22 shows the
percent distribution of Medicare hospital OPD charges, by type
of service, for 1995.
The law provides for a reduction in payment for services
paid on a cost-related basis, other than capital costs, by 5.8
percent of the recognized costs for payments. The Balanced
Budget Act of 1997 extends the reduction through cost-reporting
periods, occurring through January 1, 2000. The reduction also
applies to cost portions of blended payment limits for
ambulatory surgery and radiology services. The Balanced Budget
Act also extends the reduction in reimbursement for capital
costs for OPDs by 10 percent for cost-reporting periods
occurring through January 2000. Sole community hospitals and
rural primary care hospitals are exempt from these reductions.
The Balanced Budget Act requires the Secretary to
establish a prospective payment system for covered OPD services
furnished beginning in 1999. The Secretary is required to
develop a classification system for covered OPD services, such
that services within each group are comparable clinically and
with respect to the use of resources. The Secretary is also
required to establish relative payment rates for covered OPD
services using 1996 hospital claims and cost report data, and
to determine projections of the frequency of use of each
service or group of services in 1999. In addition, she must
determine a wage adjustment factor to adjust for relative
geographic differences in labor and labor-related cost that
must be applied in a budget-neutral manner and establish other
adjustments as necessary, including adjustments to account for
variations in coinsurance payments for procedures with similar
resource costs, and to ensure equitable payments under the
system. Finally, the Secretary must develop a method for
controlling unnecessary increases in the volume of covered OPD
services.
TABLE 2-21.--MEDICARE HOSPITAL OUTPATIENT CHARGES AND REIMBURSEMENTS BY TYPE OF ENROLLMENT AND YEAR SERVICE
INCURRED, SELECTED YEARS 1974-95
----------------------------------------------------------------------------------------------------------------
Number of Program payments
SMI \1\ Covered --------------------------------------
Type of enrollment and year of service enrollees charges in
in thousands Amount in Per Percent of
thousands thousands enrollee charges
----------------------------------------------------------------------------------------------------------------
All beneficiaries:
1974....................................... 23,166,570 $535,296 $323,383 $14 60.4
1976....................................... 24,614,402 974,708 630,323 26 64.7
1978....................................... 26,074,085 1,384,067 923,658 35 66.7
1980....................................... 27,399,658 2,076,396 1,441,986 52 69.4
1982....................................... 28,412,282 3,164,530 2,203,260 78 69.6
1983....................................... 28,974,535 3,813,118 2,661,394 92 69.8
1984....................................... 29,415,397 5,129,210 3,387,146 115 66.0
1985....................................... 29,988,763 6,480,777 4,082,303 136 63.0
1986....................................... 30,589,728 8,115,976 4,881,605 160 60.1
1987....................................... 31,169,960 9,794,832 5,690,786 183 58.2
1988....................................... 31,617,082 11,833,919 6,371,704 202 53.8
1989....................................... 32,098,770 14,195,252 7,160,586 223 50.4
1990....................................... 32,635,800 18,346,471 8,171,088 250 44.5
1991....................................... 33,239,840 22,016,673 8,612,320 259 39.1
1992....................................... 33,956,460 26,799,501 9,941,391 293 37.1
1993....................................... 34,642,500 32,026,576 10,938,545 315 34.2
1994....................................... 35,178,600 36,323,649 11,813,522 336 32.6
1995 \2\................................... 31,806,740 40,476,180 12,933,358 407 31.9
----------------------------------------------------------------------------------------------------------------
Average annual rate of growth:
1974-95.................................... 1.5 22.9 19.2 17.4 ----
1974-83.................................... 2.5 24.4 26.4 23.3 ----
1984-95.................................... 0.7 20.7 13.0 12.2 ----
================================================================================================================
Aged:
1974....................................... 21,421,545 394,680 220,742 10 55.9
1976....................................... 22,445,911 704,569 432,971 19 61.5
1978....................................... 23,530,893 1,005,467 648,249 28 64.5
1980....................................... 24,680,432 1,517,183 1,030,896 42 69.9
1982....................................... 25,706,792 2,402,462 1,645,064 64 68.5
1983....................................... 26,292,124 2,995,784 2,066,207 79 69.0
1984....................................... 26,764,150 4,122,859 2,679,571 100 65.0
1985....................................... 27,310,894 5,210,762 3,211,744 118 61.6
1986....................................... 27,862,737 6,529,273 3,809,992 137 58.4
1987....................................... 28,382,203 7,859,038 4,522,841 159 56.4
1988....................................... 28,780,154 9,790,273 5,098,546 177 52.1
1989....................................... 29,216,027 11,855,127 5,767,589 197 48.7
1990....................................... 29,691,180 15,384,510 6,563,454 221 42.7
1991....................................... 30,183,480 18,460,835 6,842,329 227 37.1
1992....................................... 30,722,080 22,253,657 7,741,774 252 34.8
1993....................................... 31,162,480 26,556,415 8,522,089 273 32.1
1994....................................... 31,443,800 29,768,892 9,116,610 290 30.6
1995 \2\................................... 28,020,760 33,110,441 9,900,199 353 29.9
----------------------------------------------------------------------------------------------------------------
Average annual rate of growth:
1974-95.................................... 1.3 23.5 19.9 18.5 ----
1974-83.................................... 2.3 25.3 28.2 25.8 ----
1984-95.................................... 0.4 20.9 12.6 12.1 ----
================================================================================================================
Disabled:
1974....................................... 1,745,019 140,617 102,641 59 73.0
1976....................................... 2,168,467 270,139 197,352 91 73.1
1978....................................... 2,543,162 378,600 275,409 108 72.7
1980....................................... 2,719,226 559,213 411,090 152 73.5
1982....................................... 2,705,490 762,068 558,195 206 73.2
1983....................................... 2,682,411 817,335 595,187 222 72.8
1984....................................... 2,651,247 1,006,351 707,575 267 70.3
1985....................................... 2,677,869 1,270,015 870,560 325 68.5
1986....................................... 2,726,991 1,586,703 1,071,613 393 67.5
1987....................................... 2,787,757 1,773,664 1,167,945 417 65.8
1988....................................... 2,836,928 2,043,646 1,273,158 449 62.3
1989....................................... 2,882,743 2,340,124 1,392,897 483 59.5
1990....................................... 2,944,620 2,961,961 1,607,634 546 54.3
1991....................................... 3,056,360 3,555,838 1,769,991 579 49.8
1992....................................... 3,234,380 4,545,843 2,199,617 680 48.4
1993....................................... 3,480,020 5,470,161 2,416,456 694 44.2
1994....................................... 3,734,800 6,463,757 2,696,912 722 41.7
1995 \2\................................... 3,785,980 7,465,739 3,033,158 801 40.6
----------------------------------------------------------------------------------------------------------------
Average annual rate of growth:
1974-95.................................... 3.8 20.8 17.5 13.2 ----
1974-83.................................... 4.9 21.6 21.6 15.9 ----
1984-95.................................... 3.3 20.0 14.1 10.5 ----
----------------------------------------------------------------------------------------------------------------
\1\ 1974 is the first full year of coverage for disabled beneficiaries under Medicare; SMI = supplementary
medical insurance.
\2\ Beginning in 1995, the utilization rates per 1,000 enrollees do not reflect managed care enrollment; that
is, Medicare enrollees in managed care plans are not included in the denominator used to calculate the
utilization rates.
Note.--Numbers may not add to totals because of rounding. Hospital outpatient services include clinics or
hospital-based renal dialysis facility services, and surgical facility or hospital-based ambulatory surgical
center services provided to hospital outpatient.
Source: Health Care Financing Administration, Bureau of Data Management and Strategy. Data from the Medicare
Decision Support System; data developed by the Office of Research and Demonstrations.
The Secretary is authorized to periodically review and
revise the groups, relative payment weights, wages, and other
adjustments to take into account changes in medical practice,
medical technology, the addition of new services, new cost
data, and other relevant information. Any adjustments made by
the Secretary must be made in a budget-neutral manner. If the
Secretary determines that the volume of services increased
beyond amounts established through those methodologies, the
Secretary is authorized to adjust the update to the conversion
factor in a subsequent year.
TABLE 2-22.--PERCENT DISTRIBUTION OF HOSPITAL OUTPATIENT CHARGES UNDER
MEDICARE BY TYPE OF SERVICE, 1995
------------------------------------------------------------------------
Percent of
Service category charges
------------------------------------------------------------------------
Radiology.................................................. 20.5
Laboratory................................................. 13.0
Operating room............................................. 11.4
End-stage renal disease.................................... 7.9
Pharmacy................................................... 6.2
Emergency room............................................. 3.2
Clinic..................................................... 1.7
Physical therapy........................................... 2.5
Medical supplies........................................... 9.3
All other \1\.............................................. 20.4
------------------------------------------------------------------------
\1\ Includes computerized axial tomography, durable medical equipment,
and blood.
Source: Health Care Financing Administration, Bureau of Data Management
and Strategy; Data from the Medicare Decision Support System.
A hospital may bill a beneficiary for the coinsurance
amount owed for the outpatient services provided. The
beneficiary coinsurance is based on 20 percent of the
hospital's submitted charges for the outpatient service,
whereas Medicare usually pays based on the blend of the
hospital's costs and the amount paid in other settings for the
same service. As a result, the amount the beneficiary pays in
coinsurance does not equal 20 percent of the program's
allowable payment. On average, beneficiaries pay 37 percent of
the total payment.
The Balanced Budget Act provides for a new method for
determining beneficiary coinsurance beginning in 1999. Hospital
OPD coinsurance payments are limited to 20 percent of the
national median of the charges for the service (or services
within the group) furnished in 1996 updated to 1999 using the
Secretary's estimate of charge growth. The Secretary is
required to develop rules for the establishment of a
coinsurance payment amount for a covered OPD service not
furnished during 1996, based on its classification within a
group of such services. In addition, the Balanced Budget Act
provides for the entire fee schedule amount (program payments
plus beneficiary coinsurance payments) to be updated by the
market basket increase minus 1 percentage point for years 2000
through 2002, and by the market basket percentage increase in
subsequent years. Beneficiary coinsurance payments are to be
subtracted from the fee schedule amount to determine Medicare
Program payments. Over time, beneficiary cost sharing will move
closer to the 20 percent of Medicare's recognized amount
applicable for most part B services.
The Secretary must establish a procedure under which a
hospital, before the beginning of a year (starting with 1999),
can elect to reduce the coinsurance payment for some or all
covered OPD services to an amount that is not less than 20
percent of the total amount (Medicare Program plus beneficiary
coinsurance payment) for the service involved, adjusted for
relative differences in labor costs and other factors. A
reduced coinsurance payment can not be further reduced or
increased during the year involved, and hospitals can
disseminate information on the reduction of coinsurance
amounts.
Ambulatory Surgical Center Services
Medicare reimburses ambulatory surgical centers (ASCs) for
performing surgical procedures on an ambulatory basis. ASCs are
paid a prospectively determined rate for use of an operating
room associated with covered surgical procedures. Excluded are
the physicians charge for professional services performed and
other medical items and services (for example, durable medical
equipment for the patient's home use) for which separate
payment is authorized under Medicare. Participating ASCs are
paid 80 percent of the prospectively determined rate for
facility services, adjusted for regional wage variations. The
rate is intended to represent HCFA's estimate of a fair
payment, taking into account the costs incurred by ASCs
generally in providing services that are furnished in
connection with performing a surgical procedure.
For payment purposes, ASC services are divided into nine
groups, and the ASC facility payment for all procedures in each
group is established at a single rate adjusted for geographic
variation. The ASC payment groups for fiscal year 1998 range
from $314 for a procedure in payment group one, to $928 for a
procedure in payment group eight. Payment for group nine,
allotted exclusively to extracorporeal shockwave lithotripsy
services, was established and published in the Federal Register
on December 31, 1991 (vol. 56, no. 251, 67666); however, a
court decision in American Lithotripsy Society v. Sullivan, 785
F.Supp. 1034 (D.D.C. 1992), currently prohibits payment for
these services under the ASC benefit. The Secretary is required
to review and update standard overhead amounts annually. The
ASC facility payment rates are required to result in
substantially lower Medicare expenditures than would have been
paid if the same procedure had been performed on an inpatient
basis in a hospital.
Medicare also requires that payment for insertion of an
intraocular lens include an allowance that is reasonable and
related to the cost of acquiring the class of lens involved.
OBRA 1993 also reduced the amount of payment for an intraocular
lens inserted during or subsequent to cataract surgery in an
ASC on or after January 1, 1994 and before January 1, 1999, to
$150.
OBRA 1993 eliminated inflation updates in the payment
amounts for ASCs for fiscal years 1994 and 1995. The Social
Security Act Amendments of 1994 (Public Law 103-432) required
the Secretary to survey, not later than January 1, 1995, and
every 5 years thereafter, the actual audited costs incurred by
ASCs, based on a representative sample of procedures and
facilities. In addition, the 1994 legislation provides for an
automatic application of an inflation adjustment during a
fiscal year when the Secretary does not update ASC rates based
on survey data of actual audited costs. The act also provides
that ASC payment rates be increased by the percentage increase
in the Consumer Price Index for Urban Consumers (CPI-U), as
estimated by the Secretary for the 12-month period ending with
the midpoint of the year involved, if the Secretary has not
updated rates during a fiscal year, beginning with fiscal year
1996. The update for 1996 was 2.9 percent; the update for 1997
was 2.6 percent.
The Balanced Budget Act sets the annual update for ASC fees
at the CPI-U minus 2 percentage points for fiscal years 1998-
2002, specifying that the update cannot be less than zero. The
update for fiscal year 1998 was 0.6 percent. In 1997, there
were 2,433 ASCs, a 400-percent increase over the 485 facilities
which were participating in Medicare in 1985. As shown in table
2-23, payments for ASC services totaled $688.9 million in 1996.
Table 2-24 shows the top 10 procedures performed in ASCs in
1996.
TABLE 2-23.--MEDICARE-CERTIFIED AMBULATORY SURGICAL CENTERS: UTILIZATION
AND PROGRAM BENEFIT PAYMENTS FOR FACILITY SERVICES, 1993-96
------------------------------------------------------------------------
Allowed Program
Number of charges for payments for
Year services ASC facility ASC facility
services services
------------------------------------------------------------------------
1993........................ 1,059,644 $625,005,465 $495,313,388
1994........................ 1,298,740 721,315,789 572,001,981
1995........................ 1,497,934 836,270,472 659,726,047
1996 \1\.................... 1,527,130 867,629,247 688,910,712
------------------------------------------------------------------------
\1\ Short file, as of December 1996 (89 percent complete).
Source: Health Care Financing Administration, Bureau of Data Management
and Strategy. Data from part B Extract and Summary System.
TABLE 2-24.--HIGH VOLUME PROCEDURES PERFORMED AT MEDICARE-CERTIFIED
AMBULATORY SURGICAL CENTERS, 1996
------------------------------------------------------------------------
Volume of
Current procedural terminology Short descriptor Medicare
code cases
------------------------------------------------------------------------
66984......................... Remove cataract, insert lens. 525,520
66821......................... After cataract laser surgery. 165,281
43239......................... Upper GI endoscopy, biopsy... 78,391
45378......................... Diagnostic colonoscopy....... 59,972
45385......................... Colonoscopy, lesion removal.. 41,699
62289......................... Lumbar or caudal epidural.... 35,340
45380......................... Colonoscopy and biopsy....... 34,744
43235......................... Upper GI endoscopy, diagnosis 24,055
45384......................... Colonoscopy.................. 22,537
52000......................... Cystourethroscopy............ 19,048
------------------------------------------------------------------------
Source: Health Care Financing Administration, Bureau of Data Management
and Strategy. Data from the National Claims History Procedure Summary
File.
Other Part B Services
Preventive services
Screening mammograms.--In 1997, Medicare covered a
screening mammography once every 2 years for persons over age
65. The program covers mammographies for the disabled according
to the following schedule: age 35-39--one baseline screening;
age 40-50--one every 2 years, except one every year for women
at high risk; and age 50-64--one every year. The Balanced
Budget Act authorizes coverage for annual mammograms for all
women over age 40 beginning January 1, 1998. The deductible is
waived for these services.
Payment for a mammogram is based on the lesser of the
actual charge, the amount established for the global procedure
under Medicare's fee schedule, or the payment limit established
for the procedure. The 1997 limit is $63.34; the 1998 limit is
$64.73.
Screening Pap smears; pelvic exams.--In 1997, a screening
pap smear was authorized once every 3 years, except for women
who were at a high risk of developing cervical cancer.
Beginning in 1998, coverage is authorized every 3 years for
screening pelvic exams; annual coverage is authorized for women
at high risk. Payment is based on the clinical diagnostic
laboratory fee schedule (see above).
Prostate cancer screening tests.--The Balanced Budget Act
authorizes coverage, beginning January 1, 2000, for an annual
prostate cancer screening test for men over age 50. The test
could consist of any (or all) of the following procedures: (1)
a digital rectal exam; (2) a prostate-specific antigen blood
test; and (3) after 2002, such other procedures as the
Secretary finds appropriate for the purpose of early detection
of prostate cancer.
Colorectal screening.--The Balanced Budget Act authorizes
coverage of and establishes frequency limits for colorectal
cancer screening tests, effective January 1, 1998. A covered
test is any of the following procedures furnished for the
purpose of early detection of colorectal cancer: (1) screening
fecal-occult blood test (for persons over 50, no more than
annually); (2) screening flexible sigmoidoscopy (for persons
over 50, no more than one every 4 years); (3) screening
colonoscopy for high-risk individuals (limited to one every 2
years); and (4) such other procedures as the Secretary finds
appropriate for the purpose of early detection of colorectal
cancer. Payment limits are established for the tests.
The Balanced Budget Act requires the Secretary, within 90
days of enactment, to publish a determination on the coverage
of screening barium enema. The Secretary has determined that
barium enema tests, as an alternative to either a screening
flexible sigmoidoscopy or a screening colonoscopy, will be
covered in accordance with the same screening parameters
specified for those tests.
Diabetes screening tests.--The Balanced Budget Act
specifies that, effective July 1, 1998, Medicare's covered
benefits will include diabetes outpatient self-management
training services. These services are defined as including
educational and training services furnished to an individual
with diabetes by a certified provider in an outpatient setting.
They will be covered only if the physician who is managing the
individual's diabetic condition certifies that the services are
needed under a comprehensive plan of care to ensure therapy
compliance or to provide the individual with necessary skills
and knowledge (including skills related to the self-
administration of injectable drugs) to participate in the
management of their own condition. Certified providers for
these purposes are defined as physicians or other individuals
or entities that, in addition to providing diabetes outpatient
self-management training services, provide other items or
services reimbursed by Medicare. Providers must meet quality
standards established by the Secretary. They are deemed to meet
the Secretary's standards if they meet standards originally
established by the National Diabetes Advisory Board and
subsequently revised by organizations that participated in the
establishment of standards of the Board, or if they are
recognized by an organization representing persons with
diabetes as meeting standards for furnishing such services.
In addition, beginning January 1, 1998, Medicare will
cover blood glucose monitors and testing strips for type I or
type II diabetics (without regard to a person's use of insulin,
as determined under standards established by the Secretary in
consultation with appropriate organizations). The national
payment limit for testing strips is reduced by 10 percent
beginning in 1998.
Bone mass measurements.--The Balanced Budget Act
authorizes coverage, beginning July 1, 1998, for bone mass
measurement for the following high risk persons: an estrogen-
deficient woman at clinical risk for osteoporosis; an
individual with vertebral abnormalities; an individual
receiving long-term glucocorticoid steroid therapy; an
individual with primary hyperparathyroidism; or an individual
being monitored to assess osteoporosis drug therapy. The
Secretary would be required to establish frequency limits.
Drugs/vaccines
Medicare generally does not cover outpatient prescription
drugs. Despite the general limitation, Medicare law
specifically authorizes coverage for the following drugs:
--Immunosuppressive drugs.--Drugs used in immunosuppressive
therapy (such as cyclosporin) during the first 30
months following a covered organ transplant. The
coverage period is extended to 3 years beginning in
1998.
--Erythropoietin (EPO).--EPO for the treatment of anemia for
persons with chronic kidney failure.
--Osteoporosis drugs.--Injectable drugs approved for the
treatment of postmenopausal osteoporosis provided to an
individual by a home health agency. A physician must
certify that the individual suffered a bone fracture
related to postmenopausal osteoporosis and that the
individual is unable to self-administer the drug.
--Oral cancer drugs.--Oral drugs used in cancer chemotherapy
when identical to drugs which would be covered if not
self-administered.
The Balanced Budget Act also authorizes coverage, effective
January 1, 1998, for oral antinausea drugs used as part of an
anticancer chemotherapeutic regimen, subject to specified
conditions.
Generally, Medicare payment for drugs has been based on the
lower of the estimated acquisition cost or the national average
wholesale price. These provisions do not apply when payment is
based on reasonable costs. Special limits apply in the case of
erythropoietin; the limit is $10 per 1,000 units. Osteoporosis
drugs can only be paid on the basis of reasonable costs.
The Balanced Budget Act specifies that, effective January
1, 1998, in any case where payment is not made on a cost or
prospective payment basis, the payment will equal 95 percent of
the average wholesale price. The Secretary is authorized to pay
a dispensing fee to pharmacies. Further, the Secretary is
required to study the effect of this provision on average
wholesale prices.
Medicare also pays for influenza virus vaccines (flu
shots), pneumococcal pneumonia vaccine, and hepatitis B vaccine
for persons at risk of contracting hepatitis B. Cost-sharing
charges do not apply for pneumococcal pneumonia or influenza
virus vaccines; cost-sharing charges do apply for hepatitis B
vaccines.
Ambulance services
Medicare pays for ambulance services provided certain
conditions are met. The services must be medically necessary
and other methods of transportation must be contraindicated.
Ambulance services are currently paid on the basis of
reasonable costs when such services are provided by a hospital;
otherwise the payment is based on reasonable charge screens
developed by individual carriers based on local billings (which
may take a variety of forms). Based on these local billing
methods, carriers develop screens for one or more of the
following four main billing methods: (1) a single all inclusive
charge reflecting all services, supplies, and mileage; (2) one
charge reflecting all services and supplies, with separate
charge for mileage; (3) one charge for all services and
mileage, with separate charges for supplies; and (4) separate
charges for services, mileage, and supplies. Within each broad
payment method, additional distinctions are made based on
whether the service is basic life support service or advanced
life support, whether emergency or nonemergency transport was
used, and whether specialized advanced life services were
rendered.
The Balanced Budget Act of 1997 specifies that the
reasonable cost and charge limits will apply through 1999, with
annual increases equal to the CPI minus 1 percentage point. A
fee schedule will be implemented in 2000. The aggregate amount
of payments in 2000 cannot exceed what would be paid if the
interim reductions remained in effect in that year. Annual
increases in subsequent years will equal the CPI increase,
except that in 2001 and 2002 there will be a 1-percentage point
reduction. The act specifies that coverage is provided for
advanced life support services provided by paramedic intercept
service providers in rural areas under contract with one or
more volunteer ambulance services.
END-STAGE RENAL DISEASE SERVICES
Coverage
The Medicare Program covers individuals who suffer from
end-stage renal disease if they are: (1) fully insured for old
age and survivor insurance benefits; (2) entitled to monthly
Social Security benefits; or (3) spouses or dependents of
individuals described in (1) or (2). Such persons must be
medically determined to be suffering from end-stage renal
disease and must file an application for benefits. In 1996, 8.4
percent of the population suffering from end-stage renal
disease (ESRD) who needed renal dialysis and 11.6 percent who
needed kidney transplants did not meet any of these
requirements and thus were not eligible for Medicare renal
benefits.
Benefits for qualified end-stage renal disease
beneficiaries include all part A and part B medical items and
services. ESRD beneficiaries are automatically enrolled in the
part B portion of Medicare and must pay the monthly premium for
such protection.
Table 2-25 shows estimates of expenditures, number of
beneficiaries, and the average expenditure per person for all
persons with ESRD (including the aged and disabled) from 1974
through 2002. Total projected program expenditures for the
Medicare End-Stage Renal Disease Program for fiscal year 1998
are estimated at $11.0 billion. In fiscal year 1998, there are
an estimated 287,169 beneficiaries, including successful
transplant patients and persons entitled to Medicare on the
basis of disability who also have ESRD.
TABLE 2-25.--END-STAGE RENAL DISEASE MEDICARE BENEFICIARIES AND PROGRAM
EXPENDITURES, 1974-2002
[Expenditures in millions of dollars]
------------------------------------------------------------------------
Expenditures HI Per person
Fiscal year (HI & SMI) beneficiaries cost
------------------------------------------------------------------------
1974.......................... $229 15,993 $4,319
1975.......................... 361 22,674 15,921
1976.......................... 512 28,941 17,691
1977.......................... 641 35,889 17,861
1978.......................... 800 43,482 18,398
1979.......................... 1,009 52,636 19,169
1980.......................... 1,245 54,725 22,750
1981.......................... 1,464 61,487 23,810
1982.......................... 1,640 69,267 23,676
1983.......................... 1,984 78,361 25,319
1984.......................... 2,325 87,609 26,538
1985.......................... 2,835 96,965 29,237
1986.......................... 3,165 106,568 29,699
1987.......................... 3,490 117,020 29,824
1988.......................... 3,998 128,075 31,216
1989.......................... 4,653 140,324 33,159
1990.......................... 5,251 154,575 33,971
1991.......................... 5,634 170,718 33,003
1992.......................... 6,433 186,729 34,451
1993.......................... 7,192 202,988 35,429
1994.......................... 7,877 220,359 35,747
1995.......................... 8,652 237,469 36,436
1996.......................... 9,560 254,157 37,614
1997.......................... 10,252 270,672 37,875
1998.......................... 11,008 287,169 38,334
1999.......................... 11,849 303,765 39,007
2000.......................... 12,795 320,593 39,909
2001.......................... 14,121 337,774 41,806
2002.......................... 15,606 355,387 43,914
------------------------------------------------------------------------
Note.--Estimates for 1979-2001 are subject to revision by the Office of
the Actuary, Office of Medicare and Medicaid Cost Estimates;
projections for 1994-2001 are under the fiscal year 1996 budget
assumptions.
Source: Health Care Financing Administration, Office of the Actuary.
When the ESRD Program was created, it was assumed that
program enrollment would level out at about 90,000 enrollees by
1995. That mark was passed several years ago, and no indication
exists that enrollment will stabilize soon.
Table 2-26 shows that new enrollment for all Medicare
beneficiaries receiving ESRD services grew at an average annual
rate of 7.4 percent from 1989 to 1994. Most of the growth in
program participation is attributable to growth in the numbers
of elderly people receiving services and growth in the numbers
of more seriously ill people entering treatment. Table 2-26
shows the greatest rate of growth in program participation is
in people over age 75, at 12.0 percent, followed by people of
ages 65-74 with a growth rate of 9.1 percent. The largest rate
of growth in primary causes of people entering ESRD treatment
was diabetes. People with diabetes frequently have multiple
health problems, making treatment for renal failure more
difficult.
The rates of growth in older and sicker patients entering
treatment for end-stage renal disease indicate a shift in
physician practice patterns. In the past, most of these people
would not have entered dialysis treatment because their age and
severity of illness made successful treatment for renal failure
less likely. Although the reasons that physicians have begun
treating older and sicker patients are not precisely known, it
is clear that these practice patterns have resulted, and will
continue to result, in steady growth in the number of patients
enrolling in Medicare's End-Stage Renal Disease Program.
End-stage renal disease is invariably fatal without
treatment. Treatment for the disease takes two forms:
transplantation and dialysis. Although the capability to
perform transplants had existed since the 1950s, problems with
rejection of transplanted organs limited its application as a
treatment for renal failure. The 1983 introduction of a
powerful and effective immunosuppressive drug, cyclosporin,
resulted in a dramatic increase in the number of transplants
being performed and the success rate of transplantation.
Table 2-27 indicates that the number of kidney transplants
in 1995 was more than double the number performed in 1980.
Despite the significant increases in the number and success of
kidney transplants, transplantation is not the treatment of
choice for all ESRD patients. A chronic, severe shortage of
kidneys available for transplantation now limits the number of
patients who can receive transplants. Even absent a shortage of
organs, some patients are not suitable candidates for
transplants because of their age, severity of illness, or other
complicating conditions. Finally, some ESRD patients do not
want an organ transplant.
For all of these reasons, dialysis is likely to remain the
primary treatment for end-stage renal disease. Dialysis is an
artificial method of performing the kidney's function of
filtering blood to remove waste products. There are two types
of dialysis: hemodialysis and peritoneal dialysis. In
hemodialysis, still the most common form of dialysis, blood is
removed from the body, filtered and cleansed through a
dialyzer, sometimes called an artificial kidney machine, before
being returned to the body. There are three types
TABLE 2-26.--MEDICARE END-STAGE RENAL DISEASE PROGRAM INCIDENCE BY AGE, SEX, RACE, AND PRIMARY DIAGNOSIS, 1989-94
--------------------------------------------------------------------------------------------------------------------------------------------------------
Average
annual Percent
Age, sex, race, and primary diagnosis 1989 1990 1991 1992 1993 1994 percent change
change 1993-94
--------------------------------------------------------------------------------------------------------------------------------------------------------
Age:
Under 15 years........................................ 417 462 465 419 444 437 0.9 -1.6
15-24 years........................................... 1,327 1,282 1,289 1,362 1,315 1,268 -0.9 -3.6
25-34 years........................................... 3,442 3,459 3,556 3,580 3,628 3,496 0.3 -3.6
35-44 years........................................... 4,718 5,174 5,590 5,954 5,825 5,986 4.9 2.8
45-54 years........................................... 5,947 6,275 6,859 7,642 8,019 8,756 8.0 9.2
55-64 years........................................... 9,230 9,973 10,796 11,430 11,631 12,426 6.1 6.8
65-74 years........................................... 11,554 12,964 14,499 16,007 16,542 17,851 9.1 7.9
75 years and over..................................... 6,845 7,765 8,932 10,275 10,813 12,046 12.0 11.4
Sex:
Male.................................................. 23,569 25,708 27,958 30,251 31,289 33,259 7.1 6.3
Female................................................ 19,911 21,646 24,028 26,418 26,928 29,007 7.8 7.7
Race:
Asian................................................. 831 1,032 1,117 1,266 1,318 1,456 11.9 10.5
Black................................................. 12,608 13,538 14,962 16,520 16,976 17,638 6.9 3.9
White................................................. 28,983 31,564 34,669 37,477 38,072 40,532 6.9 6.5
American Indian....................................... 540 580 633 792 618 689 5.0 11.5
Other/unknown......................................... 518 640 605 614 1,233 1,951 30.4 58.2
Primary diagnosis:
Diabetes.............................................. 14,456 16,219 18,715 20,792 20,368 23,417 10.1 15.0
Glomerulonephritis.................................... 5,701 5,852 5,944 6,161 5,953 6,256 1.9 5.1
Hypertension.......................................... 12,408 13,544 15,014 16,831 15,839 17,705 7.4 11.8
Polycystic-kidney disease............................. 1,268 1,400 1,484 1,548 1,359 969 -5.2 -28.7
Interstitial nephritis................................ 1,389 1,397 1,538 1,569 1,392 1,585 2.7 13.9
Obstructive nephropathy............................... 980 945 1,019 1,091 960 944 -0.7 -1.7
Other................................................. 2,678 2,866 3,588 3,931 4,157 5,030 13.4 21.0
Unknown............................................... 2,506 2,481 2,760 3,018 2,594 2,453 -0.4 -5.4
Not reported.......................................... 2,094 2,650 1,924 1,728 5,595 3,907 13.3 -30.2
-----------------------------------------------------------------------------------------------
Total number of new enrollees....................... 43,480 47,354 51,986 56,669 58,217 62,266 7.4 7.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Health Care Financing Administration, Bureau of Data Management and Strategy; data from the Program Management and Medical Information System,
September 1996 update.
TABLE 2-27.--TOTAL KIDNEY TRANSPLANTS PERFORMED IN MEDICARE-CERTIFIED U.S. HOSPITALS, 1979-95
----------------------------------------------------------------------------------------------------------------
Living donor Cadaveric donor
Calendar year Total -------------------------------------------
transplants Number Percent Number Percent
----------------------------------------------------------------------------------------------------------------
1979................................................... 4,189 1,186 28 3,003 72
1980................................................... 4,697 1,275 27 3,422 73
1981................................................... 4,883 1,458 30 3,425 70
1982................................................... 5,358 1,677 31 3,681 69
1983................................................... 6,112 1,784 29 4,328 71
1984................................................... 6,968 1,704 24 5,364 76
1985................................................... 7,695 1,876 24 5,819 76
1986................................................... 8,976 1,887 21 7,089 79
1987................................................... 8,967 1,907 21 7,060 79
1988................................................... 8,932 1,816 20 7,116 80
1989................................................... 8,899 1,893 21 7,006 78
1990................................................... 9,796 2,091 21 7,705 79
1991................................................... 10,026 2,382 24 7,644 76
1992................................................... 10,115 2,536 25 7,579 75
1993................................................... 10,934 2,828 26 8,106 74
1994................................................... 11,312 3,000 26 8,312 73
1995................................................... 11,902 3,416 29 8,426 71
----------------------------------------------------------------------------------------------------------------
Source: Health Care Financing Administration, Bureau of Data Management and Strategy.
of peritoneal dialysis. Intermittent peritoneal dialysis (IPD)
and continuous cycling peritoneal dialysis (CCDP) requires the
use of a machine while continuous ambulatory peritoneal
dialysis (CAPD) does not require the use of a machine. Under
peritoneal dialysis, filtering takes place inside the body by
inserting dialysate fluid through a permanent surgical opening
in the peritoneum (abdominal cavity). Toxins filter into the
dialysate fluid and are then drained from the body through the
surgical opening. Hemodialysis is usually performed three times
a week, IPD is performed once or twice a week, while CAPD and
CCPD require daily exchanges of dialysate fluid.
Reimbursement
Medicare reimbursement for facility-based dialysis services
provided by hospital-based and independent facilities are paid
at prospectively determined rates for each dialysis treatment
session. The rate, referred to as a composite rate, is derived
from area wage differences and audited cost data adjusted for
the national proportion of patients dialyzing at home versus in
a facility. Adjustments are made to the composite rate for
hospital-based dialysis facilities to reflect higher overhead
costs.
Beneficiaries electing home dialysis may choose either to
receive dialysis equipment, supplies, and support services
directly from the facility with which the beneficiary is
associated (method I) or to make independent arrangements for
equipment, supplies, and support services (method II). Under
method I, the equipment, supplies, and support services are
included in the facility's composite rate. Under method II,
payments are made on the basis of reasonable charges and
limited to 100 percent of the median hospital composite rate,
except for patients on continuous cycling peritoneal dialysis,
in which case the limit is 130 percent of the median hospital
composite rate.
Kidney transplantation services, to the extent they are
inpatient hospital services, are subject to the prospective
payment system. However, kidney acquisition costs are paid on a
reasonable cost basis.
The composite rate is not routinely updated, nor are method
II reasonable charge payments. There is no specific update
policy for reasonable costs of kidney acquisition; 100 percent
of reasonable costs are reimbursed. In fiscal year 1998, the
composite rate is $130 for hospitals and $126 for freestanding
facilities.
PRIVATE HEALTH PLANS IN MEDICARE
The Medicare Risk Contract Program in its current form
(section 1876 of the Social Security Act) was authorized as
part of the Tax Equity and Fiscal Responsibility Act of 1982
(TEFRA). It gives Medicare beneficiaries the option to enroll
in a private health plan, typically a health maintenance
organization (HMO). (An HMO is a type of managed care plan that
acts as both insurer and provider of health care services to an
enrolled population.) The program receives a predetermined, per
capita payment from Medicare for each enrolled beneficiary and
is at risk for providing each enrollee Medicare-covered items
and services. The Risk Contract Program built upon an earlier
Medicare provision, originating in the 1970s, which authorized
private plans to contract with Medicare on a cost-reimbursement
basis.
The Balanced Budget Act of 1997 made several major changes
to underlying Medicare law dealing with private health plans.
First, it replaces the risk program (and most other Medicare
managed-care options, such as plans with cost contracts) with a
program called Medicare+Choice (new part C of Medicare).
Second, it creates a new set of private plan options for
Medicare beneficiaries. Third, it establishes a new method for
paying participating private health plans. Under the Balanced
Budget Act of 1997, every individual entitled to Medicare part
A and enrolled in part B will be able to elect the existing
package of Medicare benefits through either the existing
Medicare fee-for-service program (traditional Medicare) or
through a Medicare+Choice plan.
This section describes the rules and standards under which
both the old and new program operate. The Risk Contract Program
is characterized as the ``current'' program; the new program is
generally referred to as Medicare+Choice.
Plan Options and Rules for Enrollment Before the Balanced Budget Act of
1997
Prior to the implementation of Medicare+Choice, which
should be fully in place by 1999, persons enrolling in Medicare
have two basic coverage options. They may elect to obtain
services through the traditional fee-for-service system under
which program payments are made for each service rendered.
Alternatively, under section 1876 of the Social Security Act,
they may elect to enroll with a managed care organization which
has entered into a payment agreement with Medicare.
Three types of managed care organizations are authorized
under section 1876 to contract with Medicare: an entity that
has a risk contract with Medicare, an entity that has a cost
contract with Medicare, and a health care prepayment plan
(HCPP) that has a cost contract to provide Medicare part B
services. Risk contracts are frequently referred to as TEFRA
risk contracts and cost contracts are frequently referred to as
TEFRA cost contracts because the TEFRA legislation established
the rules governing these types of contracts.
Risk contracts
Both HMOs and competitive medical plans (CMPs) are
permitted to sign risk contracts with Medicare. (A CMP is a
health plan that is not a federally qualified HMO but that
meets specific Medicare requirements.) By contrast, provider-
sponsored organizations (PSOs) and preferred provider
organizations (PPOs) that are not organized under the laws of a
State and are neither a federally qualified HMO or CMP are not
eligible to contract with Medicare under the Risk Contract
Program. Allowing PSOs and PPOs to compete for Medicare
beneficiaries is one of the major changes made by the Balanced
Budget Act of 1997.
Medicare makes a single monthly capitation payment for
each of its enrollees. This payment has been called the
adjusted average per capita cost (AAPCC). The Balanced Budget
Act of 1997 changed the capitation payment methodology, as
discussed below. In return, the entity agrees to provide or
arrange for the full range of Medicare services through an
organized system of affiliated physicians, hospitals, and other
providers.
In general, a beneficiary in an area served by an HMO or
CMP with a risk contract may voluntarily choose to enroll in
the organization. With a few exceptions, the beneficiary must
obtain all covered services through the HMO or CMP, except in
emergencies. Typically, the beneficiary is not responsible for
many of the cost-sharing charges associated with traditional
Medicare. In some cases, the beneficiary may be charged a
monthly premium by the organization. In 1995, risk plans were
authorized to offer point-of-service (POS) options in which
enrollees can go out of plan for services, with cost-sharing
responsibilities varying with the choice of provider (higher
cost sharing is associated with the use of nonnetwork
providers).
Cost-based plans
Beneficiaries may also enroll in organizations with TEFRA
cost contracts. These entities must meet essentially the same
conditions of participation as risk contractors. Under a cost
contract, Medicare pays the actual cost the entity incurs in
furnishing covered services (less the estimated value of
beneficiary cost sharing).
The other type of cost-based arrangement is the health
care prepayment plan. A HCPP arrangement is similar to a TEFRA
cost contract except that it provides only part B services.
Further, there are no specific statutory conditions to qualify
for a HCPP contract.
Enrollment
With certain exceptions, any Medicare beneficiary residing
in the area served by a risk plan or cost plan may enroll.
Under the rules in effect until Medicare+Choice is implemented,
the plans must have an annual open enrollment period of at
least 30 days duration. During this period, they must accept
beneficiaries in the order in which they apply up to the limits
of its capacity, unless doing so would lead: (a) to violation
of the rule requiring HMOs to have no more than 50 percent of
their enrollees as Medicare-Medicaid beneficiaries, or (b) to
an enrolled population unrepresentative of the population in
the area served by the HMO. As of January 1, 1997, the
Secretary is authorized to waive this ``50-50 rule'' if she
finds it in the public interest. This provision was included in
the Balanced Budget Act of 1997, which also repeals the 50-50
rule as of January 1, 1999.
An enrollee may request termination of his or her
enrollment at any time. An individual may file disenrollment
requests directly with the HMO or at the local Social Security
Office. Disenrollment takes effect on the first day of the
month following the month during which the request is filed.
The HMO may not disenroll or refuse to reenroll a beneficiary
on the basis of health status or need for health services.
The Secretary is authorized to prescribe procedures and
conditions under which eligible organizations contracting with
Medicare may inform beneficiaries about the organization.
Brochures, application forms, or other promotional or
informational material may be distributed only after review and
approval by the Secretary of Health and Human Services (DHHS).
HMOs must provide enrollees, at the time of enrollment and
annually thereafter, an explanation of rights to benefits,
restrictions on services provided through nonaffiliated
providers, out-of-area coverage, coverage of emergency and
urgently needed services, and appeal rights. A terminating HMO
must arrange for supplementary coverage for Medicare enrollees
to pay for certain cost-sharing charges during any preexisting
condition exclusion under their successor coverage for the
lesser of 6 months or the duration of the exclusion period.
Trends in Plan Availability and Enrollment
As of 1997, a small but growing portion of Medicare
beneficiaries are enrolled in managed care plans. Recent growth
in enrollment reflects increases in both the number of plans
with Medicare risk contracts and the number of Medicare
enrollees per plan.
Availability of Medicare risk plans
In the 1980s, many large HMOs did not participate in
Medicare. Participation by health plans, however, has grown
rapidly in the past 5 years, especially since 1993 (chart 2-1).
CHART 2-1. NUMBER OF RISK PLANS PARTICIPATING IN MEDICARE, 1987-97
Note: All data are for December, except that June data are
used for 1997.
Source: Physician Payment Review Commission (now Medicare
Payment Advisory Commission) analysis of data from Health Care
Financing Review, 1996 Statistical Supplement and Medicare
Managed Care Contract Reports.
By law, each risk plan is available for a specific service
area. Plans define their service areas as a set of counties and
partial counties (partial counties are identified by ZIP code).
Typically, a plan serves some portion of a single State or a
multistate metropolitan area. Analysis by the Physician Payment
Review Commission (PPRC; 1997) shows that, in June 1997, 67
percent of all Medicare beneficiaries had at least one risk
plan available to them (chart 2-2). (PPRC has now merged with
the Prospective Payment Assessment Commission to become the
Medicare Payment Advisory Commission or MedPAC.) Almost 60
percent of all beneficiaries had a choice of plans, and one-
third had five or more available to them. In 2 years, the
proportion of all beneficiaries without access to at least one
risk plan had dropped 12 percent, while the number with access
to at least five plans had more than doubled.
CHART 2-2. DISTRIBUTION OF MEDICARE BENEFICIARIES BY NUMBER OF RISK
PLANS AVAILABLE IN THEIR AREA, 1995-97
Note: Area is defined as the ZIP codes in a risk plan's
service area.
Source: Physician Payment Review Commission (now Medicare
Payment Advisory Commission) analysis of Health Care Financing
Administration enrollment data.
Access to risk plans, however, is much greater in urban
areas than in rural areas (chart 2-3). All residents of central
urban areas have at least one plan available, and most have
more. By contrast, rural beneficiaries rarely have even one
plan available.
Enrollment trends for Medicare managed care
Historically, few Medicare beneficiaries have enrolled in
HMOs, but the numbers have risen steadily to 14.2 percent of
all beneficiaries in mid 1997 (chart 2-4). The largest numbers
and all of the growth have been in risk plans, in which
enrollment increased from 3.3 percent in 1990 to 12.6 percent
in June 1997. By contrast, enrollment in cost contracting plans
fell to a low of 1.6 percent in 1997. Nationally, enrollment in
risk plans grew about 30 percent from June 1996 to June 1997.
CHART 2-3. DISTRIBUTION OF MEDICARE BENEFICIARIES IN URBAN AND RURAL
LOCATIONS BY NUMBER OF AVAILABLE PLANS, JUNE 1997
Note: Urban counties are divided into central counties and
others; rural counties are divided into urban fringe counties
and others.
Source: Physician Payment Review Commission (now Medicare
Payment Advisory Commission) analysis of Health Care Financing
Administration enrollment data.
In addition to enrollment in risk and cost plans, over
16,000 beneficiaries had enrolled in plans offered through the
Medicare Choices Demonstration Project as of mid 1997. This
project was established to give Medicare beneficiaries expanded
choices among types of managed care plans and test new ways to
pay for managed care.
Patterns of enrollment differ across urban and rural
locales. Risk plan enrollment in central urban areas (cities at
the core of metropolitan areas) was about 24 percent in June
1997, about twice the level in outlying urban areas. That level
was up from 17 percent 2 years earlier. Risk plan enrollment in
rural areas was about 1.8 percent. Although low, it has been
rising rapidly over the past 2 years. Enrollment in cost
contract plans is more evenly distributed.
Enrollment patterns are not uniform around the country,
with risk plan enrollment higher generally in western States
(chart 2-5). In particular, over one-third of the beneficiaries
in Arizona (37 percent) and California (37 percent) were in
risk plans in June 1997. The highest levels of enrollment in
eastern States were in Florida (24 percent), Massachusetts (17
percent), Pennsylvania (19 percent), and Rhode Island (16
percent).
CHART 2-4. PERCENT OF MEDICARE BENEFICIARIES ENROLLED IN RISK AND COST
PLANS, 1990-97
Note: All data are for December, except that 1997 data are
from June.
Source: Physician Payment Review Commission (now Medicare
Payment Advisory Commission) analysis of Medicare Managed Care
Contract Reports.
Further evidence of the degree of concentration is that
five States account for just over two-thirds of all risk
enrollees but just over one-third of all Medicare
beneficiaries. Almost half of all risk enrollees live in
California and Florida. New enrollees, however, come from a
somewhat different mix of States than do current risk
enrollees. Beneficiaries in California and Florida represent
under one-fourth of net new enrollment between June 1996 and
June 1997, whereas Pennsylvania has the largest share of new
enrollees (14 percent).
Although enrollment in the risk program initially was
concentrated on the west coast and Florida, other areas,
especially in the East and Midwest, have seen rapid rises in
risk plan enrollment over the last 2 years. Urban areas with
the greatest share of national enrollment growth tend to be
those where Medicare payments are high. New competition has
entered many of these markets, but the newer entrants do not
necessarily attract the most new enrollees.
Although nearly 300 risk plans participate in Medicare,
risk contracts are concentrated among a few large national
firms. Just 12 large national firms enroll over three-fourths
of all risk plan enrollees (chart 2-6). The largest firm is
Pacificare (including its recent merger partner, FHP) with 21
percent of risk plan enrollees nationwide. Kaiser Permanente,
the Blue Cross Blue Shield companies, and Humana are the next
largest firms participating in Medicare. The concentration of
enrollment appears to be declining, possibly because of the
large number of recent new entrants into the program.
Countering this trend, however, may be corporate mergers, which
tend to increase enrollment concentration.
CHART 2-5. PERCENT OF MEDICARE BENEFICIARIES ENROLLED IN RISK PLANS, BY
STATE, JUNE 1997
Note: Enrollment in eight States falls in a different
category than it would based on HCFA's monthly reports because
certain plans serve beneficiaries in States other than where
they are located.
Source: Physician Payment Review Commission (now Medicare
Payment Advisory Commission) analysis of Health Care Financing
Administration enrollment data.
Projections of enrollment show continued growth. Forecasts
by the Congressional Budget Office (CBO) suggest enrollment
will reach about 34 percent by 2005, modestly above the 29-
percent rate projected under prior law.
CHART 2-6. PERCENT OF PLAN ENROLLEES WHO ARE IN RISK PLANS AFFILIATED
WITH NATIONAL FIRMS, JUNE 1997
Source: Physician Payment Review Commission (now Medicare
Payment Advisory Commission) analysis of Health Care Financing
Administration enrollment data.
Plan Options and Rules for Enrollment in Medicare+Choice
The Balanced Budget Act establishes Medicare+Choice, which
will give beneficiaries an expanded array of private plan
alternatives to traditional Medicare. Each Medicare+Choice plan
will have to provide the same benefits as required under
traditional Medicare. Standards for Medicare+Choice plan
organization and performance are discussed below. Also
discussed below are beneficiary and provider protections.
Plan options
A Medicare+Choice plan can be: (1) a coordinated care
plan, (2) a private fee-for-service plan, or (3) on a limited
demonstration basis, a combination of a medical savings account
(MSA) plan and contributions to a Medicare+Choice MSA.
Coordinated care plans may be offered by an HMO (with or
without a point-of-service plan), a PPO, or a PSO. PPOs are
generally groups of physicians and hospitals who contract with
an insurer or employer to serve a group of enrollees on a fee-
for-service basis at negotiated rates that are lower than those
charged to nonenrollees. PPOs do not traditionally have primary
care gatekeepers. A PSO is generally a cooperative venture of a
group of providers who control its delivery and financial
arrangements.
The Balanced Budget Act defines a private fee-for-service
plan as a plan that: reimburses hospitals, physicians, and
other providers at a rate determined by the plan on a fee-for-
service basis without placing the provider at financial risk;
does not vary rates for a provider based on the utilization
relating to the provider; and does not restrict the selection
of providers among those who are lawfully authorized to provide
the covered services, and who agree to accept the terms and
conditions of payment established by the plan.
The Balanced Budget Act defines an MSA plan as a plan that
reimburses Medicare-covered services after a specified
deductible (up to $6,000) is met. The difference between the
premium for the high-deductible plan and applicable
Medicare+Choice capitation payment would be placed into an
account for the beneficiary to use in meeting his or her
expenses below the deductible. The MSA option is offered on a
demonstration basis. Up to 390,000 individuals can enroll in
MSA plans (specific rules for MSA plans are described below).
As Medicare+Choice begins operation, probably late in
1998, most existing risk and cost-based contracts will be
phased out. No new risk contracts may be initiated after
Medicare+Choice standards are released, and no risk contracts
may be renewed after January 1999. Existing risk-contract plans
will be able to convert to Medicare+Choice if they meet the new
program requirements. Effective immediately, no new cost-based
contracts may be initiated, and most cost-based contracts may
not be renewed beyond December 2002.
Enrollment rules for Medicare+Choice
With two exceptions, beneficiaries will be able to enroll
in any Medicare+Choice plan that serves their area. The first
exception applies to beneficiaries not enrolled in part B. The
second exception applies to persons qualifying for Medicare on
the basis of end-stage renal disease (ESRD); however, persons
already enrolled who later develop ESRD may remain enrolled in
the plan.
After a transition period (through 2001) in which
individuals are able to make and change elections on an ongoing
basis, elections will be made and changed only during an annual
coordinated election period. There will also be a 3-month
period after making an election in which individuals can change
their election (except for a 6-month period in 2002).
Additional election periods (called special election periods)
will apply for newly eligible Medicare beneficiaries (based on
age, but not disability) and beneficiaries who experience
certain events; for example, the individual is no longer
eligible to participate in a plan because she moves or because
the plan has terminated its contract with Medicare. Table 2-28
summarizes the enrollment schedule for Medicare+Choice.
TABLE 2-28.--TRANSITION TO ANNUAL COORDINATED ELECTION OF
MEDICARE+CHOICE PLANS
------------------------------------------------------------------------
Date Event
------------------------------------------------------------------------
June 1, 1998...................... Secretary of DHHS must issue
regulations implementing standards
(other than those for solvency) for
Medicare+Choice plans.
Medicare+Choice contracts cannot be
signed until such standards are in
place. Upon signing a contract with
DHHS, Medicare+Choice plans begin
accepting Medicare beneficiaries on
a continuous open enrollment and
continuous disenrollment basis.
November 1998..................... Medicare+Choice Information Fair
nationwide coordinated educational
and publicity campaign. Individuals
can begin enrolling in
Medicare+Choice MSAs (with coverage
becoming effective January 1,
1999).
January 1, 1999................... Current risk contract enrollees are
hereafter considered to be enrolled
in Medicare+Choice plans. MSA plans
begin providing coverage.
November 1999..................... First coordinated annual election
period for Medicare+Choice plans
(for coverage becoming effective
January 1, 2000) and first mailing
of informational materials to all
Medicare beneficiaries.
December 31, 2001................. Last day of continuous open
enrollment/disenrollment during
which an individual can change
elections an unlimited number of
times.
January 1, 2002................... First year in which elections become
locked in. First 6 months of 2002
is a transition period when an
individual can change election only
once (other than an election during
the coordinated annual election
period or in the case of an event
qualifying for a special election).
Limited exceptions are provided.
December 31, 2002................. New elections end for
Medicare+Choice MSA plans (unless
390,000 cap is reached prior to
this date).
January 1, 2003................... New elections become effective the
first day of January following each
election period. Each year there is
a 3-month period when an individual
can change election one time.
Otherwise, elections cannot be
changed until the next annual
coordinated election period (unless
individual qualifies for special
enrollment period). Limited
exceptions are provided.
------------------------------------------------------------------------
Source: Congressional Research Service analysis of provisions in the
Balanced Budget Act of 1997.
Marketing rules
Medicare+Choice organizations and the plans they offer to
Medicare beneficiaries must meet certain marketing rules. They
will have to submit marketing material to the Secretary at
least 45 days before distribution. The material can then be
distributed if it is not disapproved by the Secretary (whereas
in the previous rules active approval was required). The
Secretary is required to disapprove such material if it is
inaccurate or misleading. Each organization must conform to
fair marketing standards, and must not permit an organization
to provide for cash or other monetary rebates as an inducement
for enrollment or otherwise. The Secretary is permitted to
prohibit an organization or its agent from completing any
portion of any election form on behalf of any individual.
Information to beneficiaries
The Secretary is required to provide for activities to
disseminate broadly information on traditional Medicare and
Medicare+Choice plans to current and prospective Medicare
beneficiaries. The information has to be comparative in order
to help beneficiaries make informed choices among available
options. The Secretary is required to conduct an educational
and publicity campaign during November 1998 to inform
Medicare+Choice individuals about the identity of
Medicare+Choice plans and risk contract plans offered in
different areas and the election process. As shown in table 2-
28, the Secretary is required to provide comprehensive
information, including plan comparisons, to beneficiaries every
November, beginning with 1999.
Specifically, the Secretary is required to mail to all
individuals eligible for Medicare+Choice general and
comparative plan information. This mailing must occur at least
15 days before each annual, coordinated election period. (Such
information will also be sent to newly eligible beneficiaries
in advance of their initial enrollment period.)
The general information is to include: (1) benefits and
cost-sharing requirements under the traditional Medicare
Program; (2) the procedures for electing traditional Medicare
and Medicare+Choice; (3) a general description of procedural
rights (including grievance and appeals procedures) for both
traditional Medicare and Medicare+Choice; (4) information on
benefits and other features of supplemental coverage, including
Medigap and Medicare Select; and (5) notice that a
Medicare+Choice organization may terminate its contract with
Medicare or otherwise cease to be available to an enrolled
individual and what would happen in that event.
The comparative plan information for Medicare+Choice will
have to include: (1) benefits, cost-sharing requirements, and
the extent to which an enrollee may obtain benefits through
out-of-network providers; (2) plan premiums; (3) plan service
areas; (4) quality and performance information, including
disenrollment rates, enrollee satisfaction, health outcomes,
and compliance data; (5) supplemental benefits, if any, and
their premiums.
The Secretary is required to maintain a toll-free number
and internet site to facilitate access to information on
Medicare+Choice plans. Nonfederal entities may be used to carry
out information activities required under the Balanced Budget
Act. The Medicare+Choice organizations will be required to
furnish the Secretary with the information needed to enable the
Secretary to comply with these requirements.
Medicare+Choice organizations will be required to pay a
``user fee'' to offset HCFA's costs of providing beneficiaries
with comparative plan information, conducting annual
information fairs, maintaining the toll-free information number
and internet site, and conducting the other activities designed
to inform Medicare beneficiaries about their insurance options.
This user fee must equal the organization's share (as
determined by the Secretary) of the aggregate amount of fees
which are appropriated for a fiscal year. The amounts collected
are authorized to be appropriated, and are capped at $200
million in fiscal year 1998; $150 million in fiscal year 1999;
and $100 million in fiscal year 2000 and subsequent years.
However, Public Law 105-78, providing for appropriations for
the Departments of Labor, Health and Human Services, and
Education, provides for only $95 million in user fees for
fiscal year 1998. Report language accompanying the legislation
suggests that HCFA should give priority in using these funds
to: (1) publishing a comparative booklet to be mailed to
beneficiaries describing the new Medicare+Choice plans; (2)
contracting for a toll-free number and maintaining an internet
site for questions about Medicare+Choice options; and (3)
operating Medicare+Choice information fairs and funding future
dissemination of information through local information centers
and other forms of public relations.
Nondiscrimination
Medicare+Choice organizations are required to accept
eligible individuals without restriction during election
periods (also referred to as open enrollment periods). In
general, organizations and plans cannot deny enrollment on the
basis of health status related factors. These include: health
status, medical condition (including both physical and mental
illnesses), claims experience, receipt of health care, medical
history, genetic information, evidence of insurability
(including conditions arising out of acts of domestic
violence), and disability. These provisions do not apply if
they will result in enrollment misrepresentative of the
Medicare population in the service area. An organization can
deny enrollment in the event it has reached the limits of its
capacity. Organizations also cannot terminate an enrollee's
election except for failure to pay premiums on a timely basis,
disruptive behavior, or because the plan ends for all
Medicare+Choice enrollees.
Payments to Plans Through 1997
There are two basic components of the risk program payment
methodology used through 1997. The first is the actuarial
method used to calculate risk plan payment rates each year. The
second is the adjusted community rate (ACR) mechanism through
which risk contracting plans determine the amount of Medicare
noncovered benefits that they will provide to Medicare
enrollees and the premiums they are permitted to charge for
those benefits. As described below, the Balanced Budget Act
made substantial changes in the calculation of plan payment
rates, but only modest changes in the ACR mechanism.
Capitation payments to risk contracting plans
Under the old system, Medicare paid risk plans 95 percent
of an actuarial projection, at the county level, of what the
program would have paid if the beneficiary had remained in the
traditional fee-for-service sector. This payment rate was known
as the adjusted average per capita cost (AAPCC). The Health
Care Financing Administration (HCFA) recalculated AAPCCs every
calendar year based on estimates of national average spending,
county spending, and beneficiary characteristics.
National Medicare per capita expenditures.--In the first
stage of the AAPCC calculation, HCFA actuaries used historical
program expenditures to project national per capita program
expenditures for the coming calendar year. These U.S. per
capita costs (USPCC) were needed to update historical spending
at the county level. Separate projections were made for part A
services and part B services for the aged, the disabled, and
people with ESRD. These projections took into account expected
inflation and changes in utilization patterns and services
covered by the Medicare Program. The USPCC was reported in
terms of monthly per capita expenditures because risk plans are
paid on a monthly basis.
County level Medicare per capita expenditures.--In the
second stage, HCFA estimated expected per capita program
expenditures for the aged and the disabled in each county, and
for people with ESRD in each State. County level per capita
spending differed from the national average because of
differences in input prices, practice patterns, health status,
utilization, and Medicare payments for special purposes such as
graduate medical education and support for disproportionate-
share hospitals. Risk adjusters were applied to these data to
approximate what Medicare per capita spending in the fee-for-
service sector would have been in each year if a county had the
same demographic characteristics as the nation as a whole.
These projected risk-weighted per capita payments are the
AAPCC.
Enrollee-level payment to plans.--Finally, HCFA calculated
what it would pay a risk plan for each individual enrollee.
This payment was based on 95 percent of the AAPCCs for the
enrollee's county of residence and was adjusted by national
risk adjusters to reflect each enrollee's demographic
characteristics, such as age, sex, and whether the person is in
a nursing home (see section below on risk adjustment). Medicare
also paid plans 95 percent of the State level end-stage renal
disease AAPCCs for enrollees with end-stage renal disease.
Payment issues
For several years, certain issues have been raised about
the AAPCC-based payment methodology. Payment rates varied
widely across the country and from year to year. Risk plans
also were paid for graduate medical education and
disproportionate-share hospital (DSH) payments that they may
not actually have incurred.
Geographic variation and volatility.--Certain policies in
place under the old system led to significant variation in risk
payments across the country. Nationally, in 1997, AAPCCs ranged
from $221 to $767. AAPCCs for central urban counties ($546) and
other urban counties ($436) were higher on average than AAPCCs
for rural counties adjacent to urban areas ($393) or the most
rural counties ($371). Furthermore, because Medicare risk
payments were county based, neighboring counties often had
substantially different AAPCCs that could not be explained by
differences in plan costs. For example, the AAPCC varied by
over $200 per month among the counties adjacent to Chicago or
to Washington, DC. These geographic variations in AAPCCs
resulted from local differences in fee-for-service Medicare
expenditures that in turn reflected service use patterns (both
volume and intensity), provider input prices (for example, cost
of wages or supplies), and Medicare payments for special
purposes (for example, payments for graduate medical
education).
In addition, many counties experienced substantial changes
in the AAPCC from year to year, despite the use of multiple
years of expenditure data to smooth changes in per capita
spending. Per capita costs for counties with small Medicare
populations fluctuated more over time than per capita costs for
counties with larger Medicare populations.
Both the levels of AAPCC-based payment rates and their
volatility over time have influenced Medicare risk plan
enrollment rates. PPRC's analysis indicated that, in urban
counties, the level of payments is one of the important factors
influencing enrollment rates, with higher enrollment rates
where payment rates are high. Payment volatility appears to
have had a weaker but measurable effect, with lower enrollment
rates where volatility is high.
Medical education and disproportionate-share payments.--
Medicare fee-for-service payments for inpatient hospital stays
include payments for direct and indirect medical education
costs incurred by teaching hospitals and extra payments to
hospitals that serve a disproportionate share of low-income
beneficiaries. Under the old payment system, these payments
were retained in the expenditures used to calculate the AAPCCs.
As a result, an AAPCC reflected a county's average monthly per
capita cost for fee-for-service medical education and
disproportionate share hospitals. These amounts may not
correspond with actual risk plan costs, however, because not
all plans have medical education programs or use teaching or
disproportionate-share hospitals. Each type of payment averaged
about 3 percent of the AAPCC rates overall. The shares of total
payments, however, varied across the country.
Payments for services in VA or defense facilities.--In
some areas, many Medicare enrollees obtain services from
Veterans Administration or Department of Defense facilities. As
a result, Medicare expenditures are reduced in these areas.
Because the AAPCCs were based on Medicare fee-for-service
expenditures, the exclusion of these services meant that the
AAPCC did not represent the average service use of Medicare
beneficiaries in the fee-for-service sector. The value of the
services provided by these non-Medicare Programs averaged about
3 percent of total Medicare per enrollee costs across all
States, although it varied substantially across individual
States.
Medicare+Choice Payments to Plans
The Balanced Budget Act substantially restructured the
system for setting the rates by which Medicare pays plans.
While Medicare+Choice is not yet in place, the Balanced Budget
Act requires HCFA to determine 1998 payments to risk plans
using the new capitation payment methodology. The rates for
1998, the first to be so calculated, were issued in September
1997.
In general, the program makes monthly payments in advance
to each participating health plan for each covered individual
in a payment area (typically a county). The Secretary is
required to determine annually, and announce by March 1 before
the calendar year concerned, the annual Medicare+Choice
capitation rate for each payment area, and the risk and other
factors to be used in adjusting such rates.
Payments to Medicare+Choice organizations and payments to
Medicare+Choice MSAs are made from the Medicare Trust Funds in
proportion to the relative weights that benefits under parts A
and B represent of Medicare's actuarial value of the total
benefits.
Calculation of the payment rate
The major factors for determining Medicare's annual
Medicare+Choice capitation rates are summarized in table 2-29.
The annual Medicare+Choice capitation rate, for a payment area
(for a contract for a calendar year) is set at the highest of
three amounts calculated for each county:
--a rate calculated as a blend of an area-specific (local)
rate and a national rate,
--a minimum or floor rate, and
--a rate reflecting a minimum increase from the previous
year's rate.
Each year, the two components of the blended rate and the floor
rate will be updated by a national growth percentage. Each part
of the system is described in more detail below.
Blended rates.--The blended capitation rate is designed to
shift county rates gradually away from local rates, which
reflect the wide variations in fee-for-service costs discussed
above, toward a national average rate. Blending is designed to
reduce payments in counties where AAPCCs historically have been
higher than the national average rate, and to increase payments
in counties where AAPCCs have been lower. The blended rate is
defined as the sum of:
--a percentage of the annual area-specific Medicare+Choice
capitation rate for the year for the payment area, and
--a percentage of the input-price adjusted annual national
Medicare+Choice capitation rate for the year.
The area-specific (local) rate is based on the 1997 AAPCC
for the payment area with two adjustments. First, the area-
specific rate is reduced to remove an amount corresponding to
graduate medical education (GME) payments (described below).
Second, rates are updated each year by the national growth
percentage (described below).
The national rate is the weighted average of all local
area-specific rates. This component of the blend is adjusted to
reflect differences in certain input prices, such as hospital
labor costs, by a formula stated in the law. The Balanced
Budget Act allows the Secretary to change the method for making
input-price adjustments in the future.
The percentage applied to the area-specific rate will be
reduced in increments over 6 years from 90 percent in 1998 to
50 percent in 2003, while the corresponding percentage for the
national rate is increased over the same 6 years from 10
percent to 50 percent (table 2-29). In 2003, the blended rate
will be based on 50 percent of area-specific costs and 50
percent of national, input-price adjusted costs. Each year, the
blended rates may be raised or lowered to achieve budget
neutrality (described below).
TABLE 2-29.--MAJOR FACTORS FOR DETERMINING MEDICARE PAYMENTS TO
MEDICARE+CHOICE PLANS
Factor Rule established in the Balanced Budget Act of 1997
------------------------------------------------------------------------
------------------------------------------------------------------------
Blended counties (blend of General.......... Transition over 6
local and national rates). years to 50-50 blend
of local and
national rates.
National rates are
adjusted for
differences in input
prices.
1998............. 90 percent local, 10
1999............. percent national.
2000............. 82 percent local, 18
2001............. percent national.
2002............. 74 percent local, 26
2003 and after... percent national.
66 percent local, 34
percent national.
58 percent local, 42
percent national.
50 percent local, 50
percent national.
Minimum payment (``floor'') 1998............. Minimum of $367 or
rate. 150 percent of 1997
payment outside the
United States.
1999 and after... Previous year's
payment times annual
percentage increase.
Minimum percent increase...... 1998............. 102 percent of 1997
1999 and after... payment rate.
102 percent of prior
year's rate.
Treatment of payments for GME payments excluded
graduate medical education in equal intervals
(GME) and disproportionate- over 5 years. DSH
share hospitals (DSH). payments not
excluded.
Budget neutrality............. Total Medicare+Choice
payments may not
exceed what would
have been spent if
payments were
entirely based on
local rates.
Annual percentage increase.... 1998............. Increase in Medicare
1999-2002........ per capita
After 2002....... expenditures minus
0.8 percentage
points.
Increase in Medicare
per capita
expenditures minus
0.5 percentage
points.
Increase in Medicare
per capita
expenditures.
Risk adjustment............... Payments are adjusted
by Secretary to
reflect demographic
and other factors.
Study is to be done
of risk adjusters
based on health
status. Starting
2000, payments are
risk adjusted based
on Secretary's
recommendations.
------------------------------------------------------------------------
Source: Congressional Research Service analysis of provisions in the
Balanced Budget Act of 1997.
Minimum (floor) rates.--Each county is also subject to a
floor rate, designed to raise payment in certain counties more
quickly than would occur through the blend alone. The minimum
rate is set at $367 for 1998 (but not to exceed, in the case of
an area outside the 50 States and the District of Columbia, 150
percent of the 1997 payment rate). For subsequent years, this
payment amount will be increased by the national growth
percentage (described below). In about one-third of all
counties, the 1998 payment rate had to be raised to meet the
floor.
Minimum percentage increase.--The minimum increase rule
protects counties that would otherwise receive only a small (if
any) increase. In 1998, the minimum rate for any payment area
is 102 percent of its 1997 AAPCC. For subsequent years, it will
be 102 percent of its annual Medicare+Choice capitation rate
for the previous year.
Exclusion of payments for graduate medical education.--
Payments (direct and indirect) for GME are excluded or ``carved
out'' of the payments to Medicare+Choice plans over 5 years.
Specifically, in determining the local rate prior to
determining the blended rate, amounts attributable to payments
for the indirect costs of medical education and for direct
graduate medical education costs are deducted from the 1997
payment amount. The amount excluded begins at 20 percent in
1998, rising in equal amounts until it reaches 100 percent in
2002. Payments for disproportionate-share hospitals are not
carved out.
National growth percentage.--The national per capita
Medicare+Choice growth percentage is defined as the projected
per capita increase in total Medicare expenditures minus a
specific reduction set in law. In 1998, the reduction is 0.8
percentage points; from 1999 through 2002, it is 0.5 percentage
points. There is no reduction after 2002. (Starting with the
1999 rates, adjustments will be made for errors in the previous
year's projection of spending.) The actual national growth
percentage for 1998, after the reduction, is 2.6 percent.
Estimated growth percentages for the period 1999-2002 have been
estimated by CBO to range from about 4-6 percent.
Budget neutrality.--Once the rates are calculated for each
county, based on the greatest of the blended rate, floor, and
minimum increase, total payments are compared to a budget-
neutral amount. A budget neutrality adjustment is applied as
necessary to the blended rates to ensure that the aggregate of
payments for all payment areas equals that which would have
been made if the payment were based on 100 percent of the area-
specific capitation rates for each payment area. In no case may
rates be reduced below the floor or minimum increase amounts
for the particular county. In some years, it may not be
possible to achieve budget neutrality because no county rate
may be reduced below its floor or minimum increase. The law
makes no provision for achieving budget neutrality after all
county rates are at the floor or minimum increase. When this
situation occurred for the 1998 rates, HCFA chose to waive the
budget-neutrality rule rather than one of the other rules.
Rates for disabled and ESRD beneficiaries.--Payment rates
for disabled and ESRD beneficiaries are set using a similar
method as that for aged beneficiaries except that ESRD rates
are calculated on a statewide basis. In particular, the same
floor rates also apply to both groups of beneficiaries, even
though payments for disabled beneficiaries have been
historically 15 percent lower than for aged beneficiaries.
Geographic basis for payment rates.--A Medicare+Choice
payment area is defined as a county or equivalent area
specified by the Secretary. (In the case of individuals
determined to have ESRD, the Medicare+Choice payment area is
each State, or other payment areas as the Secretary specifies.)
Upon request of a State for a contract year (beginning after
1998), the Secretary will redefine Medicare+Choice payment
areas in all or a portion of the State to: (1) a single
statewide payment area; (2) a metropolitan system; or (3) a
single payment area consolidating noncontiguous counties (or
equivalent areas) within a State.
Special rules for MSA plans.--Special rules will apply for
payments to MSA plans. If the monthly premium for an MSA plan
(that is, a high deductible plan) for a Medicare+Choice payment
area is less than the monthly capitation rate for the area and
year involved, the Secretary is required to deposit the
difference in a Medicare+Choice MSA established by the
individual. For cases when an MSA election was terminated
before the end of the year, the Secretary will have to
establish a procedure to recover deposits attributable to the
remaining months.
Risk adjustment
Actual payments to plans depend on the characteristics of
the beneficiaries who enroll. The rate for an enrollee's county
of residence (or State in the case of ESRD enrollees) is
adjusted by national risk adjusters to reflect each enrollee's
demographic characteristics (table 2-30).
TABLE 2-30.--CALCULATION OF RISK PLAN MONTHLY PAYMENT ON BEHALF OF SELECTED BENEFICIARIES, LOS ANGELES COUNTY,
CALIFORNIA, 1998
----------------------------------------------------------------------------------------------------------------
Part A Part B
(Part A risk + (Part B risk = Total
rate adjuster) rate adjuster) payment
----------------------------------------------------------------------------------------------------------------
Male \1\ ($364.81 0.65) + ($270.19 0.80) = $453.28
Female \2\ ($364.81 2.10) + ($270.19 1.65) = $1,211.91
----------------------------------------------------------------------------------------------------------------
\1\ Age 68, non-Medicaid, noninstitutionalized, nonworking.
\2\ Age 87, non-Medicaid, institutionalized, nonworking:
Note.--The monthly payment for an average beneficiary in Los Angeles County is $635.00.
Source: Medicare Payment Advisory Commission analysis.
The risk adjusters currently in use reflect the relative
level of program spending for groups defined on the basis of
age, sex, institutional status, Medicaid enrollment, and
working aged with employment-based insurance coverage (table 2-
31). Disability and ESRD status are handled through separate
rates for each county (or State, in the case of ESRD), rather
than as a national risk adjuster.
The Physician Payment Review Commission, among others, has
presented evidence of significant risk selection in the
Medicare managed care program. For the 6 months before
enrolling in managed care plans, beneficiaries' costs were 37
percent below those of a fee-for-service comparison group. In
the 6 months after disenrolling, beneficiaries' costs were 60
percent above the fee-for-service average (chart 2-7). The
current system does a poor job of risk adjustment because the
risk adjusters used provide little information about
beneficiaries' health and explain only 1 percent of the
variation in their health case costs.
TABLE 2-31.--MEDICARE RISK ADJUSTERS FOR AGED BENEFICIARIES, 1998
----------------------------------------------------------------------------------------------------------------
Noninstitutional
-----------------------------
Sex and age group Institutional Non- Working
Medicaid Medicaid aged
----------------------------------------------------------------------------------------------------------------
Part A--hospital insurance:
Male:
85 and over............................................... 2.25 2.60 1.35 0.90
80-84..................................................... 2.25 2.35 1.20 0.80
75-79..................................................... 2.25 1.95 1.05 0.70
70-74..................................................... 2.25 1.50 0.85 0.45
65-69..................................................... 1.75 1.15 0.65 0.40
Female:
85 and over............................................... 2.10 2.10 1.20 0.80
80-84..................................................... 2.10 1.70 1.05 0.70
75-79..................................................... 2.10 1.45 0.85 0.55
70-74..................................................... 1.80 1.05 0.70 0.45
65-69..................................................... 1.45 0.80 0.55 0.35
Part B--supplementary medical insurance:
Male:
85 and over............................................... 1.95 1.70 1.15 1.00
80-84..................................................... 1.95 1.70 1.15 0.90
75-79..................................................... 1.95 1.55 1.10 0.80
70-74..................................................... 1.80 1.35 0.95 0.65
65-69..................................................... 1.60 1.10 0.80 0.45
Female:
85 and over............................................... 1.65 1.25 1.00 0.85
80-84..................................................... 1.65 1.25 0.95 0.75
75-79..................................................... 1.65 1.25 0.95 0.70
70-74..................................................... 1.65 1.15 0.85 0.55
65-69..................................................... 1.50 1.05 0.70 0.40
----------------------------------------------------------------------------------------------------------------
Note.--Values indicate the multiplier used for a beneficiary with a particular set of characteristics; average
beneficiary has a multiplier of 1.00. A separate set of risk adjusters is used for disabled beneficiaries.
Source: Health Care Financing Administration.
By March 1, 1999, the Secretary must submit to Congress a
report on a method of risk adjustment of payment rates that
accounts for variations in per capita costs based on health
status. The Balanced Budget Act calls for the new risk
adjustment methodology to be in effect for payments to plans as
of January 1, 2000.
CHART 2-7. COSTS AS A PERCENTAGE OF AVERAGE MEDICARE SPENDING PER
BENEFICIARY
Source: Physician Payment Review Commission (now Medicare
Payment Advisory Commission) analysis of 1989-94 Medicare
claims and denominator files, 5-percent sample.
Unresolved issues for plan payment
As policy changes in the method of paying plans are
implemented, several unresolved issues remain. Some issues are
relatively technical, such as the absence of any alternative
mechanism to achieve budget neutrality in a situation where all
rates are reduced to floors or minimum updates. Other issues,
among those described above, were not resolved by the Balanced
Budget Act of 1997. They include adjustments to local rates for
Medicare payments to disproportionate-share hospitals or for
services beneficiaries receive from Veterans Administration and
Department of Defense facilities, and basing payment on
geographic areas larger than counties. Longer range issues
include determining whether adequate progress toward reducing
variation in rates will result from the rules in the Balanced
Budget Act.
County Payment Rates, 1997-2003
The payment rates used in 1998 are the first to be
calculated under the new rules established by the Balanced
Budget Act. Based on HCFA's projection of overall Medicare
growth, the national growth percentage for 1998 is set to be
2.6 percent for aged beneficiaries. This amount results from an
estimated 3.4 percent Medicare spending growth, less the 0.8-
percent reduction required by the Balanced Budget Act. The
carve-out for graduate medical education spending for an
average county is about 0.8 percent, so the effective average
increase in county payment rates, before floors and minimum
increases are applied, is 1.8 percent.
After applying the floors and minimum increases, the
average county payment rate (weighted by beneficiaries) is
$484, about a 3-percent increase over 1997. The difference
between this average and the 1.8-percent increase expected from
the formula results from the Balanced Budget Act requirement to
create floor rates and minimum increases. The fact that the
1.8-percent increase is below the minimum increase of 2 percent
also illustrates why the budget-neutrality requirement could
not be met for 1998 rates.
The increases from 1997 to 1998 would have been even lower
under the policy that was replaced by the Balanced Budget Act.
This is because the Balanced Budget Act did not provide for a
correction for HCFA's overprojection of 1997 spending a year
earlier. Had such a correction been applied, the 1997 base
rates used as the starting point for the calculation of 1998
monthly county rates would have been lower by an average of
about $10. After the statutory reduction, the effective
national growth percentage would then have been 0.3 percent
instead of 2.6 percent.
As noted above, each county rate is set at the greatest of
the amounts calculated under three rules--its blended rate,
minimum increase, and floor. Because of the low national growth
percentage in 1998, no county rate will be set by the blended
rate rule. About one-third of all counties are set at the
floor, with the rest receiving the minimum 2-percent increase
(chart 2-8).
Sample calculations show how the rates are determined
(table 2-32). After the initial calculation of rates under the
three rules (blended, floor, and minimum increase) but before
budget neutrality, the rates are set simply at the highest of
these three amounts. Among the sample counties shown in the
table, there are two counties whose rates are determined by
each rule. The budget-neutrality adjustment only applies to the
counties whose rates are set by the blended-rate rule (Hennepin
and Fairfax Counties in table 2-32) because rates may never
fall below the rates set by the other two rules. The 1998 rates
for such counties were reduced below where they would have been
by about 1-2 percent because of this adjustment. Had the
budget-neutrality adjustment been smaller, then rates for these
counties would have been set between the blended and minimum-
increase amounts.
Geographic variations
Large variation in county payment rates was one of the
motivating forces behind some of the changes enacted in the
Balanced Budget Act. The establishment of a floor rate removed
some of the greatest variation. The combination of the low
national growth percentage and the budget-neutrality rule,
however, delayed the application of the blended-rate rule. Only
when county rates are more heavily based on the national
component of the blend will more of the county variation be
reduced.
CHART 2-8. RULE USED TO DETERMINE COUNTY PAYMENT RATES, BY YEAR, 1998-
2003
Note: Analysis based on actual rates for 1998 and simulated
rates for 1999-2003, using dynamic enrollment growth
assumptions.
Source: Medicare Payment Advisory Commission simulations of
payment rates under the Balanced Budget Act of 1997.
TABLE 2-32.--CALCULATION OF MONTHLY PAYMENT RATES FOR SAMPLE COUNTIES, 1998
----------------------------------------------------------------------------------------------------------------
Calculation under separate Determination of rate
rule ------------------------
1997 ----------------------------- Actual
County actual Before rate (after
rate Minimum Blend budget budget
update Floor (90:10) neutrality neutrality
adjustment adjustment)
----------------------------------------------------------------------------------------------------------------
Los Angeles, CA................................. 622.55 635.00 367.00 625.92 635.00 635.00
Dade, FL........................................ 748.23 763.19 367.00 737.10 763.19 763.19
Hennepin, MN.................................... 405.63 413.74 367.00 419.34 419.34 413.74
Fairfax, VA..................................... 400.54 408.55 367.00 417.44 417.44 408.55
Arthur, NE...................................... 220.92 225.34 367.00 244.89 367.00 367.00
Presidio, TX.................................... 229.70 234.29 367.00 255.58 367.00 367.00
----------------------------------------------------------------------------------------------------------------
Note.--Before budget-neutrality adjustments are applied, county rates are determined by the highest of the three
rates calculated under separate rules. In 1998, the budget-neutrality adjustment lowered all blended rates so
that they were no higher than the minimum update or floor rates. As a result, rates for Hennepin and Fairfax
Counties were set by the minimum update rule instead of the blend rule.
Source: Medicare Payment Advisory Commission analysis.
Across the counties, there is a substantial range above
and below the average payment rate (chart 2-9). For 1997, the
lowest rates in the country were $221 in two rural Nebraska
counties (Arthur and Banner). The highest rates in 1997 were
$767 and $748, respectively, in Richmond County, New York
(Staten Island), and Dade County, Florida (Miami). In 1998 the
floor rate brings the national minimum rate (excluding
territories) up to $367, while the highest rate (Richmond
County) rises to $783. Despite these extreme values, about half
of all beneficiaries live in counties with 1998 rates between
about $400 and $540.
CHART 2-9. MEAN, MINIMUM, AND MAXIMUM COUNTY PAYMENT RATES, BY
LOCATION, 1997-98
Note: The tick mark on each bar indicates the mean county
payment rate (weighted by the number of beneficiaries in each
county). The length of each bar represents the range of payment
rates.
Source: Physician Payment Review Commission (now Medicare
Payment Advisory Commission) analysis of payment rates under
the Balanced Budget Act of 1997.
Regionally, payment varies considerably, with higher
payments generally in more urbanized areas (chart 2-9). The
1998 floor mostly affects rural counties, but it raises rates
for some urban counties as well. Since all counties not
affected by the floor get the same increase for 1998 (that is,
2 percent), payment rates will continue to be higher in urban
areas and lowest in the most rural areas. The average payment
in central urban counties is more than $100 above that for
other urban counties and nearly $160 above that for rural
counties. The range within each of the urban-rural categories
remains substantial as well.
Payment rates range widely across markets as well as
across counties. For example, plans serving southern Florida
will be paid an average of $675 per month in 1998, compared
with $409 in Minneapolis-St. Paul (table 2-33). Moreover,
within some markets that encompass more than one county, the
range of monthly payment rates across counties is $200 or
greater. Plans competing in the same market may receive
substantially different payments for beneficiaries who live on
opposite sides of a county boundary. These differing payment
levels appear to affect plan participation and enrollment. The
Balanced Budget Act will eventually reduce some of this
variation, but generally not until increases are high enough to
support blended rates. Among the largest markets, the only
significant compression of variation for 1998 occurs in
Minneapolis-St. Paul, where many suburban counties have rates
raised to the $367 floor.
TABLE 2-33.--MONTHLY PAYMENT RATES FOR AGED ENROLLEES IN SELECTED AREAS,
1998
------------------------------------------------------------------------
Payment
County rate
------------------------------------------------------------------------
Washington, DC-Maryland-Virginia:
Prince George's County, MD............................... $614
Washington, DC........................................... 596
Montgomery County, MD.................................... 501
Arlington County, VA..................................... 460
Falls Church City, VA.................................... 456
Alexandria City, VA...................................... 456
Fairfax City, VA......................................... 425
Loudoun, VA.............................................. 422
Fairfax County, VA....................................... 409
Minneapolis-St. Paul, MN metro area:
Ramsay (St. Paul)........................................ 431
Hennepin (Minneapolis)................................... 414
Anoka.................................................... 403
Dakota................................................... 387
Washington............................................... 373
Carver................................................... 367
Scott.................................................... 367
Southern Florida:
Dade (Miami)............................................. 763
Broward (Ft. Lauderdale)................................. 663
Palm Beach............................................... 577
Southern California:
Los Angeles.............................................. 635
Orange................................................... 584
San Bernardino........................................... 544
Riverside................................................ 526
------------------------------------------------------------------------
Source: Health Care Financing Administration.
Impact of reforms beyond 1998
This section uses the results of simulations conducted by
MedPAC to assess the impact of the new payment rules
established by the Balanced Budget Act. These simulations
incorporate the published 1998 rates and simulated rates from
1999 to 2003, using CBO's assumptions about spending growth to
set the annual national growth percentage. Dynamic assumptions
about enrollment growth are incorporated into these
simulations, that is, it is assumed that enrollment will
respond to changes in payment rates leading to a different
distribution of plan enrollment across the United States
(regardless of how much the level of enrollment changes).
Source of payment rate determination.--Based on
projections by MedPAC, it appears that there may be no counties
with rates set by the blended rate rule in 1999, the same
result as in 1998. This result assumes that the projected
national growth percentage for 1999 will be too low to achieve
budget neutrality and that at least some enrollment is shifting
to counties affected by the floor rate or the minimum increase.
Starting in 2000, the national growth percentage is
projected to be high enough to pay for increased enrollment in
counties where rates have been raised to the floor or minimum
increase and still support some higher blended rates. By 2003,
when all transitions are complete, over 80 percent of all
counties are projected to be at their blended rates, with 2
percent raised to the minimum increase and 16 percent raised to
the floor rate (chart 2-8).
Once the various phased-in changes (blended percentages
and phasing out of GME payments) are complete in 2003, the
projection is that 16 percent of counties will remain at floor
rates unless the Congress makes further changes in the payment
methodology. This result occurs because floor rates and blended
rates grow each year by the same amount.
The small number of counties that are still affected by
the minimum increase in 2003 (2 percent of all counties) should
in the future receive blended rates, given no further shift in
the blend proportions. As long as the national growth
percentage is greater than 2 percent, blended rates for these
counties will eventually rise above the minimum increase.
Reducing volatility in payments.--The Balanced Budget Act
effectively eliminates the year-to-year volatility inherent in
county payment rates under the old rules. In 1998, the $367
floor rate caused volatility in the sense that rates for many
counties rose dramatically to achieve that floor. But, from
1999 to 2003, as various changes are phased in, county rates
generally will increase by a minimum of 2 percent each year and
a maximum of about 2 percentage points above the national
growth percentage that year. The differences among counties
reflect the relative magnitudes of such factors as the amount
of GME payments being excluded and the input-price adjustments
(for example, hospital wages). After 2003, all county rates
will increase uniformly by the national growth percentage
(except for those few counties still affected by the minimum-
increase rule).
Reducing variation in payments.--The rate system in the
Balanced Budget Act will reduce the amount of variation
occurring under current law (chart 2-10). Although central
urban counties remain on average substantially above the
national average and all other types of counties remain below,
the range is reduced over the first 5 years of new rates. In
the first year, the only source for reducing variation is the
use of the floor rate, since all other county rates are
increased by a uniform 2 percent. Floor rates apply to about
half of the most rural counties and to decreasing proportions
of counties in the more urban categories.
CHART 2-10. EFFECT OF NEW RATES ON REGIONAL VARIATION, USING DYNAMIC
ENROLLMENT GROWTH ASSUMPTIONS, 1997-2003
Note: Analysis based on actual rates for 1998 and simulated
rates for 1999-2003.
Source: Medicare Payment Advisory Commission simulations of
payment rates under the Balanced Budget Act of 1997.
At the individual county level, changes can be more
dramatic (chart 2-11). As a proportion of the national average
rate, those rural counties paid at very low rates (for example,
Arthur County, Nebraska) will get a big increase the first
year, then stay at just under 80 percent of the national
average. Counties with historically high rates (for example,
Richmond County, New York) will get only a 2-percent increase
each year and thus fall from nearly two-thirds above the
national rate to only 50 percent above it. Other counties
converge toward rates driven by local input-price variations.
The degree to which variation is reduced is influenced by
at least two factors. First, the low national growth
percentages projected for Medicare+Choice combined with the
guaranteed 2-percent increase limit the influence of the
blended rates. Second, stopping the blended rates at a 50-50
blend, together with the appropriate application of input-price
adjustments, limits the potential for convergence toward a
national rate.
CHART 2-11. EFFECT OF NEW RATES ON COUNTY VARIATION, 1997-2003, USING
DYNAMIC ENROLLMENT GROWTH ASSUMPTIONS
Note: Analysis based on actual rates for 1998 and simulated
rates for 1999-2003.
Source: Medicare Payment Advisory Commission simulations of
payment rates under the Balanced Budget Act of 1997.
Adjusted Community Rate (ACR)
The adjusted community rate mechanism is a process through
which health plans determine the minimum amount of Medicare
noncovered benefits they are required to provide to Medicare
enrollees and the premiums they are permitted to charge for
those benefits. This system, which has been in place for the
Risk Contract Program, will continue with only a few changes
under Medicare+Choice. HCFA, however, is considering
administrative changes to this system.
No later than May 1 of each year, each Medicare+Choice
organization is required to submit to the Secretary for each of
its Medicare+Choice plans specific information about premiums,
cost sharing, and additional benefits (if any). Under
Medicare's rules, a plan may not earn a higher return from its
Medicare business than it does in the commercial market. The
Secretary will be required to review this information and
approve or disapprove the premiums, cost-sharing amounts, and
benefits. The Secretary will not have the authority to review
the premiums for either MSA plans or private fee-for-service
plans.
Beneficiaries are expected to share in any projected cost
savings between Medicare's capitation payment to a plan and
what it would cost the plan to provide Medicare benefits to its
commercial enrollees. To accomplish this, a plan must provide
additional benefits and reduced cost sharing to its enrollees.
A plan is also permitted to offer extra benefits, known as
supplemental benefits, beyond those required by the ACR
mechanism.
The ACR process requires a plan to use its costs and
revenues from its commercial business to estimate the cost of
providing services to Medicare enrollees. These costs are
adjusted to reflect differences between Medicare and commercial
enrollees with regard to both utilization of services and the
range of covered benefits. The plan's commercial revenues are
used to calculate an allowance for administrative costs and
profits.
As with medical costs, the allowance for administrative
costs and profits for Medicare-covered services provided to
Medicare enrollees is calculated by applying the ratio of
administrative to direct patient care expenses for commercial
enrollees. This provides plans with expected profits on
Medicare enrollees that probably are comparable in percentage
terms to profits on commercial members, but substantially
larger in terms of dollars per member.
In the first year of Medicare participation, plans may use
utilization factors provided by HCFA or obtained from other
sources. In subsequent years, plans are supposed to use factors
based on their own utilization data. Because the Balanced
Budget Act drops the existing requirement that at least half of
a plan's enrollment be commercial (the 50-50 rule), procedures
will be created to calculate the ACR for plans without such
enrollment.
Required Noncovered Services
Plans must provide additional benefits or reduced premiums
to Medicare enrollees valued at the difference between the
projected cost of providing Medicare services and expected
revenue for Medicare enrollees. HCFA calls this difference
between expected Medicare costs and revenues ``savings.'' These
savings are distributed to Medicare enrollees in the form of
additional benefits either as services or as reduced cost
sharing (table 2-34).
Plans calculate the cost of providing Medicare noncovered
services to make up this difference between their expected
revenues and costs in the same way they determine their costs
of providing Medicare covered services. They choose which
additional benefits to offer. The total cost of these
additional benefits must at least equal the ``savings'' on
Medicare-covered services (table 2-34).
Allowable cost sharing
Plans are permitted to charge Medicare enrollees the
expected cost of additional benefits (that is, Medicare
noncovered services beyond the amount required to spend the
savings) plus the national average amount of beneficiary cost
sharing for Medicare-covered services. Plans can collect these
payments through a combination of copayments and premiums.
Premiums cannot exceed the difference between total allowable
beneficiary cost sharing and expected copayments. Plans may
choose to waive part or all of this allowable premium for all
enrollees. Thus, plans report on the ACR proposal the maximum
premium that will be charged to any Medicare enrollee (table 2-
34).
TABLE 2-34.--CALCULATION OF ADJUSTED COMMUNITY RATE AND MAXIMUM MONTHLY
PREMIUM USING NATIONAL AVERAGE AMOUNTS, 1995
------------------------------------------------------------------------
Weighted
Component average
------------------------------------------------------------------------
Cost of covered benefits and administrative overhead........ $433.14
Less average fee-for-service cost sharing............... -65.08
-----------
Adjusted community rate (ACR)....................... 368.06
===========
Average Medicare payment rate............................... 409.97
Less ACR................................................ -368.06
-----------
``Savings''......................................... 41.91
===========
Additional benefits......................................... 35.02
Net waived cost sharing..................................... +51.59
Less ``savings''........................................ -41.91
-----------
Maximum monthly premium............................. 44.70
===========
Monthly premium to be charged............................... 17.65
Waived monthly premium...................................... 27.05
------------------------------------------------------------------------
Note.--Weighted averages are based on the number of enrollees in each
risk plan.
Source: Physician Payment Review Commission (now Medicare Payment
Advisory Commission) analysis of adjusted community rate proposal data
from the Health Care Financing Administration.
Differences for private fee-for-service and MSA plans
For private fee-for-service plans, most of the same rules
apply as for other Medicare+Choice plans. For example, they
must provide additional benefits to beneficiaries in the amount
of the savings calculated through the ACR. Allowable cost
sharing (not including premiums) cannot exceed the comparable
cost sharing in traditional Medicare. But there is no limit on
the additional premium charged by these plans. For MSA plans,
there are no restrictions provided through the ACR process.
These plans must submit information on premiums charged, but no
review or approval by the Secretary is required.
Additional Benefits and Premiums in the Medicare Risk Program
Although plans may charge premiums to enrollees, about
two-thirds of plans do not do so for their basic package (chart
2-12). These are commonly referred to as zero-premium plans.
The proportion of zero-premium plans increased by about one-
third in the past 2 years. One in nine plans charges a monthly
premium of over $40 for their basic package. (Plans may charge
higher premiums for high-option packages that include more
extensive benefits.)
CHART 2-12. DISTRIBUTION OF MEDICARE RISK PLANS BY PREMIUMS CHARGED,
1995 AND 1997
Source: Physician Payment Review Commission (now Medicare
Payment Advisory Commission) analysis of Medicare Managed Care
Contract Reports.
At least two reasons explain why a risk plan may offer a
zero-premium plan. The first is that Medicare's capitation
payment to a plan exceeds its costs (a ``savings'' in the terms
of the ACR) and the plan chooses to add only enough benefits to
match the savings. In this case, no premium would be allowable
under the ACR rules. The second is that a plan is allowed to
charge a premium to cover the cost of the total benefits
offered, but the plan waives its premium to stay competitive in
its local market. In the latter case, the plan may not be at
risk of taking a loss on its Medicare business because profits
and overhead based on commercial rates are included in its
allowed costs under the ACR calculation.
Nearly all plans offer some additional benefits to
enrollees beyond those in traditional Medicare (chart 2-13).
These include both required benefits offered to meet ACR rules
and optional benefits the plan chooses to offer. Benefits
widely available include routine physicals, eye exams, and
immunizations. Two-thirds of plans offer some outpatient drug
coverage as an additional benefit in their basic package. In
addition, about half of plans offer a high-option package that
may include more extensive benefits.
The ACR data allow analysis of patterns in the
availability of additional benefits. Risk plans with the most
generous packages in 1996 served areas having above-average
payment rates. They also expected to incur below-average costs
in providing Medicare benefits (table 2-35). For example, plans
that offered the richest packages served counties where payment
rates were 17 percent above average, and they projected costs 7
percent below average. By contrast, plans offering the fewest
extra benefits anticipated below-average payment rates and
projected costs 3 percent above average.
CHART 2-13. PERCENTAGE OF MEDICARE RISK PLANS OFFERING ADDITIONAL
BENEFITS IN THEIR BASIC OPTION PACKAGE, JUNE 1995 AND JUNE 1997
Source: Physician Payment Review Commission (now Medicare
Payment Advisory Commission) analysis of Medicare Managed Care
Contract Reports, June 1995 and June 1997.
At the market level, similar patterns appear. In Miami,
which has one of the highest payment rates in the country,
plans had an average Medicare savings of over $100 per month
for 1995, meaning that they were required to provide this
amount to beneficiaries in benefits (table 2-36). Including
optional benefits, they provided a total of over $125 in
benefits for no premium. Where Medicare payment rates were
lower, plans typically provided fewer benefits.
TABLE 2-35.--CHARACTERISTICS OF MEDICARE RISK PLANS RANKED BY VALUE OF
EXTRA BENEFITS, 1996
------------------------------------------------------------------------
Average
--------------------------------------
Decile Plan
Standardized payment Cost
extra benefits index index
------------------------------------------------------------------------
All.............................. $ 77 1.00 1.00
10 (highest)..................... 148 1.17 0.93
9............................... 111 1.06 0.96
8............................... 99 1.03 0.99
7............................... 90 1.03 0.96
6............................... 82 1.02 1.01
5............................... 73 1.06 1.09
4............................... 60 0.92 1.04
3............................... 51 0.92 1.02
2............................... 39 0.91 0.97
1 (lowest)...................... 15 0.87 1.03
------------------------------------------------------------------------
Note.--Extra benefits are the sum of any savings and the amount of
waived premium, standardized by the Medicare hospital wage index for
the risk plan's service area. They are expressed as per member per
month values. The decile averages are for 10 equal-sized groups of
plans, ranked by the value of extra benefits.
Source: Prospective Payment Assessment Commission (now Medicare Payment
Advisory Commission) analysis of adjusted community rate proposal data
from the Health Care Financing Administration.
TABLE 2-36.--RISK-PLAN BENEFITS AND MONTHLY PREMIUMS BASED ON ADJUSTED COMMUNITY RATE PROPOSALS BY MARKET, 1995
[Dollars per month]
----------------------------------------------------------------------------------------------------------------
Number Medicare Required Optional Premium
Primary metropolitan statistical area of payment benefit benefit charged
plans value value
----------------------------------------------------------------------------------------------------------------
United States.................................................. 174 $382.27 $25.17 $56.67 $22.04
Boston......................................................... 8 360.06 4.09 71.56 47.84
Chicago........................................................ 3 418.79 24.45 38.31 0.00
Los Angeles.................................................... 13 462.88 68.83 37.18 6.08
Miami.......................................................... 8 488.65 106.27 20.75 0.00
Minneapolis.................................................... 3 333.93 0.00 75.89 60.97
New York....................................................... 5 465.95 53.37 46.77 8.80
Philadelphia................................................... 6 434.12 19.30 66.85 10.00
Portland, OR................................................... 7 315.07 9.38 64.52 46.00
San Francisco.................................................. 8 390.51 21.50 56.96 20.25
Nonmetropolitan California..................................... 6 369.00 14.43 60.19 31.08
Nonmetropolitan Florida........................................ 5 353.36 12.46 73.61 9.80
Nonmetropolitan Pennsylvania................................... 3 402.32 6.70 62.18 18.14
----------------------------------------------------------------------------------------------------------------
Note.--Required benefit value is equal to Medicare savings in the adjusted community rate proposal; optional
benefit value is equal to the maximum monthly premium. Values are unweighted averages of all Medicare risk
plans.
Source: Physician Payment Review Commission (now Medicare Payment Advisory Commission) analysis of 1995 adjusted
community rate proposal data from the Health Care Financing Administration.
In Minneapolis, for example, plans' revenues matched their
adjusted costs, so that beneficiaries received no required
additional benefits in 1995. Plans offered $76 in optional
benefits, but charged a $61 premium.
Beneficiary Protections
Risk contract plans currently operating under section 1876
of the Social Security Act must comply with requirements
designed to limit beneficiaries' financial liability and to
assure beneficiaries of certain rights and remedies. Most of
these requirements have been included and expanded in the new
Medicare+Choice Program. A few of the areas in which there are
significant differences between the risk plan requirements and
those for Medicare+Choice relate to beneficiary liability,
access to emergency medical services, and quality assurance. In
addition, the Medicare+Choice requirements largely incorporate
procedures for expedited review of coverage denials that were
issued by HCFA in final regulations on April 30, 1997.
Beneficiary financial liability
Enrollees currently in risk plans pay the part B premium
and have the same balance billing protections as beneficiaries
under traditional Medicare, so long as they do not obtain
unauthorized services from a provider that is not part of the
plan's network. Under traditional (fee-for-service) Medicare,
for example, hospitals must accept Medicare's payment as
payment in full for inpatient services except for required
beneficiary cost sharing. Similarly, participating physicians
agree to accept Medicare's payment amount as payment in full.
They can only bill patients for the coinsurance and any unmet
deductible. Physicians who are not ``participating'' physicians
in the Medicare Program, and who do not accept Medicare's
payment as payment in full, can bill beneficiaries only 15
percent above Medicare's recognized payment amount. (Medicare's
recognized payment for these physicians is actually 95 percent
of the fee schedule amount for the service.) The amount in
excess of Medicare's recognized payment amount is known as
``balance billing.'' Balance billing limits do not apply to
certain services (for example, durable medical equipment).
In the new program, all Medicare+Choice enrollees will
continue to pay the part B premium. Additional beneficiary out-
of-pocket liabilities will differ depending on the type of
Medicare+Choice plan the individual elects (table 2-37). The
rules for beneficiary financial liability apply to the basic
benefit package and required additional benefits. The basic
benefit package includes benefits required under traditional
Medicare. Medicare+Choice plans might also have to cover
additional benefits as part of the basic package if their
capitation payment exceeds the estimate of the amount it would
cost them to cover Medicare's benefits for a commercial
population (as described in the section on the adjusted
community rate).
TABLE 2-37.--BENEFICIARY COST SHARING AND PROVIDER REIMBURSEMENT UNDER MEDICARE+CHOICE PLANS FOR BASIC BENEFIT PACKAGE
--------------------------------------------------------------------------------------------------------------------------------------------------------
Item Coordinated care plan Private fee-for-service plan MSA plan
--------------------------------------------------------------------------------------------------------------------------------------------------------
Beneficiary out-of-pocket costs Premium and actuarial value of other cost The actuarial value of the cost sharing A deductible of no more than
(premium plus any deductibles, sharing (for example, coinsurance) on (not including the premium) on average $6,000 (indexed for
coinsurance, and copayments). average cannot exceed the actuarial cannot exceed the actuarial value of inflation). Amounts above
value of the cost sharing applicable on cost sharing on average under traditional Medicare
average under traditional Medicare. traditional Medicare. payments (including
coinsurance) do not have to
be counted toward
satisfying the deductible.
Beneficiary liability for balance Beneficiaries are not liable for any Contract providers can bill 15 percent
billing. balance billing amounts. above the private fee schedule (or other
provider reimbursement amount).
Balance billing is allowed
Medicare+Choice plan payment Contract providers are paid fees or rates
obligation to physicians, that are privately negotiated by the
hospitals, and other providers. plan with them.
Contract providers are paid private fees
Above the deductible, plan
Medicare+Choice payments received by Contract providers receive payments based
physicians, hospitals, and other on a privately negotiated fee schedule.
providers.
Contract providers receive payments based
Providers receive payments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Congressional Research Service and Medicare Payment Advisory Commission analysis of provisions in the Balanced Budget Act of 1997.
Enrollees in Medicare+Choice coordinated care plans are
likely to experience the least amount of out-of-pocket costs
(compared to other Medicare+Choice options). For them, the
amount of cost sharing per enrollee (including premium) for
covered services can be no more than the actuarial value of the
deductibles, coinsurance, and copayments under traditional
Medicare. Neither a contracting nor a noncontracting physician,
hospital, or other provider can impose balance billing charges
on coordinated care enrollees. Coordinated care plans will have
to pay noncontracting providers at least the same amount they
would have received if the enrollee was in traditional
Medicare, including allowed balance billing amounts.
The rules for private fee-for-service plans and MSA plans
are different (table 2-37). Generally, contract providers will
be allowed to bill enrollees in private fee-for-service plans
up to 15 percent above the fee schedule the plan uses. In
contrast to traditional Medicare, this privilege extends to all
categories of providers, including hospitals. The term
``contract provider'' refers to providers who have entered into
an explicit agreement with a plan establishing payment amounts
for services rendered to the plan's enrollees. A provider can
be deemed to have a contract with a Medicare+Choice private
fee-for-service plan if, before furnishing services to the
enrollee of such a plan, the provider: (1) received a notice of
the individual's enrollment in a private fee-for-service plan
and had been informed of the terms and conditions of the plan's
payment or (2) if the provider was given reasonable opportunity
to obtain such information. For MSA plans, unlimited balance
billing is allowed, regardless of whether the deductible has
been met. Plans could determine whether they count these
amounts toward the deductible.
Access to emergency services
Each Medicare+Choice plan must ensure access to emergency
services for emergency medical conditions. The so-called
prudent layperson definition will apply. This definition states
that an emergency medical condition is one manifesting itself
by acute symptoms of sufficient severity (including severe
pain) that a prudent layperson, who possesses an average
knowledge of health and medicine, could reasonably expect the
absence of immediate medical attention to result in: (1)
placing the health of the individual in serious jeopardy (and
in case of a pregnant women, her health or that of her unborn
child); (2) serious impairment to bodily functions, or (3)
serious dysfunction of any bodily organ or part.
Quality standards
In the current risk program, a risk plan is required to
have arrangements for an ongoing quality assurance program that
stresses health outcomes and provides review by physicians and
other health care professionals of the process followed in
providing health services. External review is conducted by a
peer review organization (PRO) or similar organization that
contracts with the Secretary to do review of specified Medicare
services. Such reviews cover both inpatient and outpatient
care. The Secretary also has the right to inspect or otherwise
evaluate the quality, appropriateness, and timeliness of
services provided and the facilities of the organization when
there is reasonable evidence of some need for inspection.
In the new program, Medicare+Choice organizations and
plans must have a quality assurance program that: (1) stresses
health outcomes and provides data permitting measurement of
outcomes and other indices of quality; (2) monitors and
evaluates high volume and high risk services and the care of
acute and chronic conditions; (3) evaluates the continuity and
coordination of care that enrollees receive; (4) is evaluated
on an ongoing basis as to its effectiveness; (5) includes
measures of consumer satisfaction, and (6) provides the
Secretary with certain information to monitor and evaluate the
plan's quality. Only coordinated care plans (and not private
fee-for-service and nonnetwork MSA plans) will have to comply
with other quality assurance requirements, such as providing
for internal peer review, establishing written protocols for
utilization review, and establishing mechanisms to detect under
and over utilization.
Most Medicare+Choice organizations must obtain external
review of the quality of their inpatient and outpatient
services and of their response to written complaints about poor
quality of care from an independent quality review and
improvement organization (such as a PRO). In addition, the
external review requirement does not apply to private fee-for-
service plans and nonnetwork MSA plans that do not have
utilization review programs. However, the Secretary is required
to ensure that the external review activities do not duplicate
the review activities conducted as part of the accreditation
process. Also, the Secretary may waive the external review
requirement if she determines that the organization has
consistently maintained an excellent record of quality
assurance and compliance with other Medicare+Choice
requirements. Plans may be deemed to have met all these
requirements if they are accredited by an organization whose
accreditations are no less stringent than Medicare's.
Grievances and appeals
A Medicare+Choice organization must have meaningful
procedures for hearing and resolving grievances between the
organization and enrollees. It also must maintain a process for
determining whether an individual enrolled within the plan is
entitled to receive a health service and the amount (if any)
that the individual must pay for the service. These
determinations must be made on a timely basis, appropriate to
the urgency of the situation. The explanation of the
determination must be in understandable language and state the
reasons for the denial. A description of the reconsideration
and appeals processes must be provided.
Upon request by the enrollee, the organization generally
will have to provide for reconsideration of a determination.
The reconsideration must occur within a time period specified
by the Secretary, but (except where an expedited process is
appropriate) no longer than 60 days after receipt of the
request. A reconsideration of a denial of coverage based on
lack of medical necessity must be made by a physician with
appropriate expertise who was not involved in the initial
determination.
An enrollee in a Medicare+Choice plan or a physician will
be able to request an expedited determination or
reconsideration. If the request is made by a physician, a
Medicare+Choice organization is required to expedite the
determination or reconsideration if the request indicates that
the normal time frame for making the determination or
reconsideration could seriously jeopardize the life or health
of the enrollee or the enrollee's ability to regain maximum
function. The time limits for the organization to respond to
the request will be established by the Secretary but must be
within 72 hours of receipt of the request.
Plan Standards
Current program standards and contractor requirements
Under the existing program, managed care organizations
seeking to enroll Medicare beneficiaries must meet standards
that are specified under section 1876 of the Social Security
Act. These include minimum enrollment requirements (they
generally must have at least 5,000 members; those serving
primarily rural areas may have 1,500 members). In addition, the
entity seeking the Medicare contract must be organized under
State law and be a federally qualified HMO or a CMP. The entity
must provide physicians' services primarily through physicians
who are either employees or partners of the organization or
through contracts with individual physicians or physician
groups. The entity also has to assume full financial risk on a
prospective basis for Medicare services, except that it may
obtain stop-loss coverage and other insurance for catastrophic
and other specified costs. Finally, it has to make provision
for protection against the risk of insolvency. Provider-
sponsored organizations (PSOs) that are not organized under the
laws of a State and are neither a federally qualified HMO or
CMP are not eligible to contract with Medicare under the Risk
Contract Program.
Current contracts with risk plans are for 1 year, and may
be made automatically renewable. However, the contract may be
terminated by the Secretary at any time (after reasonable
notice and opportunity for a hearing) if the organization fails
substantially to carry out the contract, carries out the
contract in a manner inconsistent with the efficient and
effective administration of Medicare HMO law, or no longer
meets the requirements specified for Medicare HMOs. The
Secretary also has authority to impose lesser sanctions.
Medicare+Choice standards
The Medicare+Choice standards and requirements draw
extensively from those under current law. Contracts with
Medicare+Choice organizations will be made for at least 1 year
and will be automatically renewable in the absence of notice by
either party of intention to terminate. Organizations must have
at least 5,000 individuals (or 1,500 in the case of a PSO) who
are receiving health benefits through the organization or at
least 1,500 individuals (or 500 in the case of a PSO) who are
receiving health benefits if the organization primarily serves
individuals residing outside of urbanized areas.
The Secretary is required to establish by regulation
standards for Medicare+Choice organizations and plans. By June
1, 1998, the Secretary must issue interim standards based on
currently applicable standards for Medicare risk plans (except
for Federal solvency standards that apply to PSOs, as described
below). In certain areas, these Federal standards will preempt
any State law or regulation with respect to Medicare+Choice
plans to the extent such law or regulation is inconsistent with
the Federal standards. State standards that are preempted are:
(1) benefit requirements, (2) requirements relating to
inclusion or treatment by providers, and (3) coverage
determinations (including related appeals and grievance
processes).
Organizational and financial requirements.--In general, a
Medicare+Choice organization must be organized and licensed
under State law as a risk-bearing entity eligible to offer
health insurance or health benefits coverage in each State in
which it offers a Medicare+Choice plan. A Medicare+Choice
organization must assume full risk for Medicare benefits on a
prospective basis. However, an organization may obtain
insurance or make other arrangements to cover: (1) aggregate
costs in excess of a level specified by the Secretary; (2)
medically necessary services provided by nonnetwork providers;
and (3) no more than 90 percent of the amount by which its
costs exceed 155 percent of its income. The organization also
may make arrangements with physicians or other health care
professionals and health care institutions to assume all or
part of the financial risk on a prospective basis for the
provision of Medicare benefits by these individuals and
entities.
Provider-sponsored organizations.--Special rules apply to
PSOs. A PSO is defined as a public or private entity that is
established or organized and operated by a health care provider
or group of affiliated providers. A PSO must provide a
substantial proportion of health care under a Medicare+Choice
contract directly through the provider or affiliated group of
providers. The affiliated providers must share, directly or
indirectly, substantial financial risk with respect to Medicare
benefits and have at least a majority financial interest in the
entity.
A PSO may seek a waiver of State law by filing an
application with the Secretary by no later than November 1,
2002. The waiver will be effective for 3 years and is not
renewable. The Secretary will have to approve the waiver
application if the State denied the PSO's licensing application
based on its failure to meet solvency requirements that are the
same as the Federal ones or that the State imposed as a
condition of approval procedures or standards regarding
solvency that were different from those applied under Federal
law. Waivers are also available if the State fails to act on a
substantially complete license application within 90 days.
A waiver granted to a PSO will depend on the
organization's compliance with all State consumer protection
and quality standards insofar as such standards: (1) would
apply to the organization if it were licensed under State law;
(2) are generally applicable to other Medicare+Choice
organizations and plans in the State; and (3) are consistent
with the Federal standards established under the act. Certain
State standards will be preempted as they apply to PSOs and
Medicare+Choice plans more generally (as described above). The
Secretary is required to report by December 31, 2001 on whether
the waiver process should be continued after December 31, 2002.
The report must consider the impact of the waiver process on
beneficiaries and the long-term solvency of Medicare.
The Secretary is required to establish, on an expedited
basis and using a negotiated rulemaking process, final
standards related to financial solvency and capital adequacy of
organizations seeking to qualify as PSOs. The target date for
publication of the resulting rule is April 1, 1998. The
negotiated rulemaking committee was appointed by the Secretary
in October 1997. In establishing the standards for PSO
solvency, the Secretary is required to take into consideration
any standards developed by the National Association of
Insurance Commissioners specifically for risk-based health care
delivery organizations.
Provider protections and requirements.--Each
Medicare+Choice organization is required to establish
reasonable procedures relating to the participation of
physicians in any Medicare+Choice plan it offers. The
procedures include: (1) providing notice of the rules regarding
participation; (2) providing written notice of adverse
participation decisions; and (3) providing a process for
appealing adverse decisions. The organization must consult with
contracting physicians regarding the organization's medical
policy, quality, and medical management procedures. The use of
gag clauses (restricting communications between providers and
their patients) is prohibited. The use of physician financial
incentive plans is also limited. (A financial incentive plan is
any compensation arrangement between the organization and a
physician or physician group that may directly or indirectly
have the effect of reducing or limiting services provided to
enrollees.)
Protections against fraud.--Like the current program,
Medicare+Choice requires contractors to comply with various
disclosure and notification requirements. Medicare+Choice
organizations are required to report financial information to
the Secretary, including information demonstrating that the
organization is fiscally sound, a copy of the financial report
filed with HCFA containing information on ownership, and a
description of transactions between the organization and
parties in interest.
The Secretary is also required to audit annually the
financial records of at least one-third of the Medicare+Choice
organizations (including data relating to utilization, costs,
and computation of the adjusted community rate). In addition,
the Secretary has the right to inspect or otherwise evaluate
the quality, appropriateness, and timeliness of services, as
well as the organization's facilities, if there is reasonable
evidence of need for such inspection. Also, the Secretary has
the right to audit and inspect any books and records that
pertain either to the ability of the organization to bear the
risk of potential financial loss or pertain to services
performed or determinations of amounts payable under the
contract. Medicare+Choice contracts must require the
organization to provide and pay for advance written notice to
each enrollee of a plan termination, along with a description
of alternatives for obtaining benefits. They must also require
that organizations notify the Secretary of loans and other
special financial arrangements made with subcontractors,
affiliates, and related parties.
Sanctions and termination of contracts.--The Secretary is
authorized to carry out specific remedies in the event that a
Medicare+Choice organization: (1) fails substantially to
provide medically necessary items and services required to be
provided, if the failure adversely affects the individual; (2)
imposes premiums on individuals that are in excess of those
allowed; (3) acts to expel or refuses to reenroll an individual
in violation of Federal requirements; (4) engages in any
practice that would have the effect of denying or discouraging
enrollment (except as permitted by law) of eligible individuals
whose medical condition or history indicates a need for
substantial future medical services; (5) misrepresents or
falsifies information to the Secretary or others; (6) fails to
comply with rules regarding physician participation; or (7)
employs or contracts with any individual or entity that has
been excluded from participation in Medicare. The remedies
include civil money penalties, and suspension of enrollment
until the Secretary is satisfied the deficiency has been
corrected and is not likely to recur. A noncomplying plan can
also be terminated from participation in Medicare+Choice if the
Secretary determines that the organization: (1) fails
substantially to carry out the contract; (2) is carrying it out
in a manner substantially inconsistent with the efficient and
effective administration of Medicare+Choice; or (3) no longer
substantially meets Medicare+Choice conditions.
Demonstrations Authorized by the Balanced Budget Act
The Balanced Budget Act authorizes several demonstrations
in conjunction with the Medicare+Choice Program. The most
important of these are a medical savings account option for
Medicare beneficiaries, a test of whether savings can be
achieved by setting payments to plans through competitive
pricing of plan premiums, and a test of the feasibility of
using enrollment brokers for Medicare+Choice.
Medical savings account (MSA) demonstration
The Balanced Budget Act authorizes a demonstration to test
the feasibility of medical savings accounts for the Medicare
Program. Although this is the first use of this system in
Medicare, the Health Insurance Portability and Accountability
Act of 1996 (Public Law 104-1) authorized an MSA demonstration
for employed individuals who are not yet eligible for Medicare.
The Medicare+Choice option is a combination of an MSA plan
providing health insurance with an annual deductible initially
limited to $6,000 and a Medicare+Choice MSA. Initial enrollment
for MSA plans will take place in November 1998 for the 1999
plan year. Under the terms of the demonstration, new
enrollments will not be allowed after 2002 or after the number
of enrollees reaches 390,000.
MSA plans will not be available to certain low-income or
disabled individuals, among others. When enrolled in an MSA
plan, individuals will not be able to have other health
insurance (including Medigap policies), with some exceptions,
and they must reside in the United States for at least half the
year. Individuals will be able to disenroll from an MSA plan
only during an annual election period or under special
circumstances.
An MSA plan will provide reimbursement for items and
services covered under parts A and B of Medicare, though only
after the enrollee incurs countable expenses equal to the
annual deductible (limited to $6,000, indexed for inflation).
Countable expenses include at least those payable by Medicare
under parts A and B as well as the deductibles, coinsurance,
and copayments the enrollee would have paid under those parts.
At a plan's option, other expenses (such as prescription drugs
or charges that exceed what Medicare would have paid) may also
be counted.
After the deductible is met, the plan will have to
reimburse at least 100 percent of parts A and B expenses (the
provider charges) or 100 percent of what Medicare would have
paid for these expenses without regard to deductibles or
coinsurance, whichever is less. Providers delivering services
to those with MSA plans will not be subject to balance billing
limitations, and the plans will not be required to pay any
balance billing charges, though some might do so (see table 2-
37).
Contributions to a Medicare+Choice MSA will be made
annually from the enrollee's capitation rate after the MSA plan
insurance premium has been paid. Contributions to accounts will
be exempt from taxes, as will account earnings. Withdrawals
will likewise not be taxed nor be subject to penalties if they
are used to pay unreimbursed enrollee medical expenses that are
deductible under the Internal Revenue Code. However, qualified
withdrawals cannot be made to pay insurance premiums other than
for long-term care insurance, continuation coverage (such as
COBRA), or coverage while an individual is receiving
unemployment compensation.
Nonqualified withdrawals will be included in the
individual's gross income for tax purposes. Withdrawals would
also be subject to an additional 50-percent penalty to the
extent they exceed the amount by which the account balance on
December 31 of the prior year is greater than 60 percent of the
MSA plan deductible for the year of withdrawal. For example, if
the account balance on December 31 were $3,500 and the plan
deductible the next year were $5,000, the amount that could be
withdrawn for nonqualified purposes without the penalty is $500
(that is, $3,500 minus 60 percent of $5,000). The 50-percent
penalty will not apply in cases of death or disability. Account
balances at death will be subject to various tax treatments
depending on their disposition.
If MSA plan enrollees switch to another Medicare+Choice
option or traditional Medicare, they will be able to maintain
their account and use it to pay qualified medical expenses. No
additional contributions will be allowable unless enrollees
elect an MSA plan again.
Medicare competitive pricing demonstration
Under its demonstration authority, HCFA attempted to
initiate a project in 1996 and 1997 to determine whether
changes in methods for paying health plans, specifically a
shift to some form of negotiated rates, would have the effect
of increasing the efficiency and economy of providing Medicare
services. HCFA's plan called for the application of competitive
bidding as a method for establishing payments for risk contract
HMOs in either the Baltimore or the Denver area. Through a
combination of court and legislative decisions, these
demonstrations have been terminated.
The Balanced Budget Act of 1997 requires the Secretary of
DHHS to establish a demonstration project under which payments
to Medicare+Choice organizations in certain areas are
determined in accordance with a competitive pricing
methodology.
The Secretary is required to designate, in accordance with
recommendations of the newly created Competitive Pricing
Advisory Committee (CPAC), up to seven Medicare payment areas
in which the project would be conducted. The Balanced Budget
Act spells out the composition and responsibilities of the
CPAC. The CPAC is required to recommend to the Secretary four
specific areas to be included. Demonstrations in two areas
should begin January 1, 1999, and in two other areas on January
1, 2000. Of the four areas recommended, three must be in urban
areas and one in a rural area. By December 31, 2001, the
committee could recommend to the Secretary the designation of
up to three additional payment areas to be included in the
project. The CPAC will terminate on December 31, 2004.
For each Medicare payment area in the project, the
Secretary will (in accordance with recommendations of the
CPAC), establish the benefit design among plans, structure the
method for selecting plans, establish methods for setting the
price to be paid to plans, and provide for the collection and
dissemination of plan information. In doing this, the Secretary
will have to consult an area advisory committee created for
that payment area. The Secretary is required to monitor the
project and report to Congress on its impact by the end of
2002.
Medicare+Choice enrollment demonstration
Under both the risk program and the Medicare+Choice
Program, plans with Medicare contracts may directly market to
and enroll Medicare beneficiaries. The Balanced Budget Act
authorizes the Secretary to conduct a 3-year demonstration
using a third-party contractor (sometimes called a broker) to
conduct Medicare+Choice plan enrollment and disenrollment
functions in an area. The demonstration must be conducted
separately from the Medicare competitive pricing
demonstrations. Before implementing the project, the Secretary
must consult with affected parties on the design of the
project, the selection criteria, and the establishment of
performance standards. The Secretary is required to establish
performance standards for accuracy and timeliness of enrollment
and disenrollment. In the event that the third-party contractor
fails to comply substantially with the performance standards,
the enrollment and disenrollment functions will be performed by
Medicare+Choice organizations until a new contractor is
appointed by the Secretary.
SELECTED ISSUES
Utilization and Quality Control Peer Review Organizations
The Medicare Utilization and Quality Control Peer Review
Organization Program was established by Congress under the Tax
Equity and Fiscal Responsibility Act of 1982 (TEFRA, Public Law
97-35). Building on the former professional standards review
organizations, the new peer review organizations (PROs) were
charged by the 1982 law with reviewing services furnished to
Medicare beneficiaries to determine if the services met
professionally recognized standards of care and were medically
necessary and delivered in the most appropriate setting. Major
changes were made to the PRO Program by the Social Security Act
Amendments of 1983 (Public Law 98-21) and subsequent budget
reconciliation acts. Most PRO review is focused on inpatient
hospital care. However, there is limited PRO review of
ambulatory surgery, postacute care, and services received from
Medicare HMOs.
There are currently 53 PRO areas, incorporating the 50
States and the territories. Organizations eligible to become
PROs include physician-sponsored and physician-access
organizations. In limited circumstances, Medicare fiscal
intermediaries may also be eligible. Physician-sponsored
organizations are composed of a substantial number of licensed
physicians practicing in the PRO review area (for example, a
medical society); physician access organizations are those
which have available to them sufficient numbers of licensed
physicians so that adequate review of medical services can be
assured. Such organizations obtain PRO contracts from the
Secretary of DHHS through a competitive proposal process. Each
organization's proposal is evaluated by HCFA for technical
merit using specific criteria that are quantitatively valued.
Priority is given to physician-sponsored organizations in the
evaluation process. Effective October 1, 1996, all 53 PROs are
operating under the fifth round of contracts (also referred to
as the ``fifth scope of work'').
In general, each PRO has a medical director and a staff of
nurse reviewers (usually registered nurses), data technicians,
and other support staff. In addition, each PRO has a board of
directors, comprised of physicians and, generally,
representatives from the State medical society, hospital
association, and State medical specialty societies. The Omnibus
Budget Reconciliation Act of 1986 (Public Law 99-509) requires
each board to have a consumer representative. Because the board
is usually consulted before a case is referred by the PRO to
the DHHS inspector general for sanction, it assumes a major
role in the PRO review process. Each PRO also has physician
advisors who are consulted on cases in which there is a
question regarding the nurse reviewer's referral. Only
physician advisors can make initial determinations about
services furnished or proposed to be furnished by another
physician.
PROs are paid by Medicare on a cost basis for their review
work. Spending for the PROs in fiscal year 1996 totaled $191
million; in fiscal years 1997 and 1998, spending was expected
to be $269 million and $279 million, respectively. Spending
varies considerably from year to year depending on where the
PROs are in their contract cycles. HCFA has indicated that
actual spending for 1997 and 1998 may be considerably lower
than these figures. Funds for the PRO Program are apportioned
each year from the Medicare HI and SMI Trust Funds in an amount
that is supposed to be sufficient to finance PRO Program
requirements. This is the same procedure as that followed for
payment of Medicare services provided directly to
beneficiaries. HCFA is bound by law to follow the
apportionments in the running of the PRO Program; as such, the
apportionments determine contract specifications and serve as a
device to control spending.
The PRO review process combines both utilization and
quality review. In conducting utilization review, the PRO
determines whether the services provided to a Medicare patient
were necessary, reasonable, and appropriate to the setting in
which they were provided. Although some utilization review is
done on a prospective basis, the bulk of the reviews are done
retrospectively. When a PRO determines that the services
provided were unnecessary or inappropriate (or both), it issues
a payment denial notice. The providers, the physicians, and the
patient are given an opportunity to request reconsideration of
the determination.
The PRO checks for indications of poor quality of care as
it is conducting utilization review. If a PRO reviewer detects
a possible problem, further inquiry is made into the case. If
it is determined that the care was of poor quality, the PRO
must take steps to correct the problem. Specific sanctions are
required if the PRO determines that the care was grossly
substandard or if the PRO has found that the provider or the
physician has a pattern of substandard care. In addition, under
section 9403 of COBRA (Public Law 99-272), as amended by Public
Law 101-239, authority exists for the PROs to deny payments for
substandard quality care. This provision, however, has never
been used.
Each of the contracts between DHHS and the PROs must
contain certain similar elements outlined in a document known
as the Scope of Work. Under the third and previous scopes of
work, PRO review was centered on case-by-case examinations of
individual medical records, selected primarily on a sample
basis. This approach to medical review was criticized by the
Institute of Medicine and others as being costly,
confrontational, and ineffective. The fourth scope of work
incorporated a new review strategy called the Health Care
Quality Improvement Initiative. PROs were required to use
explicit, more nationally uniform criteria to examine patterns
of care and outcomes using detailed clinical information on
providers and patients. Instead of focusing on unusual
deficiencies in care, the PROs were instructed to focus on
persistent differences between actual indications of care and
outcomes from those patterns of care and outcomes considered
achievable. HCFA believed that this approach would encourage a
continual improvement of medical practice in a way that would
be viewed by physicians and providers as educational and not
adversarial.
The fifth scope of work similarly emphasizes continuous
quality improvement. Sample case reviews, other than those
mandated by law (such as those relating to hospital notices of
noncoverage and to beneficiary complaints) are no longer
required. Instead, each PRO is required to conduct 4-18 quality
improvement projects each year, depending on the size of their
beneficiary populations.
Secondary Payer
Generally, Medicare is the ``primary payer,'' that is, it
pays health claims first, with an individual's private or other
public health insurance filling in some or all of Medicare's
coverage gaps. However, in certain cases, the individual's
other coverage pays first, while Medicare is the secondary
payer. This phenomenon is referred to as the Medicare Secondary
Payer (MSP) Program.
An employer (with 20 or more employees) is required to
offer workers age 65 and over (and workers' spouses age 65 and
over) the same group health insurance coverage as is made
available to other employees. Workers have the option of
accepting or rejecting the employer's coverage. If the worker
accepts the coverage, the employer's plan is primary for the
worker and/or spouse who is over age 65; Medicare becomes the
secondary payer. Employers may not offer a plan that
circumvents this provision.
Similarly, a group health plan, offered by a large employer
with 100 or more employees, is the primary payer for employees
or their dependents who are on the Medicare Disability Program.
The provision applies only to persons covered under the group
health plan because the employee (generally the spouse of the
disabled person) is in ``current employment status'' (that is,
is an employee or is treated as an employee by the employer).
Secondary payer provisions also apply to ESRD individuals
with employer group health plans (regardless of employer size).
Prior to enactment of the Balanced Budget Act of 1997, the
group health plan was the primary payer for 18 months for
persons who became eligible for Medicare ESRD benefits. The
employer's role as primary payer was limited to a maximum of 21
months (18 months plus the usual 3-month waiting period for
Medicare ESRD coverage). The Balanced Budget Act extends the
application of the secondary payer provisions for the ESRD
population from 18 to 30 months. This applies to items and
services furnished on or after August 5, 1997 for periods
beginning on or after February 5, 1997.
Medicare is also the secondary payer when payment has been
made, or can reasonably be expected to be made, under workers'
compensation, automobile medical liability, all forms of no-
fault insurance, and all forms of liability insurance.
The law authorizes a data match program which is intended
to identify potential secondary payer situations. Medicare
beneficiaries are matched against data contained in Social
Security Administration and Internal Revenue Service files to
identify cases in which a working beneficiary (or working
spouse) may have employer-based health insurance coverage.
Cases of previous incorrect Medicare payments are identified
and recoveries are attempted. The Balanced Budget Act clarifies
that recoveries can be initiated up to 3 years after the date
the service was furnished. Further, recoveries may be made from
third-party administrators except where such administrators
cannot recover amounts from the employer or group health plan.
Table 2-38 shows savings attributable to these Medicare
secondary payer provisions. In fiscal year 1996, combined
Medicare part A and B savings are estimated at $2.9 billion.
TABLE 2-38.--MEDICARE SAVINGS ATTRIBUTABLE TO SECONDARY PAYER PROVISIONS BY TYPE OF PROVISION, FISCAL YEARS 1988-
96
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
End-stage
Year and Medicare part Workers' Working renal Automobile Disability Total
compensation aged disease
----------------------------------------------------------------------------------------------------------------
1988:
Part A................................... $110.1 $786.7 $88.4 $149.6 $275.5 $1,410.3
Part B................................... 18.1 313.8 20.2 22.3 93.5 467.9
--------------------------------------------------------------------
Total.................................. 128.2 1,100.5 108.6 171.9 369.0 1,878.2
====================================================================
1989:
Part A................................... 99.4 867.7 75.0 179.6 399.3 1,621.0
Part B................................... 27.5 337.1 25.1 28.2 137.0 554.9
--------------------------------------------------------------------
Total.................................. 126.9 1,204.8 100.1 207.8 536.3 2,175.9
====================================================================
1990:
Part A................................... 120.9 981.6 144.1 220.1 498.4 1,965.1
Part B................................... 21.6 325.8 21.5 26.4 123.2 518.5
--------------------------------------------------------------------
Total.................................. 142.5 1,307.4 165.6 246.5 621.6 2,483.6
====================================================================
1991:
Part A................................... 107.4 932.7 144.9 235.6 526.6 1,947.2
Part B................................... 21.2 417.5 40.2 26.6 186.2 691.7
--------------------------------------------------------------------
Total.................................. 128.6 1,350.2 185.1 262.2 712.8 2,638.9
====================================================================
1992:
Part A................................... 118.9 1,044.9 140.8 233.9 600.9 2,139.4
Part B................................... 17.3 398.3 37.4 34.5 182.9 670.4
--------------------------------------------------------------------
Total.................................. 136.2 1,443.2 178.2 268.4 783.8 2,809.8
====================================================================
1993:
Part A................................... 100.4 1,073.1 133.6 239.6 657.8 2,204.5
Part B................................... 11.3 392.2 32.8 28.9 192.3 657.5
--------------------------------------------------------------------
Total.................................. 111.7 1,465.3 166.4 268.5 850.1 2,862.0
====================================================================
1994:
Part A................................... 96.5 1,101.1 130.2 265.9 682.3 2,276.0
Part B................................... 13.0 398.1 31.8 32.7 211.8 687.4
--------------------------------------------------------------------
Total.................................. 109.5 1,499.2 162.0 298.6 894.1 2,963.4
====================================================================
1995:
Part A................................... 107.0 1,068.0 142.0 295.5 728.9 2,341.4
Part B................................... 10.5 360.3 39.0 40.2 215.5 665.5
--------------------------------------------------------------------
Total.................................. 117.5 1,428.3 181.0 335.7 944.4 3,006.9
====================================================================
1996:
Part A................................... 93.6 1,062.5 133.4 335.0 728.5 2,353.0
Part B................................... 11.1 295.1 34.3 50.1 196.4 586.9
--------------------------------------------------------------------
Total.................................. 104.7 1,357.6 167.6 385.0 924.9 2,939.9
----------------------------------------------------------------------------------------------------------------
Source: Health Care Financing Administration, Bureau of Program Operations.
Supplementing Medicare Coverage
In 1995, 7.7 percent of the total Medicare population were
enrolled in Medicare managed care plans. Approximately 87
percent of persons not enrolled in Medicare managed care plans
had some form of supplementary coverage. Of these, 33 percent
had individually purchased coverage, known as Medigap; 31
percent had employer-provided coverage; 6 percent had both
Medigap and employer-provided coverage; 15 percent had
Medicaid; and 2 percent had other supplemental coverage such as
the military or veterans benefits. Approximately 13 percent of
the fee-for-service population had Medicare coverage only (see
table 2-39).
TABLE 2-39.--SUPPLEMENTAL INSURANCE STATUS OF BENEFICIARIES IN MEDICARE
FEE-FOR-SERVICE, 1995
------------------------------------------------------------------------
Persons
Type of coverage (in
percent)
------------------------------------------------------------------------
Medigap..................................................... 33
Employer provided........................................... 31
Medigap and employer provided................................ 6
Medicaid..................................................... 15
Other supplemental........................................... 2
Medicare only................................................ 13
----------
Total................................................... 100
------------------------------------------------------------------------
Source: Physician Payment Review Commission, 1997.
Medigap
Medigap policies offer coverage for Medicare's deductibles
and coinsurance and for some services not covered by Medicare.
The typical premium for a community-rated plan is estimated to
be $1,300 in 1997 (Physician Payment Review Commission, 1997).
The Omnibus Budget Reconciliation Act of 1990 provided for a
standardization of Medigap policies; the intention was to
enable consumers to better understand policy choices and to
prevent marketing abuses. Implementing regulations generally
limit the number of different types of Medigap plans that can
be sold in a State to no more than 10 standard benefit plans,
known as ``plan A'' to ``plan J.'' The standardized plan A
covers a core benefits package. Each of the other nine includes
the core package plus a different combination of additional
benefits. Four plans make up an estimated three-quarters of
plan sales: plan A, 7 percent; plan B, 16 percent; plan C, 22
percent; and plan F (the most frequently sold policy), 33
percent. Only plan H, plan I, and plan J offer some drug
coverage; together they account for 14 percent of plan sales.
Beneficiaries who purchased policies prior to the
standardization requirement may renew these policies; however,
policies issued after July 1992 must be one of the 10 standard
plans. Approximately half of the beneficiaries with Medigap
policies have nonstandardized plans.
The Balanced Budget Act of 1997significantly changed
certain Medigap enrollment requirements, effective July 1,
1998. Prior to that date, the following rules apply. All
insurers offering Medigap policies are required to offer a 6-
month open enrollment period for persons turning age 65. This
is known as guaranteed open enrollment. There is no guaranteed
open enrollment for the under-65 disabled population. At the
time insurers sell a Medigap policy, whether or not during an
open enrollment period, they are permitted to limit or exclude
coverage for services related to a preexisting health
condition; such exclusions cannot be imposed for more than 6
months. An individual who has met the preexisting condition
limitation in one Medigap policy does not have to meet the
requirement under a new policy for previously covered benefits.
However, an insurer could impose exclusions for newly covered
benefits.
The Balanced Budget Act also expands the guaranteed issue
requirements, effective July 1, 1998. Specifically, the law
guarantees issuance of specified Medigap policies without a
preexisting condition exclusion for certain continuously
enrolled individuals. The insurer is prohibited from
discriminating in the pricing of such policy on the basis of
the individual's health status, claims experience, receipt of
health care, or medical condition.
The guaranteed issuance is extended to the following
persons provided they enroll within 63 days of termination of
other enrollment:
1. An individual enrolled under an employee welfare benefit
plan that provides benefits supplementing Medicare and
the plan terminates or ceases to provide such benefits.
2. A person enrolled with a Medicare+Choice organization who
discontinues enrollment under circumstances permitting
disenrollment other than during an annual election
period. (These include: (1) the termination of the
entity's certification, (2) the individual moves
outside of the entity's service area; or (3) the
individual elects termination due to cause.)
3. An individual enrolled with an HMO and enrollment ceases
for the reasons noted above.
4. An individual enrolled under a Medigap policy and
enrollment ceases because: (1) of the bankruptcy or
insolvency of the issuer, or because of other
involuntary termination of coverage and there is no
provision under applicable State law for the
continuation of such coverage, (2) the issuer
substantially violates a material provision; or (3) the
issuer misrepresented the policy's provisions.
5. An individual who: (1) was enrolled under a Medigap policy;
(2) subsequently terminates such enrollment and enrolls
with a Medicare+Choice organization, a risk or cost
contract HMO, a similar organization operating under a
demonstration project authority, or a Medicare Select
policy; and (3) terminates such enrollment during any
period within the first 12 months during which the
individual is permitted to terminate enrollment, but
only if the individual was never previously enrolled
with such an entity.
6. An individual who upon first becoming eligible for Medicare
at age 65, enrolls in a Medicare+Choice plan, and
disenrolls from such plan within 12 months.
The guaranteed issue is generally for plan A, B, C or F.
However: (1) for persons described in (5) it refers to the same
policy in which the person was previously enrolled; and (2) for
persons described in (6) it is for any Medigap policy. At the
time of the event which resulted in the cessation of enrollment
or loss of coverage, the organization, insurer, or plan
administrator (whichever was appropriate) would have to notify
the individual of his or her rights and the obligations of
issuers of Medigap policies.
The Balanced Budget Act prohibits the imposition of a
preexisting exclusion period for persons who on the date of
application, have at least 6 months of creditable coverage.
Specifically, such an exclusion can not be imposed on an
individual who, on the date of application, has a continuous
period of at least 6 months of health insurance coverage
defined as ``creditable coverage'' under the Health Insurance
Portability and Accountability Act (HIPAA). If the individual
has less than 6 months coverage, the policy would have to
reduce the period of any preexisting exclusion by the aggregate
of periods of ``creditable coverage'' applicable to the
individual as of the enrollment date. The rules used to
determine the reduction would be based on rules used under
HIPAA.
The Balanced Budget Act provides for high deductible
Medigap plans. Specifically, it adds 2 plan types to the
current list of 10 standard Medigap plans. These will offer the
benefit package of either plan F or plan J, except for the high
deductible feature. The high deductible is $1,500 in 1998 and
1999, increased by the CPI in subsequent years. The beneficiary
would be responsible for expenses up to this amount.
Medicare Select
OBRA 1990 established a demonstration project under which
insurers could market a product known as Medicare Select.
Select policies are the same as other Medigap policies except
that they will only pay in full for supplemental benefits if
covered services are provided through designated health
professionals and facilities known as preferred providers. OBRA
1990 limited the demonstration project to 3 years (1992-94) and
to 15 States. The Social Security Amendments of 1994 (Public
Law 103-432) extended Select for 6 months. Public Law 104-18
extended the program for 3 years (to June 30, 1998) and to all
States. A permanent extension beyond the 3 year period is
authorized unless the Secretary determines that the Select
Program significantly increased Medicare expenditures,
significantly diminished access to and quality of care, or did
not result in lower Medigap premiums for beneficiaries. This
determination must be made by December 31, 1997, based on a
study completed by June 30, 1997.
Public Law 104-18 also required the General Accounting
Office (GAO) to determine the extent to which individuals who
are continuously covered under a Medigap policy are subject to
medical underwriting if they change the policy under which they
are covered. Further, GAO was required to identify options, if
necessary, for modifying the Medigap market to make sure that
continuously insured beneficiaries are able to switch plans
without medical underwriting. Many of the issues identified in
the GAO report were addressed in the Balanced Budget Act of
1997.
Employer-based policies
In 1995, employer-based policies covered 37 percent of
Medicare beneficiaries. Employer-based plans are typically more
comprehensive than Medigap plans. Generally they are defined
benefit plans which may overlap significantly with Medicare
benefits. As a result, employers use a variety of approaches to
coordinate their plans with Medicare (which is the primary
payer for retirees). The costs of coverage are generally shared
by the employer and retiree. In 1996, large firms (over 500
employees) shared the costs for 43 percent of individual
retiree plans, and paid in full for an additional 29 percent of
plans. In 1996, retirees on average spent $948 for their
employer-sponsored coverage (Foster Higgins, 1996).
In recent years, the percentage of employers offering
retiree health coverage for their Medicare retirees has
dropped. Between 1994 and 1996, the number of large firms
offering such coverage dropped from 40 percent to 33 percent
(Foster Higgins, 1996).
In addition, many other employers are pursuing strategies
to lower their liabilities for retiree health costs. Some
employers are moving toward a defined contribution model for
retiree health benefits. Others are using Medicare risk plans
and other managed care organizations to deliver services to
their retirees. A number of large employers (accounting for
over 2 million Medicare-eligible retirees) have joined the
National Medicare HMO initiative to negotiate contracts with
Medicare risk plans for the provision of benefits in excess of
those otherwise offered by the plans (Physician Payment Review
Commission, 1997).
Impact of supplemental insurance on Medicare spending
Medicare cost-sharing requirements are intended, in part,
to encourage cost-conscious utilization. Insurance that
supplements Medicare by covering deductibles and coinsurance
removes these incentives. Many analyses have addressed how
supplemental insurance affects beneficiaries' use of Medicare-
covered services and the cost of those services to Medicare.
Typically, these studies have estimated that Medicare spending
for beneficiaries with supplemental coverage are one-quarter to
one-third higher, on average, than expenditures for
beneficiaries without such coverage.
A Physician Payment Review Commission analysis (Physician
Payment Review Commission, 1997) of the Medicare Current
Beneficiary Survey (MCBS) found a similar effect: Medicare
expenditures for beneficiaries covered by supplemental
insurance were about 30 percent higher than they were for those
without such coverage. Subsequent analysis showed that the
effect of secondary coverage on Medicare expenditures differs,
depending on the source of coverage. Expenditures for
beneficiaries having Medicare only are less than 75 percent of
those for beneficiaries with Medigap. Spending for
beneficiaries with employer-provided benefits average only
about 10 percent less (chart 2-14).
CHART 2-14. COMPARISON OF PROJECTED PER CAPITA SPENDING FOR AVERAGE
BENEFICIARIES, BY TYPE OF SUPPLEMENTAL INSURANCE AND YEAR
Note._These spending levels represent the expected
differences in outlays after other factors have been taken into
account.
Source: Physician Payment Review Commission analysis of
data from the 1993 and 1995 Medicare Current Beneficiary
Survey. The sample size for 1993 was 11,285 and the sample size
for 1995 was 13,261.
Higher utilization among beneficiaries with supplemental
insurance translates into increased Medicare costs because
Medicare is the primary payer for those services. The MCBS
analysis found that per capita expenditures for Medicare
beneficiaries with Medigap insurance were from $1,000 to $1,400
higher than those for beneficiaries with Medicare only. Per
capita spending for beneficiaries with employer-provided
supplements were from $700 to $900 higher than those for
beneficiaries with no supplemental coverage.
These results reflect the difference in spending by source
of insurance, once other factors have been considered. High
service use among beneficiaries with secondary insurance
appears to be a consequence of having such insurance,
presumably reflecting the reduced financial burden associated
with using additional services.
Qualified Medicare Beneficiaries (QMBs)
Medicare beneficiaries are liable for specified cost-
sharing charges; namely, premiums, deductibles, and
coinsurance. Such charges could pose a potential hardship for
some persons, especially those who do not have supplementary
protection, either through an individually-purchased
``Medigap'' policy or employer-based coverage. Certain low-
income persons are entitled to have their Medicare cost-sharing
charges paid by the Federal-State Medicaid Program. More
limited coverage is available for two other population groups:
(1) persons who meet the QMB criteria (see below) except that
their income is slightly in excess of the poverty line; and (2)
qualified disabled and working individuals. Persons meeting the
qualifications for coverage under one of these categories, but
not otherwise eligible for Medicaid, are not entitled to the
regular Medicaid benefits package. Instead, they are entitled
to have Medicaid make specified payments in their behalf.
QMB eligibility
State Medicaid Programs are required to make Medicare cost-
sharing assistance available to QMBs. A QMB is an aged or
disabled Medicare beneficiary who has: (1) income at or below
the Federal poverty line ($7,890 for a single, $10,610 for a
couple in 1997); and (2) resources below 200 percent of the
resources limit set for the Supplemental Security Income (SSI)
Program (the QMB resource limits are $4,000 for an individual
and $6,000 for a couple). Certain items, such as an
individual's home and household goods, are excluded from the
calculation.
Persons meeting the QMB definition are entitled to Medicare
part A. Included is the relatively small group of aged persons
who are not automatically entitled to part A coverage, but who
have bought part A protection by paying a monthly premium. Not
included are working disabled persons who have exhausted
Medicare part A entitlement but who have extended their
coverage by payment of a monthly premium.
QMB benefits
Medicaid is required to pay Medicare premiums and cost-
sharing charges for the QMB population as follows: (1) part B
monthly premiums; (2) part A monthly premiums paid by the
limited number of persons not automatically entitled to part A
protection; (3) coinsurance and deductibles under part A and
part B including the Medicare hospital deductible, the part B
deductible, and the part B coinsurance; and (4) coinsurance and
deductibles that health maintenance organizations (HMOs) and
competitive medical plans charge their enrollees.
Medicaid coverage is limited to payment of these charges
unless the individual is otherwise eligible for Medicaid. A
person eligible for regular Medicaid benefits as well as QMB
assistance is entitled to Medicaid payment for Medicare
premiums and cost-sharing charges as well as to the full range
of Medicaid services otherwise available to them.
Payment of QMB benefits
States are required to pay part A and part B premiums in
full for the QMB population. They are also required to pay the
requisite deductibles and coinsurance, though the actual amount
of the payment may vary. State Medicaid Programs frequently
have lower payment rates for services than those applicable
under Medicare. Federal program guidelines permit States to
either: (1) pay the full Medicare deductible and coinsurance
amounts; or (2) only pay those amounts to the extent that the
Medicare provider or supplier has not received the full
Medicaid rate for the service. If the Medicare service is not
covered under the State Medicaid Program, the State may either
pay the full Medicare deductibles and coinsurance amounts or
alternatively provide for reasonable payments (subject to
approval by DHHS).
Twenty-nine States instituted policies which used payment
rates below those applicable under Medicare. However, the U.S.
Court of Appeals for four judicial circuits issued decisions
which required States in their jurisdictions to pay the full
Medicare cost-sharing expenses for QMBs. As a result, 8 of the
29 States were required to change their policies. However, in
May 1997, another judicial circuit found that California could
cap payments to Medicare providers at Medicaid payment rates.
This issue was subsequently addressed by the Balanced Budget
Act of 1997 which permits States to limit total payments to the
amount which would otherwise be paid by Medicaid. The provision
is effective on enactment, except that it also applies to
services furnished before that date if payment for such
services is subject of a pending lawsuit.
Buy-in
All States have buy-in agreements with the Secretary that
allow them to enroll their QMB population in part B. Some
States have also elected to include payment of part A premiums
under their buy-in agreements. Payment of premiums under a buy-
in agreement is advantageous to the State because premiums paid
through this method are not subject to delayed enrollment
penalties which might otherwise be applicable in the case of
delayed enrollment or reenrollment.
The buy-in agreements for the QMB population are in
addition to the traditional buy-in agreements that States have
for other population groups. Under these traditional buy-in
agreements, States enroll in Medicare part B persons who are
eligible for both Medicare and Medicaid. As a minimum, States
may limit buy-in coverage to persons receiving cash assistance;
alternatively, they may add some or all categories of other
persons who are eligible for both programs.
Specified low-income Medicare beneficiaries (SLMBs)
States are also required to pay Medicare part B premiums
for SLMBs. These are persons meeting the QMB criteria except
that their income is slightly over the QMB limit. In 1997, the
SLMB income limit is 120 percent of the Federal poverty line.
Medicaid protection is limited to payment of the Medicare part
B premiums, unless the beneficiary is otherwise eligible for
Medicaid.
The Balanced Budget Act of 1997 requires State Medicaid
Programs, effective January 1, 1998 through December 31, 2002,
to pay part B premiums for beneficiaries with incomes up to 135
percent of poverty. For Medicare beneficiaries with incomes
between 135 and 175 percent of poverty, State Medicaid Programs
are required to cover that portion of the Medicare part B
premium attributable to the transfer of home health visits from
part A to part B.
The Federal Government will pay 100 percent of the costs
associated with expanding Medicare part B premium assistance
from 120 percent to 135 percent, as well as the extra premium
cost attributable to the home health transfer for persons
between 135 and 175 percent. To cover these costs, the
Secretary will be required to provide for allocations to States
based on the sum of: (1) a State's number of Medicare
beneficiaries with incomes between 135 and 175 percent of
poverty, and (2) twice the number of Medicare beneficiaries
with incomes between 120 and 135 percent of poverty, relative
to the sum for all eligible States. Total amounts available for
allocations are $200 million for fiscal year 1998, $250 million
for fiscal year 1999, $300 million for fiscal year 2000, $350
million for fiscal year 2001, and $400 million for fiscal year
2002. The Federal matching rate for each participating State
will be 100 percent up to the State's allocation. If a State
exceeds its allocation, the matching rate on the excess is
zero. Payments are to be made from Medicare part B for the
costs of this program.
Qualified disabled and working individuals (QDWIs)
Medicaid is authorized to provide partial protection
against Medicare part A premiums for QDWIs. QDWIs are persons
who were previously entitled to Medicare on the basis of a
disability, who lost their entitlement based on earnings from
work, but who continue to have the disabling condition.
Medicaid is required to pay the Medicare part A premium for
such persons if their incomes are below 200 percent of the
Federal poverty line, their resources are below 200 percent of
the SSI limit, and they are not otherwise eligible for
Medicaid. States are permitted to impose a premium, based on a
sliding scale, for individuals between 150 and 200 percent of
poverty.
Data
As of May 1997, Medicare reported that there were 317,753
Medicare part A beneficiaries for whom QMB payments for part A
premiums were being made. As of the same date, States reported
a total of 4,987,918 part B buy-ins of which 2,429,792 were
separately identified as QMBs and 242,749 were separately
identified as SLMBs (see table 2-40). However, these numbers
are low due to reporting problems. The QMB and SLMB numbers
include persons who were eligible for the full Medicaid benefit
package. No QMB-only or SLMB-only number is available.
Nationwide there were 18 QDWIs in May 1997; this information is
not broken down by State.
TABLE 2-40.--NUMBER OF QUALIFIED MEDICARE BENEFICIARIES AND PART B BUY-
INS BY STATE, MAY 1997
------------------------------------------------------------------------
Part B buy-
ins
State Part A QMBs Part B buy- identified
ins as QMBs by
State
------------------------------------------------------------------------
Alabama.......................... 3,444 122,455 30,441
Alaska........................... 630 6,821 15
Arizona.......................... 433 48,777 31,519
Arkansas......................... 4,027 79,371 21,534
California....................... 78,784 767,174 403,732
Colorado......................... 512 50,574 12,589
Connecticut...................... 2,453 50,639 41,009
Delaware......................... 468 8,293 1,900
District of Columbia............. 1,264 14,374 269
Florida.......................... 40,583 303,138 214,388
Georgia.......................... 7,017 167,895 46,156
Hawaii........................... 4,855 18,597 3,779
Idaho............................ 264 14,099 8,121
Illinois......................... 3,686 144,828 112,728
Indiana.......................... 1,841 76,479 49,777
Iowa............................. 1,326 49,865 35,551
Kansas........................... 602 37,243 13,216
Kentucky......................... 3,230 104,766 30,041
Louisiana........................ 5,570 115,045 26,254
Maine............................ 10 31,861 13,748
Maryland......................... 6,256 59,858 46,670
Massachusetts.................... 14,814 131,730 104,371
Michigan......................... 5,748 130,454 38,093
Minnesota........................ 3,118 56,216 17,444
Mississippi...................... 7,269 106,647 74,407
Missouri......................... 662 79,264 58,821
Montana.......................... 455 11,798 9,602
Nebraska......................... 1 17,356 652
Nevada........................... 983 16,374 12,057
New Hampshire.................... 28 6,041 1,425
New Jersey....................... 7,188 134,114 87,141
New Mexico....................... 535 33,599 7,441
New York......................... 190 349,797 168,195
North Carolina................... 11,522 203,477 32,471
North Dakota..................... 8 5,683 1,363
Ohio............................. 6,643 176,472 79,081
Oklahoma......................... 4,722 62,727 56,416
Oregon........................... 37 49,120 26,801
Pennsylvania..................... 15,609 172,703 114,830
Puerto Rico...................... 0 0 0
Rhode Island..................... 840 17,213 1,812
South Carolina................... 1,904 100,941 84,818
South Dakota..................... 779 12,766 4,560
Tennessee........................ 8,316 161,479 66,794
Texas............................ 43,166 334,970 94,082
Utah............................. 158 14,523 9,804
Vermont.......................... 241 12,996 3,228
Virgin Islands................... 0 210 0
Virginia......................... 2,961 109,046 42,105
Washington....................... 4,548 81,054 29,654
West Virginia.................... 3,714 43,386 39,095
Wisconsin........................ 4,114 76,831 17,871
Wyoming.......................... 225 5,778 1,936
Northern Marianas................ 0 311 0
Guam............................. 0 690 0
--------------------------------------
Total...................... 317,753 4,987,918 2,429,792
------------------------------------------------------------------------
Note.--See text for data limitations; QMB = qualified Medicare
beneficiary.
Source: Health Care Financing Administration.
LEGISLATIVE HISTORY, 1980-97
This section summarizes major Medicare legislation enacted
into law, beginning with the Social Security Disability
Amendments of 1980 and continuing chronologically through the
Balanced Budget Act of 1997. Previous editions of the Green
Book review legislation enacted before 1980. Since only
technical changes were included in the Social Security
Amendments of 1994, this act is not discussed here.
The summary highlights major provisions; it is not a
comprehensive list of all Medicare amendments. Included are
provisions which had a significant budget impact, changed
program benefits, modified beneficiary cost sharing, or
involved major program reforms. Provisions involving policy
changes are mentioned the first time they are incorporated in
legislation, but not necessarily every time a modification is
made. For example, the enactment of the initial secondary payer
provisions are noted in 1980, 1981, and 1982. Subsequent
clarifying amendments to these provisions are not mentioned.
The descriptions include either the initial effective date of
the provision or, in the case of budget savings provisions, the
fiscal years for which cuts were specified.
Social Security Disability Amendments of 1980, Public Law 96-265
Established a voluntary certification program for Medicare
supplemental policies in States that failed to establish
equivalent or more stringent standards. (Federal program put in
place July 1, 1982.)
Omnibus Reconciliation Act of 1980, Public Law 96-499
Home health services
Liberalized home health benefits by eliminating the number
of visits limits, the prior hospitalization requirement, and
the deductible for any benefits provided under part B.
(Effective July 1, 1981.)
Ambulatory surgical services
Required the Secretary to develop a list of surgical
procedures that could appropriately be performed on an
outpatient basis in an ambulatory surgical center and provided
that payments would be made for facility services on the basis
of prospectively determined rates. (Effective on enactment.)
Secondary payer
Provided that Medicare would be the secondary payer where
payment could be made under liability or no-fault insurance.
(Effective on enactment.)
Public Law 96-611 (an Amendment to the Social Security Act)
Authorized coverage for pneumococcal vaccines. (Effective
July 1, 1981.)
Omnibus Budget Reconciliation Act of 1981 (OBRA 1981), Public Law 97-35
Part A deductible
Increased the multiplier for computing the inpatient
hospital deductible by 12.5 percent. (Effective January 1,
1982.)
Part B deductible
Eliminated the use of medical expenses incurred during the
last 3 months of the preceding calendar year for determining
whether an individual had met the part B deductible for the
current calendar year. The part B deductible was also increased
from $60 to $75. (Effective January 1, 1982.)
Medicare secondary payer
Modified the existing Medicare benefit payment coordination
rules for persons with end-stage renal disease (ESRD), making
the individual's private employer group health plan the primary
payer and Medicare the secondary payer for the first 12 months
after an individual was determined to be eligible for Medicare
under the ESRD provisions. (Effective October 1, 1981.)
Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Public Law
97-248
Part A provider payments
Expanded prospective limits on hospital costs reimbursed
under Medicare originally enacted in the Social Security
Amendments of 1972 (Public Law 92-603), to include, in addition
to routine costs, all other inpatient hospital operating costs,
such as ancillary costs (for example, laboratory, operating
room, pharmacy, and so forth) and costs of special care units
(for example, intensive care units). Established a 3-year
Medicare ceiling (or target rate) on the allowable annual rate
of increase in operating costs per case for inpatient hospital
services. Required the Secretary to develop proposals for the
prospective payment of hospitals under Medicare by the end of
1982. (Effective for hospital cost-reporting periods beginning
on or after October 1, 1982.)
Part B premium
Increased the part B premium to cover 25 percent of program
costs for the aged for 1-year periods beginning July 1, 1983
and July 1, 1984. This provision was subsequently extended
through 1990. (Effective July 1, 1983.)
Reimbursement for inpatient radiology and pathology services
Eliminated the special 100-percent reimbursement rate for
radiologist and pathologist services furnished directly to
hospital inpatients, and the exemption of such services from
being subject to the part B deductible and coinsurance.
(Effective for items or services furnished on or after October
1, 1982.)
Medicare secondary payer for older workers
Amended the existing benefit payment coordination rules
making Medicare secondary payer for older workers with private
employer group health insurance coverage. Required private
employers with 20 or more full-time workers to provide older
workers with the same coverage provided for workers under age
65. Subsequently extended to spouses. (Effective January 1,
1983.)
Hospice care
Authorized 210 days of hospice care for terminally ill
Medicare beneficiaries with a life expectancy of 6 months or
less. (Effective for the period from November 1, 1983 to
October 1, 1986, with benefit becoming permanent and day limit
repealed at a later date.)
Health maintenance organizations (HMOs) and competitive medical plans
(CMPs)
Provided for contracts with HMOs or CMPs on a risk sharing
(prospective) basis. Individuals eligible to receive benefits
under Medicare would be eligible to enroll with any HMO or CMP
that had a Medicare contract and served the geographic area in
which the individual resided. Medicare's payment to the entity
with a risk-sharing contract would be made on a per capita
basis for each class of beneficiary enrolled in the plan,
adjusted for factors such as age, disability status, and other
factors. (Effective when the Secretary certified to Congress
that the payment methodology was adequate.)
Peer review organizations (PROs)
Established the PROs to review the medical necessity and
reasonableness of care, quality of care, and the
appropriateness of the setting in which the care was delivered
for Medicare services furnished primarily in hospitals.
Repealed authorization for the Professional Standards Review
Organizations (PSROs), which had been charged since 1972 with
reviewing both Medicare and Medicaid services. (Effective on
enactment.)
Hospital insurance (HI) tax for Federal employees
Required Federal employees to begin paying the Medicare HI
tax and to earn eligibility for HI coverage under Medicare.
(Effective January 1, 1983.)
Social Security Amendments of 1983, Public Law 98-21
Part A hospital reimbursement
Established a new method of Medicare reimbursement for
hospital inpatient care, called the prospective payment system
(PPS). Under this system, payment for each patient would be
made at predetermined, specific rates based on the average cost
of treating similar patients. Categories of patients would be
defined by the diagnosis-related groups (DRGs) patient
classification system which assigned each inpatient to a DRG
based on the diagnosis and other factors. (Effective for
hospital cost-reporting periods beginning on or after October
1, 1983.)
PROs
Authorized PROs to deny payment to a hospital for
unnecessary or inappropriate services. (Effective on
enactment.)
Deficit Reduction Act of 1984 (DEFRA), Public Law 98-369
Physicians' services
Froze physicians fees for 15 months, established the
Participating Physicians' Program, and froze billed charges of
nonparticipating physicians. (Freeze effective July 1, 1984
through September 30, 1985.)
Laboratory services
Established two fee schedules for clinical laboratory
services, one for independent laboratories and physicians and
one for services provided by hospital outpatient labs. Required
independent laboratories to accept assignment on claims and
waived patient cost-sharing charges on such claims, and
permitted physicians to bill for lab services only when they
personally performed or supervised the performance of the test.
(Fee schedules effective July 1, 1984, with schedule for
outpatient hospital services initially limited to 3 years and
made permanent in subsequent legislation.)
Hepatitis B vaccine
Authorized coverage for hepatitis B vaccine and its
administration when furnished to a high risk individual.
(Effective September 1, 1984.)
Emergency Extension Act of 1985, Public Law 99-107
Froze PPS payment rates for inpatient hospital services at
fiscal year 1985 levels and continued physician payment freeze
through November 14, 1985. Subsequent acts (Public Law 99-155,
Public Law 99-181, Public Law 99-189, and Public Law 99-201)
extended the freezes through March 14, 1986. (See below for
further extension through April 30, 1986.)
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), Public
Law 99-272
Hospital patient protection
Established requirements for hospitals participating in
Medicare to examine and treat patients in active labor or with
emergency medical conditions (also known as ``antidumping''
provisions). (Effective on first day of first month beginning
at least 90 days after enactment.)
Hospital payment freeze
Extended freeze on payments through April 30, 1986 and
reduced PPS updates for the remainder of fiscal year 1986.
(Effective on enactment.)
Indirect medical education
Began phased reduction of payments for indirect costs of
medical education. (Applied to cost-reporting periods beginning
on or after May 1, 1986.)
Direct graduate medical education
Replaced cost-based hospital reimbursement for direct costs
of medical education with a hospital-specific cost amount per
approved full-time equivalent resident. Limited the period of
residency training for which payments would be made. (Applied
to cost-reporting periods beginning on or after July 1, 1985.)
Disproportionate-share hospitals
Codified payment adjustments for hospitals serving a
disproportionate share of low-income patients. (Effective May
1, 1986.)
Physician fee freeze
Extended fee freeze from March 14, 1986 through April 30,
1986 for participating physicians and through December 1, 1986
for nonparticipating physicians. Required the Secretary in
consultation with the newly established Physician Payment
Review Commission to develop a relative value scale for
payments for physician services. (Fee freeze extension was
effective on enactment; other changes became effective later in
1986.)
Return on equity
Began phase-out of return on equity capital for for-profit
hospital services and reduced return on equity for other
services. (Effective for hospitals for cost-reporting periods
beginning on or after October 1, 1986; for other providers, on
or after October 1, 1985.)
Coverage of new State and local employees
Extended Medicare HI tax to State and local government
employees hired on or after April 1, 1986 and established
Medicare part A entitlement for these employees. (Effective
beginning after March 31, 1986 for both tax and entitlement to
coverage.)
Omnibus Budget Reconciliation Act of 1986 (OBRA 1986), Public Law 99-
509
Part A deductible
Changed the annual indexing of the part A (hospital)
deductible from an amount based on the average cost of 1 day of
inpatient hospital care to an amount based on the applicable
percentage increase used for prospective payment rates,
adjusted to reflect changes in real case mix. (Effective for
services provided on or after January 1, 1987.)
Payments for physicians' services
Provided for higher recognized payment screens for
participating physicians beginning January 1, 1987. Imposed
limits on balance billing for nonparticipating physicians known
as the maximum allowable actual charge (MAACs). (Effective
January 1, 1987 with MAAC limits effective for 4 years.)
Secondary payer for the disabled
Made Medicare the second payer for disabled Medicare
beneficiaries who elected to be covered under employer plans as
a current employee (or family member of such employee) of an
employer with at least 100 employees. (Effective January 1,
1987 through December 31, 1992. Subsequently modified and
extended.)
Payment for cataract surgical procedures
Reduced the prevailing charges of participating and
nonparticipating physicians for certain cataract surgical
procedures. (Effective for services furnished on or after
January 1, 1987 until the earlier of December 31, 1990 or 1
year after the Secretary reported to Congress on the relative
value scale.)
Ambulatory surgery
Revised payment methodology for ambulatory surgery provided
in hospital outpatient departments to be the lesser of costs or
charges or a blend of hospital costs and ASC rates (reaching
50/50 in fiscal year 1988). Required the Secretary to develop a
prospective payment system for ambulatory surgery performed in
outpatient departments. (Applied to payment rates for cost-
reporting periods beginning on or after October 1, 1987.)
Vision care
Provided for payment for vision care services furnished by
optometrists if the services were among those covered by
Medicare and the optometrist was legally authorized to perform
that service. (Prior to this change, Medicare only covered
optometrist services related to the treatment of aphakia.)
(Effective April 1, 1987.)
Physician assistants
Provided for coverage of and separate payment for services
performed by a physician assistant if the service would be
covered when performed by a physician. (Effective January 1,
1987.)
Medicare and Medicaid Patient and Program Protection Act of 1987,
Public Law 100-93
Fraud and abuse
Amended titles XI, XVIII, and XIX of the Social Security
Act to improve antifraud provisions. Established civil
penalties and sanction authority, including mandatory exclusion
from Medicare, Medicaid, and other programs under the Social
Security Act for specific acts of fraud or abuse. (Effective on
the 15th day after enactment.)
Beneficiary protections and information clearinghouse
Improved program protections for beneficiaries and created
an information-reporting system concerning sanctions taken by
State entities to prevent sanctioned providers in one State
from setting up practices anew in another. (Generally effective
on the 15th day after enactment.)
Balanced Budget and Emergency Deficit Control Reaffirmation Act of
1987, Public Law 100-119
Froze payment rates at fiscal year 1987 levels through
November 20, 1987, and mandated a sequester order that resulted
in Medicare payment reductions of 2.324 percent effective
November 21, 1987. (Effective as specified.)
Omnibus Budget Reconciliation Act of 1987 (OBRA 1987), Public Law 100-
203
Part A and B reductions under sequester order
Extended payment reductions under the sequester order for
all inpatient hospital services (including capital and direct
medical education) until March 31, 1988, and for other part A
services until December 31, 1987. Froze part B prevailing
charges and the customary charges for physicians' services for
the period January 1 through March 31, 1988 at 1987 levels, and
extended the sequester order for part B services through March
31, 1988. (Effective on enactment.)
Hospital inpatient payment rates
Reduced the update factors for PPS hospitals for fiscal
year 1988 and fiscal year 1989. Established separate updates
for large urban, ``other urban,'' and rural areas. (Effective
for discharges occurring on or after April 1, 1988, for fiscal
year 1988 update factors.)
Hospital capital payments
Reduced hospital capital-related payments by 7 percent
between October 1 and December 31, 1987; by 12 percent for the
remainder of fiscal year 1988, beginning January 1, 1988; and
by 15 percent for fiscal year 1989. Required Secretary to
establish a prospective payment system for capital to begin
with cost-reporting periods beginning on or after October 1,
1991. (Effective as specified.)
Physician payments
Reduced payment update for 1988 and 1989 for participating
physicians for nonprimary care services, beginning on April 1,
1988. Reduced nonparticipating physician payments to 95.5
percent of prevailing charges for participating physicians for
services furnished from April 1 to December 31, 1988; for
fiscal year 1989, further reduced payments to 95 percent of the
prevailing charges of participating physicians. Added a 5-
percent bonus payment for services provided in underserved
areas, effective January 1, 1989 in rural areas and January 1,
1991 in urban areas. (Effective as specified.)
Reductions in overpriced procedures
Expanded list of overpriced procedures (previously limited
to cataract surgery) and reduced prevailing charges for them.
Reduced prevailing charges by 2 percent from the 1987 level,
and further reduced prevailing charges by specified amounts if
the prevailing charge was above 85 percent of the national
average level. (Effective for items and services provided on or
after April 1, 1988.)
Durable medical equipment (DME) fee schedule
Froze payment screens for DME for 1 year from January 1
through December 31, 1988. Required the Secretary to establish
a fee schedule for the fee screen year beginning January 1,
1989, for each of 6 categories of DME services. (Effective date
of fee schedule for items furnished on or after January 1,
1989.)
Ambulatory surgery copayment
Required that the deductible and coinsurance requirements
be imposed for assigned physicians' services provided in ASCs
and hospital outpatient departments. (Effective for services
furnished on or after April 1, 1988.)
Flu vaccine
Provided coverage of influenza vaccine and its
administration if a demonstration conducted by the Secretary
found it to be cost effective. (Effective date of 24-month
demonstration October 1, 1988; Secretary authorized coverage
effective May 1, 1993.)
Therapeutic shoes for diabetics
Provided coverage for therapeutic shoes for diabetics
contingent on the demonstration of their cost effectiveness by
the Secretary. (Effective date of 24-month demonstration
October 1, 1988; Secretary authorized coverage effective May 1,
1993.)
Coverage of mental health services
Increased the limit on recognized charges for the
outpatient treatment of mental disorders beginning in calendar
year 1988. Beginning calendar year 1989, the payment limit
would not include brief office visits to prescribe or monitor
prescription drugs used as treatment. (Effective January 1,
1988.)
Medicare Catastrophic Coverage Act of 1988 (MCCA), Public Law 100-360
Part A benefits
Modified hospital coverage by specifying a maximum of one
hospital deductible per year and eliminating the day limits,
coinsurance charges, and spell of illness provisions. Modified
skilled nursing facility (SNF) benefit by requiring coinsurance
for the first 8 days of care; eliminating coinsurance for days
21-100; covering up to 150 days per year; and eliminating the
prior hospitalization requirement. Modified home health benefit
by expanding definition of intermittent care and permitting
extension of hospice benefit beyond 210 days. (Hospital and SNF
benefits effective January 1, 1989; home health and hospice
benefits effective January 1, 1990.)
Part B benefits
Established a maximum out-of-pocket limit (``catastrophic
cap'') on beneficiary liability for part B cost-sharing
charges, and set cap at level to cover 7 percent of
beneficiaries. Added coverage for routine mammography screening
and home intravenous drug therapy services. Provided respite
coverage for up to 80 hours per year for chronically dependent
individuals who had met the catastrophic or prescription drug
cap. (Effective January 1, 1990.)
Catastrophic drug benefits
Established, effective January 1, 1990, a limited
prescription drug benefit for two categories of drugs (home
intravenous (IV) drugs and immunosuppressive drugs) once the
beneficiary met a $550 deductible. Extended, beginning January
1, 1991, catastrophic coverage for all outpatient prescription
drugs once the beneficiary met a $600 deductible (indexed to
cover 16.8 percent of beneficiaries in future years). Set the
coinsurance at 50 percent, dropping to 20 percent by 1993.
(Limited coverage effective beginning in 1990; coverage for all
drugs beginning in 1991, with full implementation in 1993.)
Financing
Added an additional amount to the monthly part B premium.
Added a supplemental premium (a surtax collected in conjunction
with the Federal income tax) for persons with income tax
liability above $150. (Effective for part B premiums beginning
January 1, 1989; supplemental premiums effective for tax years
beginning after 1988.)
Qualified Medicare beneficiaries (QMBs)
Required Medicaid to pay Medicare premiums and cost-sharing
charges for Medicare beneficiaries below poverty. (Coverage
phased in beginning January 1, 1989)
Medicare Catastrophic Coverage Repeal Act of 1989, Public Law 101-234
Repealed the Medicare and financing provisions included in
the 1988 law. Generally the repeal restored prior law
provisions as if the catastrophic act had not been passed. For
hospital and SNF benefits which had gone into effect in 1989,
prior law provisions were restored, effective January 1, 1990
with transition provisions included for persons in a hospital
or SNF on that date. The additional part B premium was
repealed, effective January 1, 1990. The QMB provision was not
repealed.
Omnibus Budget Reconciliation Act of 1989 (OBRA 1989), Public Law 101-
239
Sequester
Extended sequester affecting part A and HMO payments (a
reduction of 2.1 percent) through December 31, 1989, and
extended sequester for part B payments (a 2.1-percent
reduction) through March 31, 1990. (Effective on enactment.)
Hospital capital payments
Extended the 15-percent reduction in hospital capital
payments for discharges occurring during the period January 1
through September 30, 1990. (Effective on enactment.)
DRG weighting factors
Reduced the weighting factors for each diagnosis-related
group (DRG) by 1.22 percent for hospital discharges occurring
in fiscal year 1990 and revised the update factors for fiscal
year 1990. (Effective on enactment.)
Disproportionate-share adjustment for hospitals
Increased the adjustment for certain hospitals that served
a disproportionate share of low-income patients. (Effective for
discharges occurring on or after April 1, 1990.)
Additional payments for rural hospitals
Extended rural referral centers designations for 3 years;
expanded the Sole Community Hospital Program; established new
criteria for Medicare-dependent small rural hospitals; and
established the Essential Access Community Hospital Program.
(Effective for varying periods after enactment.)
Physician payment reform
Established a fee schedule for payment of physician
services based on a resource-based relative scale, to be phased
in over a 5-year period beginning January 1, 1992.
Physician payments
Delayed the inflation update from January 1 until April 1,
1990 and reduced the 1990 update for certain physician
services; reduced payments for certain overvalued procedures;
and reduced payments under the radiology fee schedule.
(Effective for the 9-month period beginning on April 1, 1990.)
Clinical lab fee schedule
Established a ceiling on lab fee schedule payments at 93
percent of the national median for the particular test.
(Effective for lab tests performed on or after January 1,
1990.)
Durable medical equipment update
Eliminated the inflation update in the fee schedules for
durable medical equipment. (Effective for equipment provided
during calendar year 1990.)
Mental health services
Eliminated the dollar limit on payments for mental health
services, and expanded settings in which services of clinical
psychologists and clinical social workers could be covered.
(Dollar limit elimination effective January 1, 1990; expanded
settings provision effective July 1, 1990. )
Pap smear coverage
Authorized coverage of pap smears, once every 3 years, more
often for women at high risk of developing cervical cancer.
(Effective July 1, 1990.)
Agency for Health Care Policy and Research (AHCPR)
Created the AHCPR and authorized the agency to undertake
research on the effectiveness, efficiency, quality, and
outcomes of health care services, assuring that the needs and
priorities of Medicare were reflected in such research.
(Effective on enactment.)
Self-referral
Prohibited physician referral to clinical laboratories with
which the referring physician has a financial relationship.
(Effective January 1, 1992.)
Omnibus Budget Reconciliation Act of 1990 (OBRA 1990), Public Law 101-
508
General payment freeze
Froze payments for part A services at fiscal year 1990
levels for the period October 21 through December 31, 1990.
Reduced part B payments by 2 percent for November 1980 and
December 1990. (Effective as specified.)
Hospital inpatient payment rates
Reduced update factors for PPS hospitals for fiscal years
1991-93. Set update factors for rural hospitals such that rural
payment rates would equal those for ``other urban'' hospitals
by fiscal year 1995. Increased and made permanent payment
adjustments to disproportionate-share hospitals. (Effective for
fiscal years 1991-95.)
Hospital capital payments
Reduced capital payments by 15 percent for fiscal year
1991; for fiscal years 1992-95, required reductions in hospital
payments equal to 10 percent of what would have been paid for
capital costs on a reasonable cost basis. (Effective for fiscal
years 1991-95.)
Physician payments
Reduced the 1991 inflation update for primary care services
and froze rates for other services; reduced 1992 increases for
nonprimary care services. Continued payment reductions for
overpriced procedures and added to the list of such procedures.
Established new limits on balance billing charges to be phased
in over the 1991-93 period. (Payment limits effective for
calendar years 1991 and 1992; balance billing limits effective
beginning in 1991.)
Hospital outpatient payments
Reduced by 5.8 percent payments for services paid on a
reasonable cost basis. (Effective for fiscal years 1991-95.)
Durable medical equipment (DME)
Replaced regional limits on DME fees with phased-in
national upper and lower limits and reduced DME update. (Update
reductions effective for calendar years 1991 and 1992; national
limits effective for 1991 and later years.)
Clinical laboratory services
Limited the update for clinical laboratory services to 2
percent per year for 1991-93 and reduced the national limits on
laboratory fee schedules. (Update reductions effective for
calendar years 1991-93; national limit reductions effective
January 1, 1991.)
Injectable drugs for osteoporosis
Added coverage of injectable drugs for treatment of bone
fractures of homebound individuals with osteoporosis who were
unable to self-administer the drug. (Effective January 1, 1991
through December 31, 1995.)
Mammography
Added coverage of mammography screenings at specified
intervals. (Effective January 1, 1991.)
Part B deductible
Increased the part B deductible from $75 to $100.
(Effective January 1, 1991.)
Part B premium
Set part B premiums at fixed dollar amounts projected to
equal 25 percent of program costs. (Effective for fiscal years
1991-95.)
Medigap
Established mandatory standards for Medigap policies,
including uniform benefit packages, to replace the previous
voluntary certification system. (Generally effective no later
than 1 year after promulgation of model regulation by National
Association of Insurance Commissioners.)
Federally qualified health centers (FQHCs)
Established cost-based reimbursement for services furnished
by FQHCs, including federally funded community and migrant
health centers and similar facilities. (Effective October 1,
1991.)
HI tax
Raised the income level subject to the HI tax. (Effective
January 1, 1991.)
Omnibus Budget Reconciliation Act of 1993 (OBRA 1993), Public Law 103-
66
Payment for part A services
Reduced update factors for inpatient hospital and hospice
services for fiscal years 1994-97; reduced hospital capital
payment rates for fiscal years 1996-98; froze cost limits for
SNFs for fiscal years 1994-95; eliminated return on equity
payments for SNFs. (Payment reductions effective as specified;
elimination of return on equity effective October 1, 1993.)
Payment for physician services
Reduced updates for services other than primary care.
Reduced Medicare volume performance standards (MVPS) for 1994
and subsequent years and increased the potential reductions in
fee updates for failure to meet the MVPS for 1995 and
subsequent years. (Update reductions effective for calendar
years 1994 and 1995.)
Payment for other part B services
Froze payment rates for certain DME services, clinical
laboratory services, ASC services, and home health agencies.
Extended existing reductions in payments for hospital
outpatient services for fiscal years 1996-98. (Payment freezes
generally effective for 1994 and 1995.)
Graduate medical education
Froze per resident payment amounts for nonprimary care
residents. (Effective for fiscal years 1994 and 1995.)
Part B premium
Extended policy of setting part B premium at 25 percent of
program costs. (Effective for calendar years 1996-98.)
Oral cancer drugs
Added coverage of certain self-administered anticancer
drugs. (Effective January 1, 1994.)
Physician ownership and referral
Extended self-referral prohibition to additional services,
including DME, physical therapy, home health, prescription
drugs, and hospital services. (Effective for referrals made
after December 31, 1994.)
Part A revenue provisions
Eliminated upper limit on earnings subject to HI payroll
tax. Also transferred into part A trust fund new revenues from
increased taxation of Social Security benefits. (Effective
January 1, 1994.)
Health Insurance Portability and Accountability Act of 1996, Public Law
104-1
Added new criminal health care fraud provisions,
strengthened existing civil and criminal fraud and abuse
provisions and provided funding for new antifraud programs
(generally effective on enactment or January 1, 1997).
Balanced Budget Act of 1997, Public Law 105-33
Hospitals
Froze PPS hospital and PPS-exempt hospitals and units and
limited updates for fiscal years 1999-2002. Established a
prospective payment system for inpatient rehabilitation
hospitals, effective beginning in fiscal year 2001. Rebased
capital payment rates and provided for additional reductions
over the fiscal year 1997-2002 period. Reduced the IME payment
from the current 7.7 percent to 5.5 percent by fiscal year 2001
and reformed direct GME payments (generally effective on
enactment or October 1, 1997).
Skilled nursing facilities
Provided for a phase in of a prospective payment system
that will pay a Federal per diem rate for covered SNF services
(generally effective July 1, 1998).
Home health
Provided for the establishment of a prospective payment
system for home health services. Provided for a reduction in
per visit cost limits prior to the implementation of the
prospective payment system, clarified the definitions of part-
time and intermittent care, and provided for a study of the
definition of homebound. Provided for the transfer of some home
health costs from part A to part B (prospective payment
effective October 1, 1999, reduction in cost-limits effective
on enactment, definition clarification effective October 1,
1997, and transfer of costs effective January 1, 1998).
Hospice
Reduced the hospice payment update for each of fiscal year
1998 through fiscal year 2002, and clarified the definition of
hospice care (generally effective on enactment).
Physicians
Provided for use of a single conversion factor; replaced
the volume performance standard with the sustainable growth
rate; provided for phased-in implementation of resource-based
practice expenses; and permitted use of private contracts under
specified conditions (generally effective January 1, 1998).
Hospital outpatient departments
Extended reductions in payments for outpatient hospital
services paid on the basis of costs through December 1999 and
established a prospective payment system for hospital
outpatient departments for covered services beginning in 1999
(generally effective on enactment).
Other providers
Froze payments for laboratory services for fiscal years
1998-2002; provided for establishment of a fee schedule in 2000
for payment for ambulance services (generally effective on
enactment).
Beneficiary payments
Permanently set the part B premium at 25 percent of
program costs and expanded the premium assistance beginning in
1998 available under the Specified Low-Income Medicare
Beneficiary (SLMB) Program (effective on enactment).
Prevention initiatives
Authorized coverage for annual mammograms for all women
over 40. Added coverage for screening pelvic exams, prostate
cancer screening tests, colorectal cancer screening tests,
diabetes self-management training services, and bone mass
measurements for certain high-risk persons (generally effective
in 1998, except prostate cancer screening effective 2000).
Supplementary coverage
Provided for guaranteed issuance of specified Medigap
policies without a preexisting condition exclusion for certain
continuously enrolled aged individuals (effective July 1,
1998).
Competitive bidding
Provided for competitive bidding demonstrations for
furnishing part B services (not including physicians services)
(effective on enactment).
Commissions
Established a 17-member National Advisory Commission on
the Future of Medicare (with appointments to be made by
December 1, 1997). Established the Medicare Payment Advisory
Commission replacing the Prospective Payment Assessment
Commission and the Physician Payment Review Commission (with
appointments to be made by September 30, 1997).
Medicare+Choice
Established a new part C of Medicare called
Medicare+Choice. This program is built on the existing Medicare
Risk Contract Program which enabled beneficiaries to enroll,
where available, in health maintenance organizations (HMOs)
that contracted with the Medicare Program. The Medicare+Choice
Program expands, beginning in 1999, the private plan options
that could contract with Medicare to other types of managed
care organizations (for example, preferred provider
organizations and provider-sponsored organizations), private
fee-for-service plans, and, on a limited demonstration basis,
high deductible plans (called medical savings account plans)
offered in conjunction with medical savings accounts (effective
on enactment).
CBO SAVINGS AND REVENUE ESTIMATES FOR BUDGET RECONCILIATION ACTS, 1981-
93
Table 2-41 shows estimates of savings and revenue increases
for budget reconciliation legislation enacted from 1981 to
1993. These estimates were made at the time of enactment by the
Congressional Budget Office (CBO). It should be noted that the
estimates are compared with the CBO budget baseline in effect
at the time. The savings from the various reconciliation bills
cannot be added together.
TABLE 2-41.--MEDICARE SAVINGS ESTIMATES, 1981-93
[In billions of dollars]
------------------------------------------------------------------------
Legislative act Savings
------------------------------------------------------------------------
Omnibus Budget Reconciliation Act of 1981:
Spending reductions for fiscal years 1982-84............. $4.3
Tax Equity and Fiscal Responsibility Act of 1982:
Spending reductions for fiscal years 1983-87............. 23.1
Social Security Amendments of 1983:
Spending reductions for fiscal years 1983-88............. 0.2
Revenue increases for fiscal years 1983-88............... 11.5
Deficit Reduction Act of 1984:
Spending reductions for fiscal years 1984-87............. 6.1
Consolidated Omnibus Budget Reconciliation Act of 1985:
Spending reductions for fiscal years 1986-81............. 12.6
Omnibus Budget Reconciliation Act of 1986:
Spending reductions for fiscal years 1987-89............. 1.0
Omnibus Budget Reconciliation Act of 1987:
Spending reductions for fiscal years 1988-90............. 9.8
Omnibus Budget Reconciliation Act of 1989:
Spending reductions for fiscal years 1990-94............. 10.9
Omnibus Budget Reconciliation Act of 1990:
Spending reductions for fiscal years 1991-95............. 43.1
Revenue increases for fiscal years 1991-95............... 26.9
Omnibus Budget Reconciliation Act of 1993:
Spending reductions for fiscal years 1994-98............. 55.8
Revenue increases for fiscal years 1994-98............... 53.8
Health Insurance Portability and Accountability Act of 1996:
Spending reductions for fiscal years 1996-2002........... 3.0
Balanced Budget Act of 1997:
Spending reductions for fiscal years 1998-2002........... 116.4
Spending reductions for fiscal years 1998-2007........... 393.8
------------------------------------------------------------------------
Note.--Savings relative to baseline at time of enactment. Figures cannot
be summed.
Source: Committee on Ways and Means, (1988, 1989, 1991); Congressional
Budget Office.
MEDICARE HISTORICAL DATA
Tables 2-42 through 2-52 present detailed historical data
on the Medicare Program. Tables 2-42, 2-43, and 2-44 present
detailed enrollment data. Table 2-45 describes the percentage
of enrollees participating in a State buy-in agreement. Tables
2-46 and 2-47 show the distribution of Medicare payments by
type of coverage and by type of service. Tables 2-48 and 2-49
show the number of persons served and the average reimbursement
per person served and per enrollee. Table 2-50 shows the
utilization of hospital services. Table 2-51 presents Medicare
utilization and reimbursement by State. Table 2-52 shows the
number of participating institutions and organizations.
TABLE 2-42.--NUMBER OF MEDICARE ENROLLEES BY TYPE OF COVERAGE AND TYPE OF ENTITLEMENT, SELECTED YEARS 1968-95
[In thousands]
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Year Average annual rate of
--------------------------------------------------------------------------------------------------------------------------------------------------- growth (percent)
Type of entitlement and coverage --------------------------
1968 1975 1980 1982 1984 1986 1988 1989 1990 1991 1992 1993 1994 1995 1968-75 1975-83 1984-95
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total:
HI \1\ and/or SMI \2\................................... 19,821 24,959 28,478 29,494 30,456 31,750 32,980 33,579 34,203 34,870 35,579 36,306 36,935 37,535 3.3 2.3 2.1
Total HI: 19,770 24,640 28,067 29,069 29,996 31,216 32,413 33,040 33,719 34,429 35,153 35,904 36,543 37,135 3.2 2.3 2.2
HI only................................................. 1,016 1,054 1,079 1,082 1,040 1,160 1,363 1,481 1,574 1,633 1,645 1,694 1,768 1,850 0.5 0.0 5.9
Total SMI............................................... 18,805 23,905 27,400 28,412 29,416 30,590 31,617 32,099 32,629 33,237 33,933 34,612 35,167 35,685 3.5 2.4 2.0
SMI only................................................ 51 318 411 425 460 534 567 539 484 441 425 425 392 400 29.9 4.1 -1.4
Aged:
HI and/or SMI........................................... 19,821 22,790 25,515 26,540 27,571 28,791 29,879 30,409 30,948 31,485 32,010 32,462 32,801 33,142 2.0 2.2 1.9
Total HI................................................ 19,770 22,472 25,104 26,115 27,112 28,257 29,312 29,869 30,464 31,043 31,584 32,060 32,409 32,742 1.8 2.2 1.9
HI only................................................. 1,016 845 835 833 807 928 1,098 1,192 1,263 1,300 1,297 1,315 1,353 1,000 -2.6 -0.4 2.2
Total SMI............................................... 18,805 21,945 24,680 25,707 26,765 27,863 28,780 29,216 29,686 30,185 30,712 31,147 31,447 31,742 2.2 2.3 1.7
SMI only................................................ 51 318 411 425 459 534 567 539 484 441 425 401 392 400 29.9 4.1 -1.4
All disabled:
HI and/or SMI........................................... (\4\) 2,168 2,963 2,954 2,884 2,959 3,102 3,171 3,255 3,385 3,568 3,844 4,135 4,393 NA 3.8 4.3
Total HI................................................ (\4\) 2,168 2,963 2,954 2,884 2,959 3,101 3,171 3,255 3,385 3,568 3,844 4,135 4,393 NA 3.8 4.3
HI only................................................. (\4\) 209 244 249 233 232 265 288 311 333 348 378 807 451 NA 1.5 6.8
Total SMI............................................... (\4\) 1,959 2,719 2,759 2,682 2,727 2,837 2,883 2,943 3,052 3,220 3,466 3,720 3,942 NA 4.0 4.0
SMI only \3\............................................ (\4\) ......... ........ ......... ........ ......... ........ ......... ........ ......... ........ ......... ........ ......... ....... ....... .......
ESRD \5\ only:
HI and/or SMI........................................... (\4\) 13 28 27 30 39 53 58 65 69 72 226 235 71 NA 10.1 9.0
Total HI................................................ (\4\) 13 28 27 30 39 53 58 65 69 72 224 233 71 NA 10.1 9.0
HI only................................................. (\4\) 1 1 2 2 3 4 5 6 6 7 11 10 8 NA 9.1 14.9
Total SMI............................................... (\4\) 12 27 26 28 36 49 54 59 62 65 215 225 63 NA 10.1 8.4
SMI only \3\............................................ (\4\) ......... ........ ......... ........ ......... ........ ......... ........ ......... ........ ......... ........ ......... ....... ....... .......
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Hospital insurance. \2\ Supplementary medical insurance. \3\ Disabled and end-stage renal disease only must have HI to be eligible for SMI coverage. \4\ Medicare disability entitlement began in 1973. \5\ End-stage
renal disease.
NA--Not available.
Source: Health Care Financing Administration, Bureau of Data Management and Strategy.
TABLE 2-43.--GROWTH IN NUMBER OF AGED MEDICARE ENROLLEES BY SEX AND AGE, SELECTED YEARS 1968-95
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Year Average annual growth Enrollees
------------------------------------------------------------------------------------------ rate (percent) as percent
--------------------------- Total aged of total
Sex and age population aged
1968 1975 1980 1984 1986 1990 1991 1992 1993 1995 1968-75 1975-84 1986-95 1995 \1\ population
1995
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
All persons........................................ 19,496 22,548 25,515 27,571 28,791 30,948 31,485 32,011 32,462 33,142 2.1 2.3 1.6 33,530 97.8
65-69............................................ 6,551 7,642 8,459 8,784 9,163 9,695 9,690 9,692 9,683 9,517 2.2 1.6 0.4 9,928 96.6
70-74............................................ 5,458 5,950 6,756 7,300 7,564 7,951 8,163 8,373 8,509 8,756 1.2 2.3 1.6 8,830 98.6
75-79............................................ 3,935 4,313 4,809 5,327 5,573 6,058 6,175 6,261 6,369 6,563 1.3 2.4 1.8 6,681 95.8
80-84............................................ 2,249 2,793 3,081 3,382 3,559 3,957 4,065 4,166 4,257 4,470 3.1 2.2 2.6 4,463 97.8
85 and over...................................... 1,303 1,850 2,410 2,778 2,932 3,286 3,393 3,519 3,643 3,837 5.1 4.6 3.0 3,628 102.9
Males.............................................. 8,177 9,201 10,268 11,044 11,525 12,416 12,650 12,886 13,095 13,434 1.7 2.0 1.7 13,688 96.9
65-69............................................ 2,944 3,420 3,788 3,942 4,109 4,352 4,358 4,374 4,386 4,348 2.2 1.6 0.6 4,506 96.8
70-74............................................ 2,322 2,504 2,841 3,088 3,214 3,406 3,505 3,604 3,670 3,791 1.1 2.4 1.9 3,836 98.1
75-79............................................ 1,596 1,669 1,854 2,061 2,160 2,382 2,441 2,485 2,542 2,642 0.6 2.4 2.3 2,720 94.3
80-84............................................ 864 1,005 1,062 1,161 1,221 1,369 1,411 1,454 1,495 1,593 2.2 1.6 3.0 1,609 96.0
85 and over...................................... 450 604 722 793 822 906 934 968 1,003 1,060 4.3 3.1 2.9 1,017 101.2
Females............................................ 11,319 13,347 15,247 16,526 17,266 18,532 18,835 19,125 19,367 19,708 2.4 2.4 1.5 19,842 98.5
65-69............................................ 3,606 4,222 4,671 4,842 5,054 5,343 5,332 5,317 5,298 5,169 2.3 1.5 0.3 5,422 96.5
70-74............................................ 3,136 3,446 3,914 4,212 4,350 4,545 4,657 4,769 4,839 4,964 1.4 2.3 1.5 4,994 99.0
75-79............................................ 2,338 2,644 2,954 3,266 3,414 3,676 3,734 3,776 3,827 3,921 1.8 2.4 1.6 3,961 96.8
75-84............................................ 1,386 1,788 2,019 2,222 2,339 2,588 2,653 2,713 2,762 2,877 3.7 2.4 2.3 2,854 98.9
85 and over...................................... 853 1,246 1,689 1,985 2,110 2,380 2,459 2,551 2,640 2,777 5.6 5.3 3.1 2,611 103.6
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ U.S. residents only.
Source: Health Care Financing Administration, Bureau of Data Management and Strategy; and U.S. Department of Commerce, Bureau of the Census.
TABLE 2-44.--GROWTH IN NUMBER OF DISABLED MEDICARE ENROLLEES WITH HOSPITAL INSURANCE COVERAGE BY TYPE OF ENTITLEMENT AND AGE, SELECTED YEARS 1975-95
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Year Average annual percent
------------------------------------------------------------------------------------------------------------ growth rate
Type of entitlement and age --------------------------
1975 1980 1984 1988 1990 1992 1993 1994 1995 1975-82 1982-88 1982-95
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
All disabled persons..................................... 2,058,424 2,425,231 2,884,410 3,101,482 3,254,983 3,568,625 3,844,178 4,134,604 4,393,287 2.3 4.3 4.7
Under age 35......................................... 238,070 193,392 388,240 471,129 483,262 512,495 545,644 574,003 587,709 -2.7 15.7 8.8
35-44................................................ 251,142 258,374 422,207 572,408 654,953 762,759 834,426 908,076 973,328 1.0 13.4 10.4
45-54................................................ 508,345 572,823 584,214 670,131 741,193 874,797 974,589 1,083,945 1,187,993 0.7 3.9 6.4
55-64................................................ 1,060,967 1,400,642 1,489,749 1,397,814 1,375,575 1,418,574 1,489,519 1,568,580 1,644,257 4.2 -0.2 1.1
All disabled workers..................................... 1,638,662 2,396,897 2,309,866 2,456,135 2,579,097 2,856,517 3,100,532 3,367,187 3,602,559 5.5 0.5 3.2
Under age 35......................................... 100,439 184,619 193,094 249,291 257,760 286,486 317,876 345,322 357,794 9.3 4.9 5.1
35-44................................................ 164,439 253,186 290,395 414,749 482,071 576,549 642,386 710,431 769,071 7.0 7.8 8.6
45-54................................................ 426,451 565,846 485,378 552,442 612,692 731,713 823,552 926,390 1,023,616 3.0 0.8 5.3
55-64................................................ 947,333 1,393,246 1,340,999 1,239,653 1,226,574 1,261,769 1,316,718 1,385,044 1,452,078 5.9 -2.1 -0.2
Adults disabled as children.............................. 324,864 409,072 459,620 519,009 542,416 566,336 580,439 595,750 609,081 4.4 2.8 2.5
Under age 35......................................... 151,708 173,684 186,003 207,311 208,901 208,710 210,760 212,944 213,973 2.4 2.2 1.3
35-44................................................ 84,508 105,092 126,252 146,460 158,725 170,363 176,182 182,861 189,108 4.8 3.8 3.8
45-54................................................ 71,484 80,381 87,380 99,444 107,092 117,333 122,435 127,622 132,484 2.4 2.8 3.5
55-64................................................ 45,164 49,910 59,985 65,774 67,698 69,930 71,062 72,323 73,516 3.2 2.7 2.1
Widows and widowers...................................... 83,771 110,785 85,227 73,101 68,793 74,157 91,643 101,247 111,121 2.5 -5.0 0.9
Under 55............................................. 7,446 7,577 4,608 5,685 5,615 7,399 9,811 11,458 12,420 -3.5 -0.4 6.0
55-64................................................ 76,325 103,208 80,618 67,416 63,178 66,758 81,832 91,789 98,701 2.9 -5.3 -0.4
End-stage renal disease only............................. 11,127 28,334 29,697 53,237 64,677 71,615 71,564 68,420 70,526 13.7 11.7 7.6
Under age 35......................................... 3,729 8,773 9,143 14,507 16,601 17,299 17,008 15,737 15,942 12.3 9.5 5.0
35-44................................................ 2,187 5,188 5,559 11,199 14,157 15,847 15,858 14,784 15,149 12.3 14.7 9.0
45-54................................................ 2,966 6,977 6,848 12,560 15,794 18,352 18,791 18,475 19,473 12.2 11.2 8.6
55-64................................................ 2,245 7,396 8,147 14,971 18,125 20,117 19,907 19,424 19,962 18.6 12.5 7.9
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Health Care Financing Administration, Bureau of Data Management and Strategy.
TABLE 2-45.--NUMBER AND PERCENTAGE OF INDIVIDUALS ENROLLED IN SUPPLEMENTARY MEDICAL INSURANCE UNDER STATE BUY-IN
AGREEMENTS BY TYPE OF BENEFICIARY AND BY YEAR OR 1995 AREA OF RESIDENCE, SELECTED YEARS 1968-95
----------------------------------------------------------------------------------------------------------------
All persons Aged Disabled
--------------------------------------------------------------
Year or area of residence \1\ Percent Percent Percent
Number in of SMI Number in of SMI Number in of SMI
thousands enrolled thousands enrolled thousands enrolled
----------------------------------------------------------------------------------------------------------------
Year:
1968......................................... 1,648 8.8 1,648 8.8 NA NA
1975......................................... 2,846 12.0 2,483 11.4 363 18.7
1980......................................... 2,954 10.9 2,449 10.0 504 18.9
1981......................................... 3,257 11.7 2,659 10.6 598 21.7
1982......................................... 2,791 9.8 2,288 8.9 503 18.6
1983......................................... 2,654 9.3 2,177 8.4 477 18.1
1984......................................... 2,601 8.9 2,127 8.0 474 18.2
1985......................................... 2,670 9.0 2,164 8.0 505 19.2
1986......................................... 2,776 9.2 2,222 8.0 554 20.9
1987......................................... 2,985 9.6 2,337 8.2 648 23.2
1988......................................... 3,033 9.6 2,341 8.1 691 24.4
1989......................................... 3,351 10.4 2,549 8.7 802 27.8
1990......................................... 3,604 11.0 2,714 9.1 890 30.2
1991......................................... 3,768 10.4 2,817 8.7 949 27.8
1992......................................... 4,066 12.0 2,972 9.7 1,083 33.6
1993......................................... 4,353 12.6 3,122 10.0 1,231 35.5
1994......................................... 4,625 13.2 3,243 10.3 1,382 37.2
1995......................................... 4,895 13.7 3,369 10.6 1,526 38.7
Area of residence: \1\
Alabama...................................... 124 20.1 86 16.4 34 41.5
Alaska....................................... 6 19.4 4 14.8 2 50.0
Arizona...................................... 46 8.0 31 6.0 15 30.0
Arkansas..................................... 83 20.3 58 16.7 22 41.5
California................................... 783 22.4 561 17.9 204 63.6
Colorado..................................... 49 12.2 32 9.0 17 42.5
Connecticut.................................. 45 9.4 31 7.1 19 51.4
Delaware..................................... 6 6.2 4 4.6 3 33.3
District of Columbia......................... 15 21.4 11 17.5 4 57.1
Florida...................................... 284 11.1 211 9.0 77 42.3
Georgia...................................... 170 21.1 119 17.5 48 45.3
Hawaii....................................... 18 12.9 14 10.8 4 44.4
Idaho........................................ 14 9.7 8 6.2 5 41.7
Illinois..................................... 144 9.3 89 6.4 54 37.8
Indiana...................................... 84 10.6 53 7.5 29 34.9
Iowa......................................... 53 11.5 33 7.8 18 48.6
Kansas....................................... 36 9.7 24 7.1 12 41.4
Kentucky..................................... 101 17.8 67 14.3 35 42.2
Louisiana.................................... 114 20.5 80 17.1 35 44.9
Maine........................................ 29 14.9 18 10.6 12 57.1
Maryland..................................... 64 11.2 44 8.5 19 38.8
Massachusetts................................ 122 13.9 83 10.6 49 59.0
Michigan..................................... 145 11.2 75 6.5 53 37.6
Minnesota.................................... 57 9.4 35 6.3 26 53.1
Mississippi.................................. 111 28.9 77 24.4 30 51.7
Missouri..................................... 77 9.6 48 6.7 28 34.1
Montana...................................... 11 8.7 7 6.3 5 38.5
Nebraska..................................... 17 7.1 9 4.1 8 44.4
Nevada....................................... 15 8.2 10 6.1 5 33.3
New Hampshire................................ 6 4.1 3 2.2 3 23.1
New Jersey................................... 127 11.3 92 9.0 39 42.4
New Mexico................................... 31 16.1 22 12.6 9 40.9
New York..................................... 313 12.6 232 10.5 105 42.7
North Carolina............................... 177 17.8 138 16.1 56 47.9
North Dakota................................. 6 6.0 4 4.3 2 25.0
Ohio......................................... 173 10.8 119 8.3 54 32.5
Oklahoma..................................... 65 13.8 45 10.8 17 38.6
Oregon....................................... 45 10.0 29 7.1 16 42.1
Pennsylvania................................. 166 8.3 105 5.8 64 38.8
Rhode Island................................. 15 9.6 10 7.0 6 40.0
South Carolina............................... 103 20.9 69 16.6 31 48.4
South Dakota................................. 13 11.6 9 8.8 4 44.4
Tennessee.................................... 150 20.2 104 16.4 52 55.3
Texas........................................ 322 16.1 252 14.1 75 41.4
Utah......................................... 15 8.4 8 5.0 6 40.0
Vermont...................................... 12 15.2 8 11.4 5 62.5
Virginia..................................... 110 14.0 74 10.8 34 40.5
Washington................................... 76 11.5 46 7.8 29 49.2
West Virginia................................ 40 12.5 26 9.7 16 34.0
Wisconsin.................................... 86 11.7 45 6.8 31 45.6
Wyoming...................................... 5 8.6 3 5.8 2 40.0
Puerto Rico.................................. 0 0.0 0 0.0 0 0.0
Guam and Virgin Islands \2\.................. 1 8.9 1 9.1 0 6.3
--------------------------------------------------------------
United States............................ 4,892 13.9 3,367 10.7 1,525 41.7
All areas................................ 4,895 13.7 3,369 10.6 1,526 41.0
----------------------------------------------------------------------------------------------------------------
\1\ State of residence is not necessarily State that bought coverage.
\2\ Data for these areas combined to prevent disclosure of confidential information.
NA--Not available.
Source: Health Care Financing Administration, Bureau of Data Management and Strategy.
TABLE 2-46.--DISTRIBUTION OF MEDICARE BENEFIT PAYMENTS BY TYPE OF COVERAGE AND TYPE OF SERVICE, SELECTED YEARS 1975-95
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Type of coverage and type of 1975 1980 1985 1990 1992 1993 1994 1995
service amount Percent amount Percent amount Percent amount Percent amount Percent amount Percent amount Percent amount Percent
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Hospital insurance.............. $11,315 72.6 $25,051 70.2 $47,444 67.4 $66,050 60.9 $83,691 62.9 $93,290 63.3 $103,093 63.8 116,176 64.1
Inpatient..................... 10,877 69.8 24,116 67.6 44,940 63.8 59,383 54.7 71,000 53.4 76,182 51.7 81,517 50.4 89,127 49.2
Skilled nursing facility...... 254 1.6 395 1.1 548 0.8 2,620 2.4 4,051 3.0 5,797 3.9 7,596 4.7 9,595 5.3
Home health agency............ 104 0.7 540 1.5 1,913 2.7 3,689 3.4 7,760 5.8 10,252 7.0 12,559 7.8 15,571 8.6
Hospice....................... ......... ....... ......... ....... 43 0.1 358 0.3 880 0.7 1,059 0.7 1,421 0.9 1,883 1.0
Supplementary medical insurance. 4,273 27.4 10,635 29.8 22,947 32.6 42,468 39.1 49,260 37.1 53,979 36.7 58,618 36.2 64,973 35.9
Physicians \1\................ 3,416 21.9 8,187 22.9 17,312 24.6 29,609 27.3 32,394 24.4 35,282 24.0 37,435 23.1 40,435 22.3
Outpatient hospital........... 643 4.1 1,897 5.3 4,319 6.1 8,482 7.8 10,990 8.3 11,539 7.8 13,497 8.3 15,394 8.5
Home health agency............ 95 0.6 234 0.7 38 0.1 74 0.1 71 0.1 112 0.1 144 0.1 194 0.1
Group practice plan........... 80 0.5 203 0.6 720 1.0 2,827 2.6 3,933 3.0 5,002 3.4 5,465 3.4 6,883 3.8
Independent laboratory........ 39 0.3 114 0.3 558 0.8 1,476 1.4 1,872 1.4 2,044 1.4 2,077 1.3 2,067 1.1
---------------------------------------------------------------------------------------------------------------------------------------------------------------
Total payment............... 15,588 100.0 35,686 100.0 70,391 100.0 108,518 100.0 132,951 100.0 147,269 100.0 161,711 100.0 181,149 100.0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Includes other services.
Note.--Amounts in millions.
Source: Health Care Financing Administration, Bureau of Data Management and Strategy.
TABLE 2-47.--DISTRIBUTION OF MEDICARE BENEFIT PAYMENTS BY TYPE OF COVERAGE, TYPE OF SERVICE, AND TYPE OF
ENROLLEE, 1995
----------------------------------------------------------------------------------------------------------------
Type of enrollee
--------------------------------------------------------------------------
All enrollees Aged Disabled
Type of coverage and service --------------------------------------------------------------------------
Amount Amount Amount
(in Percentage (in Percentage (in Percentage
millions) distribution millions) distribution millions) distribution
----------------------------------------------------------------------------------------------------------------
Hospital insurance................... $116,176 78.9 $102,889 64.8 $13,287 59.3
Inpatient.......................... 89,127 60.5 77,607 48.9 11,520 51.4
Skilled nursing facility........... 9,595 6.5 9,176 5.8 419 1.9
Home health agency................. 15,571 10.6 14,317 9.0 1,254 5.6
Hospice............................ 1,883 1.3 1,789 1.1 94 0.4
Supplementary medical insurance...... 64,973 44.1 55,844 35.2 9,129 40.7
Physicians \1\..................... 40,435 27.5 35,813 22.6 4,622 20.6
Outpatient hospital................ 15,394 10.5 11,955 7.5 3,439 15.3
Home health agency................. 194 0.1 194 0.1 0 0.0
Group practice plan................ 6,883 4.7 6,096 3.8 787 3.5
Independent laboratory............. 2,067 1.4 1,786 1.1 281 1.3
--------------------------------------------------------------------------
Total payments................... 181,149 100.0 158,733 100.0 22,416 100.0
----------------------------------------------------------------------------------------------------------------
\1\ Includes other services.
Source: Health Care Financing Administration, Bureau of Data Management and Strategy.
TABLE 2-48.--PERSONS SERVED AND REIMBURSEMENTS FOR AGED MEDICARE ENROLLEES BY TYPE OF COVERAGE AND BY 1994 DEMOGRAPHIC CHARACTERISTICS, SELECTED YEARS
1968-95
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hospital insurance and/or Hospital insurance Supplementary medical insurance
supplementary medical insurance ------------------------------------------------------------------
----------------------------------- Reimbursements Reimbursements
Reimbursements Persons ----------------------- Persons ---------------------
Year, period, and 1994 characteristic Persons ------------------------ served served
served Per per 1,000 Per person Per per 1,000 Per Per
per 1,000 person Per enrollees served enrollee enrollees person enrollee
enrollees served enrollee served
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year:
1968............................................ 397.8 $670.08 $266.56 204.0 $934.42 $190.67 394.8 $203.94 $80.51
1975............................................ 527.9 1,054.63 556.78 220.9 1,855.38 409.78 536.0 295.91 158.60
1980............................................ 637.7 1,790.51 1,141.84 240.0 3,378.53 810.77 652.3 545.42 355.77
1981............................................ 655.0 2,024.49 1,325.97 243.4 3,877.39 943.84 669.5 613.13 410.47
1982............................................ 641.4 2,439.38 1,564.65 250.7 4,461.53 1,118.69 653.8 732.53 478.92
1983............................................ 660.2 2,610.80 1,723.69 250.9 4,803.71 1,205.13 672.2 825.26 554.77
1984............................................ 685.7 NA NA 239.6 NA NA 698.9 NA NA
1985............................................ 722.1 2,762.06 1,994.59 218.8 6,167.28 1,349.60 739.1 933.25 689.79
1986............................................ 731.7 2,870.05 2,099.93 213.0 6,528.36 1,390.28 750.8 1,012.17 759.95
1987............................................ 754.1 3,025.22 2,281.19 209.8 6,902.60 1,448.33 775.9 1,147.95 890.64
1988............................................ 767.8 3,177.60 2,439.87 207.5 7,514.76 1,559.23 792.5 1,192.41 944.96
1989............................................ 784.9 3,444.86 2,703.90 206.1 8,196.19 1,688.96 812.8 1,338.10 1,087.56
1990............................................ 801.6 3,578.43 2,868.57 209.0 8,519.97 1,780.60 831.6 1,398.86 1,163.29
1991............................................ 800.1 3,905.65 3,124.82 211.8 9,348.53 1,980.26 830.0 1,473.27 1,222.80
1992............................................ 794.4 4,193.90 3,331.60 213.0 10,126.30 2,157.20 823.4 1,522.90 1,254.00
1993............................................ 825.4 4,263.99 3,519.44 215.6 10,555.75 2,275.67 855.9 1,548.86 1,325.63
1994............................................ 830.0 4,739.79 3,933.86 217.3 11,794.20 2,563.28 861.0 1,699.26 1,461.54
1995............................................ 826.1 5,074.92 4,192.53 218.3 12,541.50 2,737.52 858.0 1,392.49 1,553.67
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annual percentage change in period:
1968-75......................................... 4.1 6.7 11.1 1.1 10.3 11.5 4.5 5.5 10.2
1975-85......................................... 3.2 10.1 13.6 -0.1 12.8 12.7 3.3 12.2 15.8
1985-95......................................... 1.4 6.3 7.7 0.0 7.4 7.3 1.5 4.1 8.5
========================================================================================================================================================
Age:
65 and 66 years................................. 809.3 $3,014.06 $2,467.31 130.4 $11,146.10 $1,493.82 888.4 $1,216.70 $1,087.20
67 and 68 years................................. 746.2 3,735.35 2,798.73 140.8 11,820.17 1,674.16 790.3 1,532.80 1,214.86
69 and 70 years................................. 772.6 3,929.28 3,038.79 156.7 11,784.69 1,852.45 808.1 1,568.08 1,269.35
71 and 72 years................................. 790.2 4,280.82 3,429.51 171.2 12,135.43 2,135.10 818.8 1,655.06 1,370.48
73 and 74 years................................. 816.6 4,628.87 3,746.84 194.8 12,232.54 2,348.54 838.0 1,770.49 1,467.95
75-79 years..................................... 844.8 5,173.87 4,434.61 232.3 12,242.76 2,875.92 858.2 1,868.11 1,624.22
80-84 years..................................... 889.6 5,823.22 5,183.68 304.5 11,795.31 3,546.93 900.3 1,904.48 1,716.14
85 years and over............................... 910.6 6,416.43 5,840.81 383.1 11,196.61 4,214.11 947.5 1,860.01 1,762.06
Sex:
Male............................................ 784.4 5,125.14 4,046.50 212.7 12,354.05 2,640.54 824.6 1,823.24 1,510.64
Female.......................................... 854.6 4,498.92 3,857.40 222.1 11,422.80 2,510.57 880.2 1,619.11 1,428.92
Race:
White........................................... 835.8 4,611.30 3,862.70 217.2 11,558.04 2,496.00 865.0 1,659.52 1,437.14
All other....................................... 754.9 6,094.26 4,628.90 233.0 13,829.43 3,204.08 803.1 2,040.84 1,645.54
Census region:
Northeast....................................... 864.5 5,502.98 4,757.37 223.8 13,838.84 3,097.66 896.8 1,982.43 1,777.95
North central................................... 891.8 4,554.89 4,062.05 227.8 11,577.00 2,636.84 914.1 1,623.12 1,483.71
South........................................... 869.4 5,263.13 4,575.79 245.8 12,264.78 3,014.69 891.7 1,828.78 1,630.75
West............................................ 663.3 5,035.56 3,339.89 159.0 13,732.15 2,183.41 681.8 1,845.51 1,258.24
--------------------------------------------------------------------------------------------------------------------------------------------------------
NA--Not available.
Note.--Data for 1995 are preliminary.
Source: Health Care Financing Administration, Bureau of Data Management and Strategy.
TABLE 2-49.--PERSONS SERVED AND REIMBURSEMENTS FOR DISABLED MEDICARE ENROLLEES BY TYPE OF COVERAGE AND BY 1995 DEMOGRAPHIC CHARACTERISTICS, SELECTED
YEARS 1968-95
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hospital insurance and/or Hospital insurance Supplementary medical insurance
supplementary medical insurance ------------------------------------------------------------------------------
--------------------------------------- Reimbursements Reimbursements
Year, period, and 1994 Persons Reimbursements Persons -------------------------- Persons -------------------------
characteristic served per -------------------------- served per served per
1,000 Per person Per 1,000 Per person Per 1,000 Per person Per
enrollees served enrollee enrollees served enrollee enrollees served enrollee
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year:
1968............................ NA NA NA NA NA NA NA NA NA
1975............................ 449.5 $1,548.09 $695.83 219.2 $2,076.58 $455.20 471.4 $564.95 $266.32
1980............................ 594.1 2,544.04 1,511.34 245.7 3,798.09 933.16 633.8 994.18 630.06
1981............................ 615.2 2,880.99 1,772.39 251.4 4,400.27 1,106.16 655.9 1,103.92 724.04
1982............................ 608.9 3,431.26 2,089.35 256.9 5,109.65 1,312.85 650.5 1,303.37 847.90
1983............................ 628.8 3,658.08 2,300.24 257.7 5,549.82 1,430.30 670.1 1,412.07 946.23
1984............................ 639.5 NA NA 242.6 NA NA 683.5 NA NA
1985............................ 668.8 3,855.22 2,578.24 227.9 7,223.96 1,646.25 715.5 1,414.04 1,011.70
1986............................ 681.0 4,032.05 2,745.64 226.3 7,622.94 1,724.99 729.0 1,518.86 1,107.32
1987............................ 695.7 3,993.70 2,778.14 219.4 7,610.01 1,669.66 747.8 1,611.42 1,205.10
1988............................ 703.7 4,114.84 2,895.52 209.3 8,372.64 1,752.76 760.0 1,643.77 1,249.35
1989............................ 721.3 4,530.89 3,268.36 208.0 9,481.76 1,971.89 785.0 1,816.65 1,426.08
1990............................ 734.3 4,702.65 3,452.97 208.9 9,846.77 2,056.60 803.5 1,921.76 1,544.18
1991............................ 728.5 5,069.61 3,693.15 208.7 10,634.43 2,218.91 799.0 2,046.50 1,635.16
1992............................ 729.3 5,351.81 3,903.33 208.9 11,278.42 2,355.73 799.4 2,145.26 1,714.91
1993............................ 751.3 5,487.71 4,123.00 211.1 11,678.14 2,465.72 824.7 2,229.08 1,838.22
1994............................ 755.9 6,020.83 4,551.42 212.6 13,082.43 2,781.71 831.7 2,365.02 1,966.96
1995............................ 758.6 6,308.12 4,785.54 212.4 13,666.40 2,902.71 836.9 2,507.18 2,098.15
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annual percentage change in
period:
1968-1975....................... NA NA NA NA NA NA NA NA NA
1975-1985....................... 4.05 9.55 13.99 0.39 13.28 13.72 4.26 9.61 14.28
1985-1994....................... 1.27 5.05 6.38 -0.70 6.58 5.84 1.58 5.89 7.57
========================================================================================================================================================
Age:
Under 35 years.................. 740.6 $6,165.57 $4,566.25 200.5 $13,654.42 $2,736.12 806.2 $2,494.30 $2,010.93
35-44 years..................... 731.1 6,099.46 4,459.24 197.8 13,460.28 2,661.94 809.8 2,483.45 2,011.13
45-54 years..................... 729.1 6,252.92 4,559.26 199.4 13,635.98 2,718.60 816.7 2,550.75 2,083.13
55-59 years..................... 765.1 6,573.88 5,029.76 220.2 13,959.38 3,074.09 842.7 2,581.74 2,175.65
60-64 years..................... 831.9 6,453.85 5,368.65 246.0 13,679.54 3,364.86 904.9 2,434.15 2,202.71
Sex:
Male............................ 713.5 6,286.21 4,485.01 199.9 13,913.10 2,780.83 789.6 2,416.56 1,908.13
Female.......................... 825.9 6,336.28 5,232.85 231.0 13,348.74 3,084.11 906.4 2,623.31 2,377.66
Race:
White........................... 760.4 5,684.71 4,322.77 204.5 12,978.13 2,654.26 840.2 2,215.36 1,861.44
All other....................... 762.9 8,127.10 6,200.45 239.8 15,347.97 3,679.88 833.8 3,341.78 2,786.50
Census region:
Northeast....................... 781.0 6,914.23 5,399.69 212.5 15,713.52 3,339.57 866.6 2,668.28 2,312.38
North central................... 778.3 5,709.39 4,443.64 211.2 12,903.54 2,725.33 859.6 2,229.50 1,916.47
South........................... 792.3 6,269.54 4,967.55 235.7 12,806.23 3,017.91 849.4 2,482.44 2,108.58
West............................ 686.6 6,868.41 4,715.68 179.2 15,615.82 2,798.55 752.6 2,818.33 2,121.17
--------------------------------------------------------------------------------------------------------------------------------------------------------
NA--Not available.
Note.--Data for 1995 are preliminary.
Source: Health Care Financing Administration, Bureau of Data Management and Strategy.
TABLE 2-50.--USE OF SHORT-STAY HOSPITAL SERVICES BY MEDICARE EMPLOYEES BY YEAR AND 1994 DEMOGRAPHIC CHARACTERISTICS, SELECTED YEARS 1975-95
--------------------------------------------------------------------------------------------------------------------------------------------------------
Discharges Total days of care Program payments
Hospital -----------------------------------------------------------------------------------------------------
Calendar year, period, and 1994 insurance Per
characteristic enrollees Number in Per 1,000 Number in Per Per 1,000 Amount in Per covered Per
in thousands enrollees thousands discharge enrollees millions discharge day of enrollee
thousands care
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year:
1975.............................. 24,640 8,001 325 89,275 11.2 3,623 $9,748 $1,218 $109 $396
1980.............................. 28,067 10,279 366 109,175 10.6 3,890 22,099 2,150 202 787
1982.............................. 29,069 11,109 382 113,047 10.0 3,889 30,601 2,755 271 1,053
1984.............................. 29,996 10,896 363 96,485 8.9 3,217 38,500 3,533 399 1,284
1985.............................. 30,589 10,027 328 86,339 8.6 2,823 40,200 4,009 466 1,314
1986.............................. 31,216 10,044 322 86,910 8.7 2,784 41,781 4,160 481 1,338
1987.............................. 31,853 10,110 317 89,651 8.9 2,815 44,068 4,359 492 1,383
1988.............................. 32,483 10,256 316 90,873 8.9 2,798 46,879 4,571 516 1,443
1989.............................. 33,040 10,148 307 89,902 8.9 2,721 49,091 4,838 546 1,486
1990.............................. 33,719 10,522 312 92,735 8.8 2,750 53,708 5,104 579 1,593
1991.............................. 34,428 10,896 316 93,936 8.6 2,728 58,901 5,406 627 1,711
1992.............................. 35,154 11,111 316 92,900 8.4 2,643 64,976 5,848 699 1,848
1993.............................. 35,904 11,158 311 88,871 8.0 2,475 67,439 6,044 759 1,878
1994.............................. 36,543 11,471 314 85,734 7.5 2,346 70,623 6,157 824 1,933
1995.............................. 37,135 11,681 315 81,282 7.0 2,189 74,836 6,407 921 2,015
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annual percentage change in period:
1975-1984 \1\..................... 2.2 4.8 2.4 1.0 -2.8 -1.5 18.7 14.2 17.6 15.8
1984-1994 \1\..................... 2.0 -1.3 -3.1 -1.2 -1.7 -3.1 6.3 5.7 7.5 4.2
1975-1994 \1\..................... 2.1 1.9 -0.2 -0.5 -2.3 -2.5 10.7 8.7 11.3 8.5
========================================================================================================================================================
Age:
Less than 65 years................ 4,393 1,570 357 11,277 7.2 2,567 9,845 6,271 873 2,241
65-69 years....................... 9,411 2,060 219 13,355 6.5 1,419 14,142 6,865 1,059 1,503
70-74 years....................... 8,652 2,260 261 15,122 6.7 1,748 15,346 6,790 1,015 1,774
75-79 years....................... 6,483 2,151 332 15,067 7.0 2,324 14,121 6,565 937 2,178
80-84 years....................... 4,409 1,806 410 13,057 7.2 2,961 11,048 6,117 846 2,506
85 years or over.................. 3,787 1,834 484 13,404 7.3 3,539 10,334 5,635 771 2,729
Sex:
Male.............................. 15,938 5,148 323 35,430 6.9 2,223 34,767 6,753 961 2,181
Female............................ 21,197 6,533 308 45,851 7.0 2,163 40,068 6,133 874 1,890
Race: \2\
White............................. 32,038 9,946 310 67,808 6.8 2,116 62,737 6,308 925 1,958
All other......................... 4,113 1,625 395 12,706 7.8 3,089 11,413 7,023 898 2,775
Census region:
Northeast......................... 7,808 2,565 329 21,858 8.5 2,799 19,127 7,457 875 2,450
North central..................... 8,954 2,962 331 19,414 6.6 2,168 18,362 6,199 946 2,051
South............................. 12,815 4,371 341 29,657 6.8 2,314 26,159 5,985 882 2,041
West.............................. 6,765 1,664 246 9,477 5.7 1,401 10,863 6,528 1,146 1,606
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Does not reflect discharges for beneficiaries who received covered services but for whom program payments were reported during the year; for
example, beneficiaries who received inpatient services in health maintenance organizations were not included in the denominator used to calculate the
average program payments per discharge.
\2\ Excludes unknown race.
Source: Health Care Financing Administration, Bureau of Data Management and Strategy.
TABLE 2-51.--NUMBER OF AGED PERSONS SERVED UNDER HOSPITAL INSURANCE AND SUPPLEMENTARY MEDICAL INSURANCE PER 1,000 ENROLLED AND REIMBURSEMENT PER PERSON SERVED BY CENSUS DIVISION AND STATE,
SELECTED CALENDAR YEARS 1967-94
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Year and persons served per 1,000 Annual percent change Year and reimbursement per person served Annual percent change
enrolled -------------------------------------------------------------------------------------------------------------------
Census division and State ----------------------------------------
1967 1985 1990 1994 1995 1967-85 1985-90 1990-93 1993-95 1967 1985 1990 1994 1995 1967-85 1985-90 1990-93 1993-95
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
New England......................... 380.4 767.4 829.0 871.7 871.1 4.0 1.6 1.4 0.4 680 2,708 3,573 5,018 5,546 8.0 5.7 8.2 10.7
Maine............................. 330.1 756.1 868.8 920.0 924.5 4.7 2.8 1.8 0.4 586 2,369 2,744 3,704 3,906 8.1 3.0 6.4 8.7
New Hampshire..................... 391.6 739.7 810.5 874.3 888.1 3.6 1.8 2.4 0.6 467 2,374 2,974 3,820 4,043 9.5 4.6 5.8 7.1
Vermont........................... 411.7 742.8 841.0 888.8 907.5 3.3 2.5 1.3 1.8 515 1,990 2,569 3,494 4,067 7.8 5.2 7.6 12.7
Massachusetts..................... 394.2 766.5 813.6 851.8 840.6 3.8 1.2 1.4 -0.4 708 2,971 4,029 5,891 6,504 8.3 6.3 8.8 12.0
Rhode Island...................... 375.4 829.6 853.6 849.2 841.6 4.5 0.6 -0.5 0.0 625 2,619 3,236 4,563 5,139 8.3 4.3 11.2 7.5
Connecticut....................... 390.9 764.1 838.1 893.1 906.8 3.8 1.9 1.6 1.6 711 2,570 3,511 4,759 5,380 7.4 6.4 7.7 10.7
Middle Atlantic..................... 388.1 768.2 834.7 864.3 862.2 3.9 1.7 0.9 0.3 578 2,771 3,933 5,384 5,488 9.1 7.3 6.5 7.5
New York.......................... 406.9 765.7 830.4 841.3 839.7 3.6 1.6 0.2 0.2 610 2,533 4,119 5,347 5,751 8.2 10.2 5.2 9.5
New Jersey........................ 399.0 759.8 826.7 879.4 885.2 3.6 1.7 1.3 1.5 526 2,650 3,483 4,973 5,235 9.4 5.6 10.6 5.4
Pennsylvania...................... 365.0 776.4 844.7 884.2 877.1 4.3 1.7 1.5 -0.3 533 3,147 3,948 5,657 5,320 10.4 4.6 6.1 6.3
East North Central.................. 350.2 725.9 834.4 888.3 895.3 4.1 2.8 1.6 1.2 614 2,906 3,595 4,414 4,786 9.0 4.3 4.2 8.4
Ohio.............................. 353.6 718.4 846.3 897.4 904.8 4.0 3.3 1.3 1.4 585 2,792 3,824 4,078 4,692 9.1 6.5 2.2 7.3
Indiana........................... 343.7 672.2 837.0 885.5 891.7 3.8 4.5 1.4 1.1 545 2,510 3,234 4,314 4,665 8.9 5.2 6.5 9.3
Ilinois........................... 339.2 693.4 788.1 840.1 849.3 4.1 2.6 1.6 1.4 703 3,313 3,760 4,750 5,112 9.0 2.6 5.3 7.9
Michigan.......................... 379.5 804.3 871.4 929.3 933.2 4.3 1.6 1.6 1.0 532 2,991 3,749 4,675 5,173 10.1 4.6 4.3 10.2
Wisconsin......................... 354.7 736.9 843.2 903.6 910.4 4.1 2.7 2.1 0.8 639 2,527 2,877 3,487 3,790 7.9 2.6 4.4 7.7
West North Central.................. 363.2 693.4 979.7 871.9 884.2 3.7 7.2 -4.3 1.5 558 2,627 3,108 3,876 4,041 9.0 3.4 3.7 8.0
Minnesota......................... 389.0 624.8 682.5 796.3 816.1 2.7 1.8 4.5 2.4 601 2,447 3,101 3,341 3,624 8.1 4.9 1.6 5.5
Iowa.............................. 365.9 715.3 850.6 918.8 936.6 3.8 3.5 2.5 1.2 505 2,282 2,753 3,121 3,435 8.7 3.8 4.3 4.9
Missouri.......................... 364.8 712.0 816.6 871.8 876.6 3.8 2.8 1.6 1.1 544 3,118 3,514 4,523 4,773 10.2 2.4 4.2 9.5
North Dakota...................... 441.2 730.7 853.4 917.7 921.5 2.8 3.2 2.1 0.8 492 2,466 2,949 3,514 3,725 9.4 3.6 1.7 9.6
South Dakota...................... 358.0 694.2 815.1 877.6 886.4 3.7 3.3 2.1 1.1 514 2,281 2,714 6,296 3,805 8.6 3.5 3.7 12.1
Nebraska.......................... 352.5 634.2 808.8 886.3 901.7 3.3 5.0 2.3 2.0 540 2,449 2,719 3,181 3,543 8.8 2.1 2.6 9.8
Kansas............................ 365.3 765.4 850.0 914.0 924.6 4.2 2.1 2.0 1.3 540 2,553 3,144 3,987 4,420 9.0 4.3 5.7 9.2
South Atlantic...................... 350.5 740.4 827.7 862.3 863.2 4.2 2.3 1.2 0.4 554 2,531 3,438 4,705 5,031 8.8 6.3 7.3 8.8
Delaware.......................... 368.2 770.9 843.6 935.3 940.6 4.2 1.8 2.5 1.8 552 2,612 3,526 4,878 4,395 9.0 6.2 4.8 4.0
Maryland.......................... 349.4 757.6 838.3 875.6 880.8 4.4 2.0 1.2 0.7 564 2,975 4,190 5,498 5,771 9.7 7.1 6.6 6.6
District of Columbia.............. 452.8 739.4 772.7 784.5 789.0 2.8 0.9 0.1 0.9 570 3,774 5,019 6,553 6,650 11.1 5.9 6.4 4.8
Virginia.......................... 317.3 729.7 848.5 891.0 899.0 4.7 3.1 1.3 1.0 516 1,976 3,127 4,054 4,322 7.7 9.6 5.2 9.0
West Virginia..................... 342.2 692.0 828.6 890.7 904.7 4.0 3.7 1.9 1.6 489 2,575 3,197 4,064 4,477 9.7 4.4 4.6 10.6
North Carolina.................... 324.0 727.9 852.3 908.1 924.1 4.6 3.2 1.8 1.4 515 1,982 2,799 3,691 4,201 7.8 7.1 7.5 9.9
South Carolina.................... 296.2 680.6 832.2 896.8 914.3 4.7 4.1 2.3 1.3 523 2,340 2,689 4,137 4,276 8.7 2.8 9.6 9.9
Georgia........................... 320.2 743.5 843.8 899.5 911.7 4.8 2.6 1.8 1.2 474 2,479 3,456 4,848 5,148 9.6 6.9 8.6 7.8
Florida........................... 420.9 759.1 805.8 813.5 797.4 3.3 1.2 0.3 -1.0 588 2,773 3,709 5,223 5,606 9.0 6.0 7.9 9.6
East South Central.................. 332.1 698.1 846.9 901.7 908.5 4.2 3.9 1.6 1.1 489 2,570 3,413 4,758 5,177 9.7 5.8 7.6 10.3
Kentucky.......................... 365.9 671.9 837.3 901.1 906.9 3.4 4.5 1.7 1.5 458 2,395 3,424 4,273 4,615 9.6 7.4 3.8 9.7
Tennessee......................... 354.8 678.7 853.4 897.7 905.6 3.7 4.7 1.5 0.8 502 2,816 3,402 4,974 5,389 10.1 3.9 9.7 9.5
Alabama........................... 322.7 743.8 848.9 906.6 912.6 4.7 2.7 1.6 1.2 490 2,502 3,596 4,959 5,359 9.5 7.5 6.8 10.6
Mississippi....................... 283.2 699.9 845.1 902.6 909.6 5.2 3.8 1.6 1.3 471 2,480 3,122 4,711 5,278 9.7 4.7 10.3 12.3
West South Central.................. 374.8 687.4 825.0 863.7 856.5 3.4 3.7 1.1 0.3 504 2,811 3,624 5,163 5,778 10.0 5.2 7.0 14.2
Arkansas.......................... 319.3 715.4 862.9 897.2 908.7 4.6 3.8 0.8 1.4 466 2,550 3,155 4,211 4,538 9.9 4.3 5.3 11.0
Louisiana......................... 343.4 653.5 821.1 877.1 861.7 3.6 4.7 1.5 0.2 446 3,167 4,368 6,208 6,872 11.5 6.6 6.2 14.6
Oklahoma.......................... 416.1 677.8 878.3 877.5 885.0 2.7 5.3 -0.4 1.0 486 2,482 3,127 4,507 5,068 9.5 4.7 8.2 13.2
Texas............................. 393.7 693.2 805.1 850.2 838.4 3.2 3.0 1.5 -0.1 522 2,860 2,652 5,232 5,916 9.9 5.0 7.1 14.8
Mountain............................ 417.1 716.6 772.7 760.7 749.2 3.1 1.5 -0.1 -1.3 560 2,637 3,992 4,188 4,347 9.0 8.6 -2.4 8.2
Montana........................... 416.5 679.7 823.5 895.1 905.6 2.8 3.9 2.1 1.7 505 2,348 3,000 4,122 3,990 8.9 5.0 3.7 9.2
Idaho............................. 408.8 714.5 862.5 905.2 920.5 3.2 3.8 1.7 0.8 467 2,384 2,556 3,320 3,616 9.5 1.4 6.7 7.9
Wyoming........................... 395.0 681.7 782.7 877.7 892.1 3.1 2.8 2.7 2.6 432 2,804 3,182 3,932 4,311 11.0 2.6 7.4 4.6
Colorado.......................... 475.4 704.0 740.8 778.0 760.1 2.2 1.0 1.5 -1.0 578 2,521 3,223 4,167 4,514 8.5 5.0 6.0 8.5
New Mexico........................ 377.6 689.8 736.4 735.1 728.5 3.4 1.3 1.4 -2.5 513 2,462 3,154 3,552 4,056 9.1 5.1 -0.4 14.1
Arizona........................... 431.7 758.1 774.3 670.5 644.2 3.2 0.4 -3.5 -3.8 612 2,896 3,692 4,781 4,541 9.0 5.0 2.8 6.5
Utah.............................. 346.0 713.1 808.2 865.8 875.1 4.1 2.5 1.6 1.7 580 2,225 2,799 3,556 4,150 7.8 4.7 8.2 8.1
Nevada............................ 414.9 688.9 721.2 687.2 670.3 2.9 0.9 -0.7 -2.6 532 3,243 3,903 5,023 5,072 10.6 3.8 3.3 8.6
Pacific............................. 468.9 739.7 713.8 665.4 629.9 2.6 -0.7 -1.2 -4.3 630 6,153 3,853 4,864 5,354 13.5 -8.9 5.6 8.6
Washington........................ 433.0 731.1 760.8 875.4 770.1 3.0 0.8 1.4 -1.5 507 2,522 3,218 3,738 4,117 9.3 5.0 3.4 7.6
Oregon............................ 392.6 716.2 707.8 701.7 694.9 3.4 -0.2 0.2 -1.3 583 2,459 2,833 3,288 3,587 8.3 2.9 3.7 6.5
California........................ 490.7 745.7 710.3 640.0 594.8 2.4 -1.0 -2.1 -5.6 653 3,379 4,138 5,416 5,987 9.6 4.1 6.5 9.4
Alaska............................ 307.2 678.4 759.0 818.2 828.3 4.5 2.3 2.1 1.3 376 3,554 4,007 4,463 6,021 13.3 2.4 0.9 21.0
Hawaii............................ 407.4 709.3 589.9 585.7 590.0 3.1 -3.6 0.7 -1.1 572 2,334 3,095 3,321 3,718 8.1 5.8 3.5 4.1
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Total, all areas \1\............ 366.5 722.1 801.6 830.0 826.1 3.8 2.1 1.0 0.0 592 2,762 3,578 4,740 5,075 8.9 5.3 6.0 9.1
United States \2\............... 370.9 731.2 810.5 838.7 834.6 3.8 2.1 1.0 0.0 593 2,772 3,592 4,750 5,096 8.9 5.3 6.0 9.1
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\1\ Consists of United States, Puerto Rico, Virgin Islands, and other outlying areas.
\2\ Consists of 50 States, District of Columbia, and residence unknown.
Source: Health Care Financing Administration, Bureau of Data Management and Strategy.
TABLE 2-52.--MEDICARE PARTICIPATING INSTITUTIONS AND ORGANIZATIONS, 1984
AND 1996
------------------------------------------------------------------------
Year
Institution or organization -------------------------
1984 1996
------------------------------------------------------------------------
Hospitals..................................... 6,675 6,273
Short stay.................................. 6,038 5,185
Long stay................................... 637 1,088
Skilled nursing facilities.................... 5,952 14,177
Home health agencies.......................... 4,684 8,860
Independent laboratories...................... 3,801 5,769
Laboratories registered under the Clinical
Laboratory Improvement Act (CLIA)............ NA 157,335
Outpatient physical therapy providers......... 791 2,432
Portable x-ray suppliers...................... 269 609
Rural health clinics.......................... 420 2,217
Comprehensive outpatient rehabilitation
facilities................................... 48 403
Ambulatory surgical centers................... 155 2,265
Hospices...................................... 108 2,161
Facilities providing services to renal disease
benefit...................................... 1,335 3,082
Hospital certified as both renal transplant
and renal dialysis center.................. 147 156
Hospital certified as renal transplant
centers.................................... 16 81
Hospital dialysis facilities................ 117 256
Nonhospital renal dialysis facilities....... 645 2,212
Dialysis centers only....................... 359 334
Inpatient care.............................. 51 43
Hospital and skilled nursing facility beds:
Hospitals................................... 1,144,142 1,038,105
Short stay................................ 1,023,465 912,054
Long stay................................. 120,677 126,051
Skilled nursing facilities.................. 530,403 671,839
------------------------------------------------------------------------
NA--Not available.
Source: Health Care Financing Administration, Bureau of Data Management
and Strategy.
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