More Changes from HCFA
The Balanced Budget Act of 1997 is bringing some of the most significant changes to Medicare health maintenance organizations (HMOs) since the risk contracting program was initiated in 1984. First, base payments will decrease over a period of years, but Earl L. Whitney, FSA, consulting actuary with Milliman & Robertson’s office in Radnor, PA, says the Health Care Financing Administration (HCFA) in Baltimore has instituted several other changes that impact the way Medicare HMOs operate:
o Medigap option. The law provides Medigap coverage with a $1,500 deductible on standardized plans F or J, Whitney says. The $1,500 deductible applies in 1998 and 1999 and will increase after 1999. "This may encourage some healthier Medicare beneficiaries to chose Medigap coverage over Medicare HMO enrollment," he says. "It also means that Medicare beneficiaries that stick with HMOs may have poorer health status."
o Medical savings accounts (MSAs). The new law permits a demonstration of up to 390,000 Medicare beneficiaries beginning Jan. 1, 1999. Only HCFA can contribute to the MSA. "MSAs are similar to an IRA [individual retirement account] in terms of tax-deferred accumulation of contributions," Whitney says. However, funds in the MSA must be used to pay for medical expenses. Healthier Medicare members may choose to use MSAs and not join Medicare risk HMOs, he notes. Again, this means that Medicare beneficiaries with poorer health status will be more likely to stick with HMOs.
o Dual eligibles. The new law offers an opportunity to enroll dually eligible Medicare/ Medicaid beneficiaries under Medicare HMOs. Programs that attract Medicaid beneficiaries can be designed so Medicaid pays for deductibles and co-insurance under the program, Whitney says.
(For more on the impact of the Balanced Budget Act on Medicare HMOs, see p. 17.)
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