The President’s proposal shifts home care costs
Here are the major points of the plan
Here are the highlights of President Clinton’s Medicare Reform Package, obtained from the Baltimore-based Health Care Financing Administration:
• Home care.
The proposal saves about $15 billion over five years ($20 billion over six years) through the transition to and establishment of a new prospective payment system and a number of program integrity (anti-fraud and abuse) initiatives.
"Originally designed as an acute care service for beneficiaries who had been hospitalized, home health care has increasingly become a chronic care benefit not linked to hospitalization," says the proposal. The proposal restores the "original" split of home health care payments between Parts A and B of Medicare. The first 100 home health visits following a three-day hospitalization would be reimbursed by Part A. All other visits including those not following hospitalization would be reimbursed by Part B.
Beneficiaries will not be affected by this "restoration of the original policy," nor will it count toward the $100 billion in savings in the President’s plan. The policy avoids the need for excess in reductions in payment to hospitals, physicians, and other health care providers while helping to extend the solvency of the Part A trust fund.
• Managed care.
Through a series of policy changes, the plan will address the flaws in Medicare’s current payment methodology for managed care. Medicare will reduce reimbursement to managed care plans by about $34 billion over five years ($46 billion over six years.) Savings will come from three sources as follows:
The elimination of the medical education and DSH payments from the HMO reimbursement formula (these funds will be paid directly to academic health centers).
A phased-in reduction in HMO payment rates from the current 95% of fee-for-service payments to 90%. A number of recent studies have validated earlier evidence that Medicare significantly overcompensated HMOs. The reduction does not start until 2000, and it accounts for a relatively modest $6 billion in savings over five years (about $8 billion over six years).
Indirect savings attributable to cuts in the traditional fee-for-service side of the program to the extent that HMO payments are based on a percentage of fee-for-service payments. HMO payments are reduced as the traditional side of the program is cut.
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