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 ----------------------------------------------------------------------------------------------------------------------------------------------------------- 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 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ \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. REFERENCES Board of Trustees, Federal Supplementary Medical Insurance Trust Fund. (1997, April 24). The 1997 Annual Report of the Board of Trustees of the Federal Supplementary Medical Insurance Trust Fund (U.S. House of Representatives Document 105-74). Washington, DC: U.S. Government Printing Office. Board of Trustees, Federal Hospital Insurance Trust Fund. (1997, April 24). The 1997 Annual Report of the Board of Trustees of the Federal Hospital Insurance Trust Fund (U.S. House of Representatives Document 105-73). Washington, DC: U.S. Government Printing Office. Committee on Ways and Means. (1988). 1988 Green book: Overview of Entitlement Programs (WMCP 100-29). Washington, DC: U.S. Government Printing Office. Committee on Ways and Means. (1989). 1989 Green book: Overview of Entitlement Programs (WMCP 101-4). Washington, DC: U.S. Government Printing Office. Committee on Ways and Means. (1991). 1991 Green book: Overview of Entitlement Programs (WMCP 102-9). Washington, DC: U.S. Government Printing Office. Federal Register v. 56, n. 251, December 31, 1991, 67666. Foster Higgins Survey and Research Services. (1996). National Survey of Employer-Sponsored Health Plans. New York: Author. Health Care Financing Administration. Health Care Financing Review. Medicare and Medicaid Statistical Supplement, 1996. Office of the President. (1997 and various years). Budget of the U.S. Government: Fiscal year 1997 (Historical Tables Volume). Washington, DC: U.S. Government Printing Office. Physician Payment Review Commission. (1997). Annual report to Congress: 1997. Washington, DC: Author. Prospective Payment Assessment Commission. (various years). Report and recommendations to the Congress. Washington, DC: Author.