Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, December 28, 1993 TAG: 9312280151
SECTION: NATIONAL/INTERNATIONAL PAGE: A-3 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
"Our system for paying HMOs is just wildly inadequate," Bruce Vladeck, head of the Health Care Financing Administration that runs Medicare and who helped create President Clinton's reform package, said Monday.
"We think it's technically harder for Medicare, but it's an issue everywhere, and we're very conscious of it," Vladeck added.
HMOs are supposed to save money by charging a flat fee for a year's worth of health care. But Medicare pays 5.7 percent more for HMOs than it would cost to pay the patients' doctors directly, according to a four-year HCFA-funded study.
The reason: The flat fee is close to the amount Medicare pays for average recipients, even though those who enroll in HMOs tend to be healthier and thus use fewer services.
Any health-care reform plan, including Clinton's proposed HMO-style, large health alliances, must carefully adjust payment rates to reflect the actual services used if it is to save money, said the study's author, Randall Brown.
"Some people think HMOs are the panacea, and our results say no, it costs money to save money," Brown said. "You have to set the payment rate right . . . . Otherwise you have chaos."
The study prompted Vladeck to announce that Medicare won't promote HMOs for its patients until he finds a better way of paying for it, probably not before 1995.
"We're pulling out all the stops" to find that method, Vladeck said.
On Saturday, 10 HMOs that serve Medicare patients in five cities will begin offering alternate payment plans. One follows Brown's suggestion that HCFA adjust its payments to reflect the lower incidence of such costly diseases as cancer, heart disease and stroke among its HMO patients.
Clinton's legislation calls for policymakers to find new, cost-saving payment methods for managed care. Whatever method works for Medicare, whose elderly patients need more care than the general population, would work for the nation, Vladeck said.
Medicare began allowing its beneficiaries to enroll in HMOs a decade ago, saying the plans should cost 5 percent less than the traditional fee-for-service method and improve quality of care.
Brown's study agreed the HMOs provided good care; the savings just weren't there.
Currently, Medicare determines its HMO payments by calculating the past year's expenditures, adjusting for each county's rank in those payments and then adjusting for the age and sex of enrollees.
That method underpays HMOs in some parts of the country and overpays others, said Charles Stellar, president of the 500-member trade group American Managed Care and Review Association.
He fears adjusting for the incidence of costly diseases won't work, either. "It sounds really too neat."
But any risk-adjustment plan has to be simple, or the cost of the paperwork to implement it will eat up any savings, Brown warned. "Instead of paying doctors, you'll be paying bookkeepers," he said.
by CNB