The Government Accountability Office is criticizing the performance of Medicare preferred provider organization test plans.
The report, requested by Sen. Max Baucus, D-Mont., the most senior Democratic member of the Senate Finance Committee, bears the title “Medicare Demonstration PPOs: Financial and Other Advantages for Plans, Few Advantages for Beneficiaries.”
The Medicare Advantage program, formerly known as the Medicare + Choice program, gives private managed care companies a chance to participate in the Medicare program. Originally, the rules seemed to be friendlier toward health maintenance organizations. In 2003, carriers operated only 6 ordinary Medicare PPOs.
The Centers for Medicare & Medicaid Services, the agency that runs Medicare, has been trying to encourage more PPOs to participate, and the Medicare Prescription Drug, Improvement and Modernization Act of 2003 includes new PPO provisions.
In 2003, the CMS added a Medicare “demonstration” program, or test program, to see if it could work within the limits of the old Medicare managed care program laws to attract more PPOs. The demonstration PPOs enrolled 98,000 beneficiaries, or about 1% of the beneficiaries living in the PPOs markets.
The rules governing the PPO test program let the CMS use financial incentives, such as special risk-sharing requirements, to make participating in Medicare more appealing.
The CMS had a right to provide special financial incentives, but it “exceeded its authority” in the 2003 PPO demonstration when it allowed 29 of the participating 33 plans to cover certain services, such as skilled nursing and routine physical exams, only if beneficiaries obtained them from in-network providers, A. Bruce Steinwald, the GAOs health care economics director, writes in the report.
“In general, beneficiaries in Medicare PPO demonstration plans who received care from non-network providers for these services were liable for the full cost of their care,” Steinwald writes.
On average, the carriers that ran the 33 plans enrolled few beneficiaries, did little to expand health care options and seemed likely to increase spending about $300 per enrollee per year, Steinwald writes.