Medicare and state health care programs: fraud and abuse, civil money penalties and intermediate sanctions for certain violations by health maintenance organizations and competitive medical plans--HHS. Final rule

This final rule implements sections 9312(c)(2), 9312(f), and 9434(b) of Public Law 99-509, section 7 of Public Law 100-93, section 4014 of Public Law 100-203, sections 224 and 411(k)(12) of Public Law 100-360, and section 6411(d)(3) of Public Law 101-239. These provisions broaden the Secretary's authority to impose intermediate sanctions and civil money penalties on health maintenance organizations (HMOs), competitive medical plans, and other prepaid health plans contracting under Medicare or Medicaid that (1) substantially fail to provide an enrolled individual with required medically necessary items and services; (2) engage in certain marketing, enrollment, reporting, or claims payment abuses; or (3) in the case of Medicare risk-contracting plans, employ or contract with, either directly or indirectly, an individual or entity excluded from participation in Medicare. The provisions also condition Federal financial participation in certain State payments on the State's exclusion of certain prohibited entities from participation in HMO contracts and waiver programs. This final rule is intended to significantly enhance the protections for Medicare beneficiaries and Medicaid recipients enrolled in a HMO, competitive medical plan, or other contracting organization under titles XVIII and XIX of the Social Security Act.     

Physician participation in Medicaid: background and issues

Most Americans gain entry into the medical care system through office-based primary care physicians. The Medicaid program was created in 1965 in part to increase the access of low-income people to medical services in that mainstream. But, over the years, office-based physicians have reduced their treatment of Medicaid patients, and many have withdrawn from the program altogether. The result is not only that the original programmatic goal has not been fully achieved, but also that the costs of the program are higher than they would be otherwise. In this article, the importance of Medicaid participation by office-based primary care physicians is described, and a number of obstacles to their participation are identified. The obstacles include state policies regarding eligibility, coverage, and provider compensation. The article recommends actions pertaining to these policies that might increase participation.     

Decisions without consequences: cost control and access in state Medicaid programs.

States have implemented a number of strategies to provide services, pay providers, and control Medicaid spending. We test the effects of some differences in state Medicaid policies on program enrollees' access to and use of health care services. Logistic and OLS regression analyses of cross-sectional data indicate that these policies exert significant influences on enrollees' access to health services but have a weaker direct effect on their use of them. However, we find evidence that utilization is affected indirectly (through increased access) by state policy decisions. Somewhat surprisingly, Medicaid policies designed to contain costs by limiting utilization appear to affect neither access nor utilization. Medicaid enrollees have greater access to a private physician in states with higher physician reimbursement and additional Medicare insurance for their enrollees. Other nonpolicy variables with pronounced impacts on access to private office physicians include race and the availability of private insurance.     

The new structure of individual practice associations

There are two types of HMOs: prepaid group practices (PGPs) and individual practice associations (IPAs). Because of rapid change in the HMO industry, the academic literature, which is based primarily on data from the 1970s, is dated in several ways. The literature has focused on PGPs, but IPAs are growing three times faster than PGPs and are likely to dominate the HMO industry in the near future. The literature indicates that a small proportion of an IPA physician's practice is capitated, but such practices often are as much as one-third capitated. And while the literature indicates that IPA physicians are rarely given financial incentives to control cost, such incentives are now common. In this decade IPAs have cut their hospital days per thousand enrollees. Furthermore, IPAs in which individual physicians or medical groups bear some of the financial risk of hospital costs appear to have the same rate of hospital days as PGPs. Additional research is especially needed on cost and quality of care in modern IPAs.     

Reducing Medicaid expenditures through family responsibility: critique of a recent proposal.

The Massachusetts Department of Public Welfare recently proposed a "Family Responsibility Plan" which would impose a financial obligation upon adult children in the state for the nursing-home care of their parents who receive Medicaid. By examining the Massachusetts plan, this Note seeks to evaluate the viability of a concept of family responsibility, under which adult children contribute to the state Medicaid expenses of their medically indigent parents in nursing homes, as a means of combating the increase in state Medicaid expenditures. The Note examines the legal and policy issues raised by the Massachusetts welfare department's plan in particular, and by the concept of family responsibility in general. The author concludes that alternative methods of cost containment, such as positive financial incentives, would be more appropriate mechanisms for reducing state Medicaid expenditures than family--that is, adult child--responsibility plans.     

State Medicaid managed care enrollment: understanding the political calculus that drives Medicaid managed care reforms

The objective of this article is to understand the political motivations underlying Medicaid managed care reforms by examining the determinants of enrollment of beneficiaries in managed care plans in the fifty states. To highlight the role of the model variables, including measures of the political environment, public interest, and special interests, a distinction is made between capitated and fee-for-service managed care enrollment. The results show that cost containment within the context of the Medicaid program is perceived as strongly favored by voters. Accordingly, the relative cost and tax price of providing Medicaid services are important factors in states' decision to enroll Medicaid beneficiaries in managed care plans, particularly capitated ones. The results also indicate a surprisingly significant influence by labor unions that generally oppose managed care enrollment for fears of lost jobs. The recipient population and provider groups also play an important role in shaping the Medicaid managed care landscape. The influence of variables measuring states' ability and willingness to pay and median voter preferences suggest that, within the context of Medicaid managed care enrollment, the public's interests are being served; however, the results also point toward inequities within the program and implications concerning financing arrangements between states and the federal government.     

Physicians' decisions to limit Medicaid participation: determinants and policy implications

Although most primary care physicians participate in state Medicaid programs, they may accept all Medicaid patients, or they may choose to limit their participation. This decision allows physicians to adjust their Medicaid caseloads to a desired level, and it has important implications for the access of low-income patients to health care. Surveys of pediatricians in 1978 and 1983 indicate that the proportion of pediatricians limiting their Medicaid participation increased significantly from 26 percent to 35 percent (p less than .001). In addition, in both 1978 and 1983, limited participants saw significantly fewer Medicaid patients than full participants. This paper describes a number of strategies available to federal and state policymakers for fostering full Medicaid participation. Multivariate analyses indicate that increasing reimbursement levels is an important strategy for encouraging full Medicaid participation. In addition, full participants will increase their Medicaid caseloads in response to a variety of Medicaid policy incentives, while limited participants are found to respond to fewer policy incentives. The authors conclude that caution will be needed to ensure that health care cost-containment strategies such as capitation or selective contracting do not inadvertently discourage participation among both full and limited Medicaid participants.     

The Department of Health and Human Services issues proposed regulations on physician incentive payments by hospitals

Hospitals tempted to operate their own physician incentive plans are reminded that, under OBRA 1986, they are precluded from paying physician incentives of any kind to reduce or limit Medicare or Medicaid covered services. In light of the proposed regulations and the guidance of the preamble, hospitals should review their incentive plans to determine whether physicians providing direct patient care are receiving prohibited payments. Further, supervising physicians who are receiving incentives for certain hospital departments may not influence direct care over patients served by those departments, even through other physicians. Some risk may also exist if incentives are based on a formula that considers patients of the supervising physician's medical group. Finally, it may be useful to develop a utilization and quality of care review program specifically designed to assure that patient undertreatment does not occur as a result of any supervising physician incentive program.     

Medicaid program; Medicaid managed care--HCFA. Proposed rule

This proposed rule would amend the Medicaid regulations to allow the States greater flexibility by giving them the option to require Medicaid recipients to enroll in managed care entities without obtaining waivers. These revisions, which are authorized by the Balanced Budget Act of 1997, would establish new beneficiary protections in areas such as quality assurance, grievance rights, and coverage of emergency services. They would eliminate certain requirements viewed by State agencies as impediments to the growth of managed care programs, such as the enrollment composition requirement, the right to disenroll without cause at any time, and the prohibition against enrollee cost-sharing. They would also permit State agencies to amend their State plans to require enrollment in managed care organizations subject to certain conditions, including limits on whose enrollment can be mandated, and a requirement for beneficiary choice. In addition, this rule would extend most of these new requirements to prepaid health plans.     

Waiver of certain membership requirements for certain health maintenance organizations (HMOs), and state option for disenrollment restrictions for certain HMOs under Medicaid--HCFA. Final rule

These regulations revise current Medicaid rules to bring them into conformity with statutory changes that (1) expanded the waiver authority of the Secretary to permit certain health maintenance organizations (HMOs) meeting specified requirements to exceed the composition of enrollment limit, (2) permitted certain organizations to contract on a risk basis, (3) permitted continuation of benefits to recipients enrolled in certain organizations after they have lost entitlement to Medicaid, and (4) granted States the option of restricting a Medicaid enrollee's right to disenroll from certain types of risk HMOs and other organizations. The statutory changes that are reflected in these regulations were enacted in section 2364 of the Deficit Reduction Act of 1984, as amended by section 9517 of the Consolidated Omnibus Budget Reconciliation Act of 1985 and section 4113 of the Omnibus Budget Reconciliation Act of 1987. We are also making a technical correction concerning HMO and PHP contracts.     

Medicaid Program; Medicaid eligibility quality control, progressive reductions in federal financial participation for FYs 1982-84, payment for physician billing for clinical laboratory services, and utilization control of skilled nursing facility services: removal of obsolete requirements--HCFA. Final rule

This final rule removes several obsolete sections of the Medicaid regulations that specify rules and procedures for disallowing Federal financial participation for erroneous medical assistance payments due to eligibility and beneficiary liability errors as detected through the Medicaid eligibility quality control program for assessment periods from 1980 through June 1990. The Medicaid regulations that contain the rules and procedures for the progressive reductions in Federal financial participation in medical assistance expenditures made to the States for fiscal years 1982 through 1984 are removed to reflect the repeal of the statutory bases for the reductions. The Medicaid regulations that provide for physician billing for clinical laboratory services that a physician bills or pays for but did not personally perform or supervise are removed to reflect the statutory repeal of this provision. In addition, the rule removes obsolete regulations that prescribe requirements concerning utilization control of Medicaid services furnished in skilled nursing facilities. This rule is part of the Department's initiate to reinvent health care regulations and eliminate obsolete requirements.     

Medicaid program; correction and reduction plans for intermediate care facilities for the mentally retarded--HCFA. Final rule

This final rule amends the portions of the Medicaid regulations under which an intermediate care facility for the mentally retarded (ICF/MR) with substantial deficiencies that did not pose an immediate jeopardy to the health and safety of clients could continue participation in the Medicaid program. These regulations gave State Medicaid agencies the option of submitting written plans to either correct deficiencies or permanently reduce the number of beds in the certified portion of the facility. This rule removes all requirements for submitting, approving, and monitoring correction plans for ICFs/MR. The requirements for submitting and approving correction plans are being removed because the time limit for submission of these plans has passed. The provisions for monitoring correction plans are being removed because there are no remaining facilities for which these provisions apply. This final rule also removes requirements for submitting and approving reduction plans for ICFs/MR because the time limit for submitting these plans has passed. It retains and updates the requirements for monitoring and compliance that apply to those ICFs/MR for which reduction plans were approved by January 1, 1990.     

The use of expensive health technologies in the era of managed care: the remarkable case of neonatal intensive care

The use of neonatal intensive care (NIC) continued to rise rapidly in the 1990s despite the concerns of observers about its cost effectiveness and its successes being mostly in facilities with high volume and capabilities. The objective of this study is to test the effects of insurance type, competition among hospitals, and market pressure from managed care plans on the supply and cost of NIC. The analysis uses logistic and linear models with techniques to avoid bias from (a) market area definitions based on actual patient flows and (b) self-selection of hospitals by patients with unmeasured risk of needing NIC. The data source contains all births in short-term hospitals in New Jersey during 1990 and 1994. Both the number of days and charges for NIC are reported. Key findings are that the decision of a hospital to offer NIC was associated with teaching status, the proportion of infants in the market area with documented high risk, and the market concentration of major competitors. The market share of managed care plans and the concentration of enrollment were not associated with either NIC being offered or with the standardized charges. Whether a particular patient was given to a NIC depended on patient risk factors and whether a NIC unit was present, but not on payer group. The results are consistent with the hypothesis that young insured parents (with the advice of their obstetricians) prefer hospitals with NIC and also are relatively profitable enrollees for health plans. In conclusion: using the results here and in other research, public and private policy makers may consider several ways to strengthen the incentives for health plans to contract for cost-effective birth-related services. The results also raise questions for a number of regulatory and payment policies and call for better public data on costs and outcomes for NIC.     

Medicare program; payments to HMOs and CMPs and appeals: technical amendments--HCFA. Final rule with comment period

This rule clarifies and updates portions of the HCFA regulations that pertain to payment for services furnished to Medicare enrollees by health maintenance organizations (HMOs) and competitive medical plans (CMPs); appeals by Medicare enrollees concerning payment for those services; and appeals by HMOs and CMPs with regard to their Medicare contracts. This rule completes the special project aimed at the total technical revision of part 417. Part 417 contains the regulations applicable to all prepaid health care organizations, that is, HMOs, CMPs, and health care prepayment plans (HCPPs). These are technical and editorial changes that do not affect the substance of the regulations. They are intended to make it easier to find particular provisions, to eliminate needless repetition and remove obsolete content, and to better ensure uniform understanding of the rules.     

Medicare program; changes to the hospital inpatient prospective payment systems and fiscal year 2001 rates. Health Care Financing Administration (HCFA), HHS. Final rule

We are revising the Medicare hospital inpatient prospective payment system for operating costs to: implement applicable statutory requirements, including a number of provisions of the Medicare, Medicaid, and State Children's Health Insurance Program Balanced Budget Refinement Act of 1999 (Pub. L. 106-113); and implement changes arising from our continuing experience with the system. In addition, in the Addendum to this final rule, we describe changes to the amounts and factors used to determine the rates for Medicare hospital inpatient services for operating costs and capital-related costs. These changes apply to discharges occurring on or after October 1, 2000. We also set forth rate-of-increase limits and make changes to our policy for hospitals and hospital units excluded from the prospective payment systems. We are making changes to the policies governing payments to hospitals for the direct costs of graduate medical education, sole community hospitals and critical access hospitals. We are adding a new condition of participation on organ, tissue, and eye procurement for critical access hospitals that parallels the condition of participation that we previously published for all other Medicare-participating hospitals. Lastly, we are finalizing a January 20, 2000 interim final rule with comment period (65 FR 3136) that sets forth the criteria to be used in calculating the Medicare disproportionate share adjustment in reference to Medicaid expansion waiver patient days under section 1115 of the Social Security Act.     

Medicaid program; Medicaid managed care. Health Care Financing Administration (HCFA), HHS. Final rule with comment period

This final rule with comment period amends the Medicaid regulations to implement provisions of the Balanced Budget Act of 1997 (BBA) that allow the States greater flexibility by permitting them to amend their State plan to require certain categories of Medicaid beneficiaries to enroll in managed care entities without obtaining waivers if beneficiary choice is provided; establish new beneficiary protections in areas such as quality assurance, grievance rights, and coverage of emergency services; eliminate certain requirements viewed by State agencies as impediments to the growth of managed care programs, such as the enrollment composition requirement, the right to disenroll without cause at any time, and the prohibition against enrollee cost-sharing. In addition, this final rule expands on regulatory beneficiary protections provided to enrollees of prepaid health plans (PHPs) by requiring that PHPs comply with specified BBA requirements that would not otherwise apply to PHPs.     

Medicaid program; external quality review of Medicaid managed care organizations. Final rule

This final rule establishes requirements and procedures for external quality review (EQR) of Medicaid managed care organizations (MCOs) and prepaid inpatient health plans (PIHPs). It defines who qualifies to conduct EQR and what activities can be conducted as part of EQR. In addition, under certain circumstances, this rule allows State agencies to (1) use findings from particular Medicare or private accreditation review activities to avoid duplicating review activities, or (2) exempt certain Medicare MCOs and PIHPs from all EQR requirements. Also, this rule allows the payment of enhanced Federal financial participation (FFP) at the 75 percent rate for the administrative costs of EQRs or EQR activities that are conducted by approved entities.     

Any-Willing-Provider laws: their financial effect on HMOs

Any-Willing-Provider (AWP) legislation requires that health plans accept any health care provider who agrees to conform to the plan's conditions, terms, and reimbursement rates. Many states have adopted such legislation, raising questions about its effect on the managed care market. Those favoring this legislation argue that it will reduce restrictions on choice of provider, while opponents argue that it will reduce competition by increasing administrative and medical costs for managed care plans. Using cross-sectional time-series data for the period 1992-1995 (the period during which many of these laws were enacted), this study investigates the effect that these laws have on HMO financial performance. Our results show that "all-provider" AWP laws have a very limited effect on the financial performance measures we examine. "Pharmacy" AWP laws have a more significant effect, but neither type of law appears to affect the overall profitability of HMOs.     

The competitive impact of health maintenance organizations on hospital finances: an exploratory study

In this study we explore whether HMO-induced competition has contained expenditures in Minneapolis/St. Paul hospitals. Specifically, we assessed the impact of HMOs on revenue, cost, and net income per admission in Twin Cities hospitals from 1979 to 1981. Some HMOs have obtained negotiated discounts from hospitals. We found that hospitals which gave larger discounts did not have lower costs per admission. This finding suggest that discounts do not force hospitals to operate more efficiently. In addition, hospitals with a large share of patients from HMOs or government Medicare and Medicaid programs did not have lower costs per admission than other hospitals during the years from 1979 to 1981. This finding casts doubt on the claim that discounts are justified by lower costs for HMO or government patients. Finally, neither HMO market share nor discounts had an adverse effect on hospital profits. During the three years studied, hospital profits in the Twin Cities showed an upward trend. This study concludes that if competition is to succeed it must encompass more than HMOs. HMOs may be important, but they are only one agent in the market. Thus, public policy created to induce competition must go beyond the simple stimulus of HMO growth.