Medicare and America's healthcare system in transition: from the death of managed care to the Medicare Modernization Act of 2003 and beyond

This Article traces the transition--in Medicare, specifically, and in the American healthcare system, generally--from the aftermath of the Balanced Budget Act of 1997 to the passage of the Medicare Modernization Act of 2003. During this time, restrictive managed care died under an onslaught of resurgent cost pressures, legislative and legal attacks, and a vehement physician and consumer backlash. The subsequent reversion to more generous (and more expensive) health plans coincided with a recession in 2001 to trigger a return to rapidly escalating healthcare spending and yet another in the Nation's series of healthcare crises. Current trends suggest that future policymakers will have no choice but to confront the consequences of rapidly rising rates of healthcare spending.     

The Independent Medicare Advisory Committee: death panel or smart governing?

This comment explores whether health care reform legislation establishes an administrative body effectively charged with the rationing of health care resources; insofar as it establishes a presidentially appointed Independent Medicare Advisory Committee (IMAC). IMAC would be charged with "making two annual reports dictating updated rates for Medicare providers including physicians, hospitals, skilled nursing facilities, home health, and durable medical equipment." IMAC's recommendations would be implemented nationally, subject to a Congressional vote. Congress would be granted a thirty-day window to achieve a simple majority for or against the IMAC recommendations. Part I is an introduction. Part II of this article covers the history of American health care. It lays out the federal government's evolving role in the arena of public health and health care, starting in the mid-nineteenth century and continues up to the present day. Part III examines the existing process by which Medicare spending is controlled. This part focuses on the administrative procedures that control Medicare reimbursements. Part IV examines IMAC. This part discusses IMAC's statutory provisions and the administrative transparency laws IMAC would be bound to follow. The close of this part, draws on three analogies as a gauge for how IMAC will operate: Senator Tom Daschle's Federal Health Board (FHB) proposal; the administrative oversight of the Federal Reserve; and the United Kingdom's National Institute for Health and Clinical Excellence (NICE). Part V creates a snapshot of the U.S. health care system as it operates today. This part emphasizes cost, quality, and accessibility of health care, with comparisons to international and state-run health care systems. Throughout this article there are a number of words, phrases, and agencies that have been given acronyms. For convenience, an index of these acronyms is provided in an appendix following the article.     

Medicare program; revisions to payment policies under the physician fee schedule for calendar year 2004. Final rule with comment period

This final rule will refine the resource-based practice expense relative value units (RVUs) and make other changes to Medicare Part B payment policy. The policy changes concern: Medicare Economic Index, practice expense for professional component services, definition of diabetes for diabetes self-management training, supplemental survey data for practice expense, geographic practice cost indices, and several coding issues. In addition, this rule updates the codes subject to the physician self-referral prohibition. We also make revisions to the sustainable growth rate and the anesthesia conversion factor. These changes will ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services. We are also finalizing the calendar year (CY) 2003 interim RVUs and are issuing interim RVUs for new and revised procedure codes for CY 2004. As required by the statute, we are announcing that the physician fee schedule update for CY 2004 is -4.5 percent, the initial estimate of the sustainable growth rate for CY 2004 is 7.4 percent, and the conversion factor for CY 2004 is $35.1339. We published a proposed rule (68 FR 50428) in the Federal Register on Part B drug payment reform on August 20, 2003. This proposed rule would also make changes to Medicare payment for furnishing or administering certain drugs and biologicals. We have not finalized these proposals to take into account that the Congress is considering legislation that would address these issues. We will continue to monitor legislative activity that would reform the Medicare Part B drug payment system. If legislation is not enacted soon on this issue, we remain committed to completing the regulatory process.     

Health care financing among the elderly: who really pays the bills?

This paper investigates the issue of who pays the health care bills of the elderly by considering the types of subsidized health insurance protection enjoyed by the noninstitutionalized elderly and the way that increased Medicare cost-sharing efforts in the 1980s are affecting those without additional health insurance subsidies. In making this examination we estimate the out-of-pocket health care expenditures of the elderly either directly or as nonsubsidized medigap premiums by income level, taking into account four types of health insurance subsidies received by elderly persons: Medicare, Medicaid, Veterans Administration health care, and subsidized health insurance from either current or former employers. We find that increased cost sharing is likely to fall most heavily on those elderly least likely to afford it: the poor and near-poor elderly who have only Medicare as a health insurance subsidy, particularly those who are older and sicker and who use Medicare services more heavily. These persons are caught between well-intentioned federal cost-cutting efforts and the often confusing panoply of health insurance programs for the aged, and they will bear an inequitably large portion of any future Medicare cost-sharing initiatives.     

Between the Scylla and Charybdis: physicians and the clash of liability standards and cost cutting goals within accountable care organizations

This article seeks to examine the conflict between non-cost-conscious medical malpractice liability standards and health care cost cutting measures within the context of Accountable Care Organizations ("ACOs") under the new health care reform law. This article begins by providing an overview of the high level of health care spending within the United States health care system in order to provide a context for better understanding policymakers' push for cost cutting measures, including ACOs. This article then examines the tension between cost containment efforts and medical liability standards through an examination of the "stuck in the middle" mentality that physicians face when they are forced to meet both liability standards that do not take into account cost concerns and cost cutting standards imposed by or through managed care organizations, pay-for-performance programs and consumer-driven healthcare. This article then introduces the concept of the ACO and describes elements of the ACOs envisioned under the new health care reform legislation. This article concludes by examining and analyzing whether and how ACOs will exacerbate the cost containment/liability standard tension, and how that tension may impact the effectiveness of ACOs.     

Barriers to achieving a cost-effective workforce mix: lessons from anesthesiology

As pressures to control health care costs increase, competition among physicians, advanced practice nurses, and other allied health providers has also intensified. Anesthesia care is one of the most highly contested terrains, where the growth in anesthesiologist supply has far outstripped total demand. This article explains why the supply has grown so fast despite evidence that nurse anesthetists provide equally good care at a fraction of the cost. Emphasis is given to payment incentives in the private sector and Medicare. Laudable attempts by the government to make Medicare payments more efficient and equitable by lowering the economic return to physicians specializing in anesthesia have created a hostile work environment. Nurse anesthetists are being dismissed from hospitals in favor of anesthesiologists who do not appear "on the payroll" but cost society more, nonetheless. Claims of antitrust violations by nurse anesthetists against anesthesiologists have not found much support in the courts for several reasons outlined in this essay. HMO penetration and other market forces have begun signaling new domestic physician graduates to eschew anesthesia, but, again, Medicare payment incentives encourage teaching hospitals to recruit international medical graduates to maintain graduate medical education payments. After suggesting desirable but likely ineffective reforms involving licensure laws and hospital organizational restructuring, the article discusses several alternative payment methods that would encourage hospitals and medical staffs to adopt a more cost-effective anesthesia workforce mix. Lessons for other nonphysician personnel conclude the article.     

Medicare program; revisions to payment policies under the physician fee schedule for calendar year 2001. Health Care Financing Administration (HCFA), HHS. Final rule with comment period

This final rule with comment period makes several changes affecting Medicare Part B payment. The changes include: refinement of resource-based practice expense relative value units (RVUs); the geographic practice cost indices; resource-based malpractice RVUs; critical care RVUs; care plan oversight and physician certification and recertification for home health services; observation care codes; ocular photodynamic therapy and other ophthalmological treatments; electrical bioimpedance; antigen supply; and the implantation of ventricular assist devices. This rule also addresses the comments received on the May 3, 2000 interim final rule on the supplemental survey criteria and makes modifications to the criteria for data submitted in 2001. Based on public comments we are withdrawing our proposals related to the global period for insertion, removal, and replacement of pacemakers and cardioverter defibrillators and low intensity ultrasound. This final rule also discusses or clarifies the payment policy for incomplete medical direction, pulse oximetry services, outpatient therapy supervision, outpatient therapy caps, HCPCS "G" Codes, and the second 5-year refinement of work RVUs for services furnished beginning January 1, 2002. In addition, we are finalizing the calendar year (CY) 2000 interim physician work RVUs and are issuing interim RVUs for new and revised codes for CY 2001. We are making these changes to ensure that our payment systems are updated to reflect changes in medical practice and the relative value of services. This final rule also announces the CY 2001 Medicare physician fee schedule conversion factor under the Medicare Supplementary Medical Insurance (Part B) program as required by section 1848(d) of the Social Security Act. The 2001 Medicare physician fee schedule conversion factor is $38.2581.     

Protecting Medicare: the best defense is a good offense

Traditional Medicare is being threatened from two political directions. The current Republican coalition, on the right, simply dislikes social insurance in principle. It seeks privatization for its own sake. Another perspective, centrist and well established among political and economic elites, worries that the program is "unaffordable," whatever its basic merits. Defenders of traditional Medicare need to address both threats by explaining why the budgetary fears are misconceived and why privatization is simply a bad idea. In order to do this, they need to take the budgetary high ground, argue more strenuously for short-term cost controls, and criticize the extra spending that the Bush administration has used to encourage private plans within Medicare. Defenders of social insurance should also seek good policy and political allies by proposing that Medicare's network of providers, prices, and administration be made available to employers (and other pools) in much the way that self-insured groups currently rent networks from private insurers.     

Medicare program; clarification of Medicare's accrual basis of accounting policy--HCFA. Final rule

This final rule revises the Medicare regulations to clarify the concept of "accrual basis of accounting" to indicate that expenses must be incurred by a provider of health care services before Medicare will pay its share of those expenses. This rule does not signify a change in policy but, rather, incorporates into the regulations Medicare's longstanding policy regarding the circumstances under which we recognize, for the purposes of program payment, a provider's claim for costs for which it has not actually expended funds during the current cost reporting period.     

Methods for developing relative need criteria to accompany a health care capital expenditure limit

In recent years capital spending in the health care industry has escalated tremendously, and most forecasters agree that needs will increase at an even faster rate throughout the 1990s. As a result of this trend, there is a dire need to develop effective and equitable controls on capital spending in health care. One of the capital payment options under consideration is the establishment of a lid on capital expenditures and the concomitant allocation of capital to health care providers whose applications are the most meritorious. The purpose of this article is to present some ideas and methods for the development of a relative need system to accompany a capital expenditure limit and to supplement and expand the absolute need determinations of the typical CON process.     

Medicare Program; establishment of the Medicare+Choice Program--HCFA. Interim final rule with comment period

The Balanced Budget Act of 1997 (BBA) establishes a new Medicare+Choice (M+C) program that significantly expands the health care options available to Medicare beneficiaries. Under this program, eligible individuals may elect to receive Medicare benefits through enrollment in one of an array of private health plan choices beyond the original Medicare program or the plans now available through managed care organizations under section 1876 of the Social Security Act. Among the alternatives that will be available to Medicare beneficiaries are M+C coordinated care plans (including plans offered by health maintenance organizations, preferred provider organizations, and provider-sponsored organizations), M+C "MSA" plans, that is, a combination of a high deductible M+C health insurance plan and a contribution to an M+C medical savings account (MSA), and M+C private fee-for-service plans. The introduction of the M+C program will have a profound effect on Medicare beneficiaries and on the health plans and providers that furnish care. The new provisions of the Medicare statute, set forth as Part C of title XVIII of the Social Security Act, address a wide range of areas, including eligibility and enrollment, benefits and beneficiary protections, quality assurance, participating providers, payments to M+C organizations, premiums, appeals and grievances, and contracting rules. This interim final rule explains and implements these provisions. In addition, we are soliciting letters of intent from organizations that intend to offer M+C MSA plans to Medicare beneficiaries and/or to serve as M+C MSA trustees.     

Halfway competitive markets and ineffective regulation: the American health care system

Since the late 1960s the U.S. has attempted to develop a strategy for controlling the rate of growth of health care spending. During the 1970s this strategy relied heavily on various forms of regulation. Some regulatory programs were partially successful in moderating spending increases, but they generated significant opposition--particularly from powerful provider groups, who successfully convinced Congress and the states to dismantle most of the regulatory structure and to substitute various forms of competitive approaches to controlling spending. Some of these competitive strategies have been successful in increasing the efficiency of subsections of our health system. But they too have produced "losers," and the government has been pressured to enter the system to minimize their losses. The net result has been a political stalemate between halfway competitive markets and ineffective regulation. With the rate of health care spending growth near historic levels, it is likely that the 1990s will bring a return to a stronger role for government regulation. But it is unlikely that we are any more willing to tolerate the negative fallout from regulation today than we were in the 1970s, and therefore we predict that the proportion of GNP going to health care will continue to grow throughout the remainder of this century.     

Medicare program; payment to health maintenance organizations and competitive medical plans--HCFA. Final rules with comment period

These regulations implement section 114 of the Tax Equity and Fiscal Responsibility Act of 1982 by authorizing Medicare reimbursement for health care services to eligible health maintenance organizations (HMOs) and competitive medical plans (CMPs) on a prospective basis for those entities that have a risk contract or on a reasonable cost basis for those that have a cost contract. The regulations set forth the requirements that an entity must meet in order to be: Eligible to enter into a Medicare contract (either risk or reasonable cost) as an eligible organization; and Reimbursed by Medicare on a capitation basis (either prospectively or retrospectively) for items and services furnished to Medicare enrollees. In addition, these regulations implement sections 2322 and 2350 (b) and (c) of Pub. L. 98-369 (Deficit Reduction Act of 1984), which further amended the Social Security Act concerning payments to HMOs and CMPs.     

The political and economic context of mental health care in the United States

Since the mid-1970s, the mental health treatment system in the U.S. has faced budgetary famine. This is in stark contrast to the growing cornucopia of fiscal resources enjoyed by the overall health care system. This paper explores the complex reasons for this disproportionate allocation in health spending. On the one hand, mental health may suffer from the perception that its diagnoses are largely "subjective" and its treatments do not fit the traditional "medical model" that can be defined precisely and paid for by third-party insurers. But more importantly, the death of mental health resources can be attributed to the peculiar nature and characteristics inherent in American politics. This paper describes the American political environment, from both a historical and a contemporary perspective, to give some insight into the development of policies affecting the mental health system in the U.S. Given the current climate of fiscal conservatism in this country toward any increases in social spending, it is likely that the profound mismatch in need and spending for mental health programs will continue indefinitely.     

TRICARE senior demonstration of military managed care--DOD. Notice of demonstration project

This notice is to advise interested parties of a demonstration project in which the Department of Defense (DoD) will provide health care services to Medicare-eligible military retirees in a managed care program, called TRICARE Senior, and receive reimbursement for such care from the Medicare Trust Fund. The program is authorized by section 1896 of the Social Security Act, amended by section 4015 of the Balanced Budget Act of 1997 (P.L. 105-33). The statue authorizes DoD and the Department of Health and Human Services (HHS) to conduct at six sites during January 1998 through December 2000, a three-year demonstration under which dual-eligible beneficiaries will be offered enrollment in a DoD-operated managed care plan, called TRICARE Senior Prime. The legislation also authorizes Medicare HMOs to make payments to DoD for care provided to HMO enrollees by military treatment facilities (MTFs) participating in the demonstration. This part of the demonstration, to be called Medicare Partners, will allow DoD to enter into contracts with Medicare HMOs to provide specialty and impatient care to dual-eligible beneficiaries currently provided on a space-available basis. Additional legal authority pertinent to this demonstration project is 10 U.S.C. section 1092. Under TRICARE Senior Prime, Medicare-eligible military retirees who enroll in the program will be assigned primary care manager (PCMs) at the MTF. Enrollees will be referred to specialty care providers at the MTF and to participating members of the existing TRICARE Prime network. TRICARE Senior Prime enrollees will be afforded the same priority access to MTF care as military retiree and retiree family member enrollees in TRICARE Prime. DoD will receive reimbursement from HCFA on a capitated basis at a rate which is 95 percent of the rate HCFA currently pays to Medicare-risk HMOs, less costs such as capital and graduate medical education, disproportionate share hospital payments, and some capital costs, which are already covered by DoD's annual appropriation. However, under the authorizing statute, DoD must meet its current level of effort for its Medicare-eligible beneficiaries before receiving payments from the Medicare Trust Fund. That is, DoD must continue to fund health care at a certain expenditure level for its Medicare-eligible population before it may be reimbursed by HCFA for care provided to TRICARE Senior Prime enrollees. The Balanced Budget Act of 1997 required DoD and HHS to complete a memorandum of agreement (MOA) specifying the operational requirements of the demonstration project. That MOA was completed on February 13, 1998, and is published below. Except as provided in the MOA, TRICARE Senior Prime will be implemented consistent with applicable provisions of the CHAMPUS/TRICARE regulation, particularly 32 CFR sections 199.17 and 199.18.     

Methods for estimating medical expenditures attributable to intimate partner violence

This article compares three methods for estimating the medical cost burden of intimate partner violence against U.S. adult women (18 years and older), 1 year postvictimization. To compute the estimates, prevalence data from the National Violence Against Women Survey are combined with cost data from the Medical Expenditure Panel Survey, the Medicare 5% sample, and published studies and with relative risk estimates from published studies. Results are compared and reasons for difference are explored, including the advantages and disadvantages of each approach. Estimates of the medical cost burden of intimate partner violence within the first 12 months after victimization range from USD 2.3 billion to USD 7.0 billion, depending on the method used. Although limited to women victimized in the last year, each method reveals that intimate partner violence imposes a substantial burden on the health care system. Among the approaches, there is no clear gold standard nor any evidence of bias.     

Medicare program; additional supplier standards. Health Care Financing Administration (HCFA), HHS. Final rule with comment period

This final rule establishes additional standards for an entity to qualify as a Medicare supplier for purposes of submitting claims and receiving payment for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS). These regulations will ensure that suppliers of DMEPOS are qualified to provide the appropriate health care services and will help safeguard the Medicare program and its beneficiaries from any instances of fraudulent or abusive billing practices.