Department Of Health & Human Services

Center for Health Plans and Providers

Health Care Financing Administration

November 10, 1997

Medicare+Choice - The New Medicare Part C

HCFA Central Office Managed Care Policy Staff

Public Law 105-33, The Balanced Budget Act of 1997, establishes a new authority permitting contracts between HCFA and a variety of different managed care and fee-for-service entities. The types of entities that may be granted contracts under this new authority include:

• Coordinated care plans, including Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Provider-Sponsored Organizations (PSOs). A PSO is defined as a public or private entity established by health care providers, which provide a substantial proportion of health care items and services directly through affiliated providers who share, directly or indirectly, substantial financial risk.
• Religious fraternal benefit society plans which may restrict enrollment to members of the church, convention or group with which the society is affiliated. Payments to such plans may be adjusted, as appropriate to take into account the actuarial characteristics and experience of plan enrollees.
• Private fee-for-service plans which reimburse providers on a fee-for-service basis, and are authorized to charge enrolled beneficiaries up to 115% of the plan's payment schedule (which may be different from the Medicare fee schedule).

In addition to the above Medicare+Choice contractors, beginning in January, 1999, up to 390,000 beneficiaries will have the choice (on a demonstration basis ending January 1, 2003) of enrolling in a Medical Savings Account (MSA) option. Under this option, beneficiaries would obtain high deductible health policies that pay for at least all Medicare-covered items and services after an enrollee meets the annual deductible of up to $6,000. The difference between the premiums for such high deductible policies and the applicable Medicare+Choice premium amount would be placed into an account for the beneficiary to use in meeting his or her deductible expenses.

Current 1876 Contracts: Current HMO/CMP risk plans that remain in compliance with current contracting standards and comply with new requirements established under this statutory authority will automatically transition into the Part C Medicare+Choice program. Beginning January 1, 1998, section 1876 risk-based contractors will be paid under a new Medicare+Choice payment methodology rather than the current AAPCC method in section 1876(a), and will be subject to certain other Medicare+Choice provisions. Contracting standards for Medicare+Choice plans (except for PSO solvency standards) will be published by June 1, 1998 as interim final regulations. Upon publication, the Secretary will no longer accept new 1876 risk applications. As of January 1, 1999, existing 1876 risk-based contracts will be terminated, and plans in good standing will transition to the Medicare+Choice program.

Repeal of Cost Option: As of August 5, 1997, the Secretary is prohibited from entering into any new 1876 cost-based contracts, unless the plan is a Health Care Prepayment Plan with an agreement under section 1833 of the Social Security Act. The 1876 cost-based payment authority is repealed and all cost contracts are terminated as of December 31, 2002.

Limited HCPP Option: Beginning January 1, 1999, the Secretary may only contract with those HCPPs that are sponsored by Union or Employer groups, or HCPPs that do not "provide, or arrange for the provision of, any inpatient hospital services ..." This amendment will result in the termination of 1833 agreements with any organization that does not meet the new definition. HCFA will establish transition rules for 1876 risk-based contractors that currently receive reimbursement on a cost basis for enrollees remaining under a previous HCPP agreement.

For Comments or Questions: that you wish to submit to HCFA on the implementation of the Medicare+Choice program, you may use the contacts listed in the Federal Register Notices or send in written comments to:

Medicare+Choice Program
Center For Health Plans and Providers
Health Care Financing Administration
7500 Security Boulevard
Baltimore, MD 21244-1850

Last Updated 11/10/97

Source: HCFA Web Site http://www.hcfa.gov

This file has been provided for MCOL Subscribers only and may not be forwarded, redistributed, copied or published in any medium.

Return to Managed Care On-Line Articles Menu