DEPARTMENT OF HEALTH & HUMAN SERVICES                                                        
HEALTH CARE FINANCING ADMINISTRATION

Center for Health Plans and Providers Health Plan Purchasing and Administration Group 7500 Security Boulevard Baltimore, Maryland 21244-1850 September 8, 1997 NOTE TO: HMO/CMP Medicare Coordinators and Other Interested Parties SUBJECT: 1998 Rate Tables

We are enclosing Medicare capitation rate tables and demographic factors used to calculate payment rates for your plan's 1998 adjusted community rate (ACR) proposal. The national average payment reflects a 3.4 percent increase in the United States Per Capita Cost, reduced by 0.8 percentage points as required under the Balance Budget Act of 1997 (P.L. 105-33). Also, the capitation amounts for each county are calculated under the provisions of P.L. 105-33 Accordingly, the increase in rates will vary per individual plan. For 1998, under P.L. 105-33 all county payment rates are either (i) at the $367 "floor" amount (or, if lower, 150 percent of the 1997 standardized rate for areas outside of the 50 States and the District of Columbia), or (ii) 2 percent greater than the 1997 level. Sincerely,

Gary Bailey Director

Enclosures

Enclosure I

For your information, the table below compares the USPCC for 1998 with 1997.
The numbers below include the impact of the Balanced Budget Act
of 1997 (P.L. 105-33). This data was furnished by the Office of the Actuary.

1998 1997¹ Change

Aged A $271.26 $297.06 -8.7% Aged B 200.88 159.39 26.0 Aged Total 472.14 456.45 3.4 Disabled A 224.86 247.24 -9.1 Disabled B 177.27 141.01 25.7 Disabled Total 402.13 388.25 3.6 ESRD A 1051.64 1258.31 -16.4 ESRD B 2182.05 2052.58 6.3 ESRD Total 3233.69 3310.89 -2.3

The following table compares the monthly actuarial equivalent of Medicare's deductible and coinsurance for 1998 with 1997.

1998 1997 Change

Part A Benefits $22.38 $22.10 1.3% Part B Benefits² 54.50 51.02 6.8 Total Monthly 76.88 73.12 5.1

¹ Unlike prior years, the 1997 USPCC amounts shown are the current estimates for the year, rather than the USPCCs as originally estimated for the 1997 ratebook. P.L. 105-33 does not provide for an adjustment for any projection error in the 1997 USPCC. Therefore, the current estimates are used in order to reflect the correct increase for the 1998 USPCCs.

² Includes the amounts for outpatient psychiatric charges.

Enclosure II

KEY ASSUMPTIONS AND FINANCIAL INFORMATION

We are providing the attached set of tables which summarize many of the key Medicare assumptions. Most of the tables include information for the years 1992 through 1999. Most of these tables are identical to the
tables released in the July 24 45-day notice. They do not include the
impacts of the Balance Budget Act of 1997 (P.L. 105-33). However, on the
page titled "Approximate Calculation of the USPCC for Aged Beneficiaries" we have included an adjustment factor to account for the
overall impact of P.L. 105-33. Caution should be employed in the use of
this information. It is based upon nationwide averages, and local
conditions can differ substantially from conditions nationwide, in
particular due to the significant changes made by P.L. 105-33.

Summary of Key Projections Under Prior Law 1/

Part A

Calendar Year Fiscal Year FY Part A Total CPI Percent PPS Update Reimbursement Year Increase Factor (Incurred)

1992 2.9% 2/ 17.8% 1993 2.8 3/ 10.4 1994 2.5 4/ 12.2 1995 2.9 5/ 10.3 1996 2.9 1.5% 9.9 1997 2.7 2.0 7.2 1998 2.5 2.9 8.1 1999 2.5 2.9 8.0

Part B 6/

Fiscal Physician Physician Year Fees Residual Outpatient Total

1992 -0.1% 0.3% 9.4% 3.4% 1993 0.8 1.3 10.9 5.2 1994 2.4 3.5 8.7 7.4 1995 4.1 2.0 11.5 8.8 1996 1.8 0.2 4.8 5.3 1997 1.0 2.0 5.8 5.5 1998 2.4 1.6 6.6 7.7 1999 1.9 3.5 12.2 9.5

1/ Percent change over prior year. 2/ For entire year, 3.8% rural and 2.8% urban updates 3/ For entire year, 3.55% rural and 2.55% urban updates 4/ For entire year, 3.3% rural and 1.8% urban updates 5/ For entire year, 8.4% rural and 1.1% urban updates 6/ Percent change in charges per aged Part B enrollee

Note: Projections shown do not reflect the impact of the Balanced Budget Act of 1997 (P.L. 105-33). See approximate "Calculation of the USPCC for Aged Beneficiaries" for overall impact of this legislation.

Enrollment Projections Under Prior Law (In Millions)

Non-ESRD

Part A Part B Calendar Year Aged Disabled Aged Disabled

1992 31.247 3.548 30.572 3.103 1993 31.700 3.818 30.998 3.324 1994 32.307 4.110 31.319 3.564 1995 32.653 4.409 31.594 3.776 1996 32.907 4.643 31.838 3.963 1997 33.077 4.886 32.045 4.150 1998 33.282 5.118 32.219 4.345 1999 33.496 5.365 32.392 4.551

ESRD Part A

Calendar Year Aged Disabled 299I Total

1992 0.064 0.053 0.074 0.191 1993 0.071 0.058 0.077 0.207 1994 0.079 0.064 0.082 0.225 1995 0.085 0.070 0.087 0.242 1996 0.091 0.075 0.092 0.258 1997 0.097 0.080 0.097 0.275 1998 0.103 0.086 0.102 0.291 1999 0.109 0.091 0.108 0.308

ESRD Part B

Calendar Year Aged Disabled 299I Total

1992 0.065 0.052 0.072 0.189 1993 0.072 0.057 0.076 0.205 1994 0.080 0.063 0.081 0.224 1995 0.086 0.068 0.087 0.241 1996 0.091 0.074 0.092 0.257 1997 0.097 0.080 0.098 0.275 1998 0.103 0.085 0.104 0.292 1999 0.109 0.091 0.109 0.309

Note: P.L. 105-33 is estimated to have a negligible effect on projected Medicare enrollment.

Part A Projections Under Prior Law

Inpatient Hospital Calendar Admissions/Capita Reimbursement/Admission Year Aged Disabled Aged Disabled 1992 0.301 0.374 $7,078 $5,936 1993 0.302 0.372 7,257 6,037 1994 0.302 0.376 7,598 6,256 1995 0.300 0.370 8,051 6,545 1996 0.304 0.373 8,537 6,938 1997 0.308 0.376 8,833 7,180 1998 0.311 0.379 9,250 7,520 1999 0.315 0.382 9,682 7,873

Skilled Nursing Facility Calendar Days/Capita Reimbursement/Day Year Aged Disabled Aged Disabled 1992 0.893 0.283 $156 $167 1993 1.045 0.320 188 202 1994 1.101 0.338 225 246 1995 1.143 0.351 266 294 1996 1.168 0.356 290 321 1997 1.181 0.355 322 355 1998 1.195 0.356 350 386 1999 1.208 0.356 381 420

Home Health Agency Calendar Visits/Capita Reimbursement/Visit Year Aged Disabled Aged Disabled 1992 4.003 2.651 $58 $59 1993 4.929 3.236 61 60 1994 6.287 4.096 60 60 1995 7.483 4.792 61 61 1996 7.941 5.042 63 63 1997 8.436 5.291 67 67 1998 8.961 5.559 70 70 1999 9.424 5.780 72 73

Calendar Hospice: Total Reimbursement (in Millions) Year Aged Disabled 1992 $804 $42 1993 1006 53 1994 1412 74 1995 1789 94 1996 1899 100 1997 2014 106 1998 2135 112 1999 2260 119

Note: Projections shown do not reflect the impact of the Balanced Budget Act of 1997 (P.L. 105-33). See approximate "Calculation of the USPCC for Aged Beneficiaries" for overall impact of this legislation.

Part B Projections Under Prior Law 1/

Physician Outpatient

Calendar Disabled Disabled Year Aged Non-ESRD Aged Non-ESRD

1992 $948.10 $829.90 $286.82 $317.57 1993 980.66 867.30 314.56 349.58 1994 1,048.50 942.71 349.27 391.85 1995 1,099.63 987.70 381.57 422.63 1996 1,126.43 988.18 402.44 440.60 1997 1,164.59 1,013.64 424.63 491.17 1998 1,221.11 1,046.74 462.88 566.62 1999 1,288.86 1,068.17 518.24 650.37

Home Health GPPP Independent Lab

Calendar Disabled Disabled Disabled Year Aged Non-ESRD Aged Non-ESRD Aged Non-ESRD

1992 $2.77 $0.00 $128.05 $36.12 $55.31 $42.47 1993 3.49 0.00 149.08 39.75 56.28 46.30 1994 5.12 0.00 174.32 43.87 56.85 49.08 1995 7.12 0.00 218.72 70.70 55.25 52.86 1996 8.12 0.00 265.79 98.36 52.98 54.59 1997 9.36 0.00 316.53 111.71 54.87 54.34 1998 10.81 0.00 387.15 132.38 59.31 57.82 1999 12.56 0.00 460.46 153.69 64.45 63.77

1/ Reimbursement per enrollee on an incurred basis.

Note: Projections shown do not reflect the impact of the Balanced Budget Act of 1997 (P.L. 105-33). See approximate "Calculation of the USPCC for Aged Beneficiaries" for overall impact of this legislation.

Claims Processing Costs, Under Present Law as a Fraction of Benefits

Calendar Year Part A Part B

1988 0.005508 0.026230 1989 0.005178 0.026494 1990 0.004632 0.025077 1991 0.004691 0.023910 1992 0.004061 0.023004 1993 0.002726 0.022985 1994 0.002531 0.020798 1995 0.002315 0.018306 1996 0.002075 0.016802 1997 0.002075 0.016802 1998 0.002075 0.016802

Approximate Calculation of the USPCC for Aged Beneficiaries

The following procedure will approximate the actual calculation of the USPCCs from the underlying assumptions for the contract year for both Part A and Part B. Because some of the underlying assumptions (Part A) are actually developed on a quarterly basis rather than an annual basis and some of the assumptions (Part B) are developed on a fiscal year rather than a calendar year basis, the following will only approximate the
actual USPCC calculation.

As mentioned previously, the tables underlying the approximate calculations discussed on this page are based on the law in effect as of July 24, 1997, and thus do not reflect the impact of P.L. 105-33. However, the paragraphs below include an adjustment factor to approximate the overall impact of the recent legislation.

Part A:

The Part A USPCC for aged beneficiaries can be approximated by using the assumptions in the tables titled "Part A Projections" and "Claims Processing Costs, as a Fraction of Benefits". Starting with the assumptions in the "Part A Projections" table, multiply the aged units per capita (admissions for hospitals, days for SNF, and visits for HHA) by the respective aged reimbursements per unit and sum over the three types of providers (hospitals, SNF, and HHA). Multiply this amount by 1 plus the loading factor for administrative expenses from the table labeled "Claims Processing Costs, as a Fraction of Benefits". Next, divide by 12 to put on a monthly basis. The next step is to multiply by .98790 to get the USPCC for the aged non-ESRD, prior to the impact of P.L. 105-33. This factor is the relationship between the total and non-ESRD per capita reimbursements in 1998. The final step is to multiply by .83833, which approximates the impact of P.L. 105-33 on the aged Part A USPCC in 1998. (The last two factors do not necessarily hold in any other year.)

Part B:

The Part B USPCC can be approximated by using the assumptions in the tables titled "Part B Projections" and "Claims Processing Costs, as a Fraction of Benefits". Information in the Part B projections table is presented on a calendar year per capita basis. One can add the per capita amounts over all types of providers for the aged. Next, multiply by 1 plus the loading factor for administrative expenses and divide by 12 to put on a monthly basis. Then multiply by .95589 to get the USPCC for the aged non-ESRD, prior to the impact of P.L. 105-33. The final step is to multiply by 1.15826, which approximates the impact of P.L. 105-33 on the aged Part B USPCC in 1998. (The last two factors do not necessarily hold in any other year.)

Comparison of 1997 / 1998 Part A and Part B Monthly Capitation Rates for Counties With High HMO Enrollment

Return to: Medicare+Choice (AAPCC) Information

Last Updated 09/08/97

This file has been provided for MCOL subscribers only.