HHS Announces Pilot Program To Offer Seniors in 23 States a PPO Plan

Under a three-year demonstration project announced Aug. 27 by the Bush administration, seniors in 23 states will have greater access to preferred provider organizations -- a "relatively unrestrictive form of managed care" -- through the Medicare+Choice program, the Washington Post reports. Since M+C began in 1997, few PPOs have elected to participate in the program, but under a "new arrangement," HHS officials have convinced 33 plans to participate in the program by offering "special financial incentives" and reducing their risk (Goldstein, Washington Post, 8/28). Under the demonstration project, which does not require legislative approval, HHS will reimburse participating PPOs at either 99% of the rate for traditional fee-for-service Medicare coverage or the local Medicare+Choice rate, whichever is higher. Participating PPOs agree to cover all services available under traditional Medicare and may choose to provide additional coverage, such as prescription drug benefits (Garvey, Los Angeles Times, 8/28). Federal officials said that all 33 PPOs intend to include some kind of prescription drug coverage in their plans (Meckler, AP/Philadelphia Inquirer, 8/28). Participating PPOs are responsible for bearing the risk of any costs up to either 2% higher or 2% lower than actual expenses. Beyond those percentages, however, insurers have the option to share the risk with the federal government or continue to assume the risk entirely by themselves (Los Angeles Times, 8/28).

Comparing Options
Beneficiaries who choose to enroll in PPOs -- which "allow a wide choice" of in-network providers and the ability to see an out-of-network doctor for an additional charge -- will pay a $60 to $80 monthly premium, compared with an average $54 monthly premium for coverage under both an M+C HMO and fee-for-service Medicare, USA Today reports. Beneficiaries in traditional Medicare also pay 20% coinsurance for services (Appleby, USA Today, 8/28). Enrollment in the new PPOs will become available to about 11 million Medicare beneficiaries in November, and coverage will begin in January. "We expect this [demonstration project] to reinvigorate (Medicare managed care)," CMS Administrator Tom Scully said, adding that about 200,000 beneficiaries are expected to enroll in one of the new PPOs (Washington Post, 8/28).

Medicare Reform?
The demonstration project is "part of a broad [Bush] administration plan to tilt the government's vast health insurance system toward the private sector," the Post reports. The plan also "reflects the determination of Bush's senior health advisers to begin refashioning Medicare," especially because several attempts by Congress this year to reform the program failed. In announcing the project, HHS Secretary Tommy Thompson said, "We'd like Congress to join us, but we will take the administrative actions we can while we are waiting for Congress to act" (Washington Post, 8/28).

Reaction
The announcement received mixed reactions from seniors groups and consumer advocacy organizations. AARP spokesperson Julie Alexis said the plan would be a "viable option for some seniors," but cautioned that it is "not a substitution for modernizing Medicare with a prescription benefit" (Salganik, Baltimore Sun, 8/28). Gail Shearer, director of health policy analysis at Consumers Union, added, "There is simply no substitute for providing a prescription drug benefit for seniors. This plan dances around it. It provides enriched benefits for some but leaves many with nothing" (Los Angeles Times, 8/28). Amanda McCloskey, director of health policy at Families USA, said that the government should not be "putting more energy into private programs when our experience has been that hasn't worked" (Lueck, Wall Street Journal, 8/28). A listing of the 23 states covered by the demonstration project is available online.