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BRIEFING SUMMARY
"Medicare+Choice Options: How PPOs Can Help
Ensure Choice for Seniors"
October 28, 2002
The Alliance to Improve Medicare (AIM) hosted a Congressional staff
briefing to provide information on CMS's Medicare+Choice Preferred Provider Option (PPO) demonstration project.
Speakers included David Kreiss, Special Assistant to the Administrator, Centers for Medicaid and Medicare Services, U.S. Department of Health and Human Services; William Haggett, Senior Vice President, Government Relations, Independence Blue Cross; Edward Ries, Executive Director, Anthem Senior Advantage, Anthem Blue Cross; and Jeff Lemieux, Senior Economist, Progressive Policy Institute. PPI also co-sponsored the event.
Mr. Kreiss described the PPO demonstration project as an opportunity
to take "measured risks in responsible ways" to try new options to improve Medicare.
Mr. Kreiss stated that growing beneficiary expectations highlight the stark contrast between the current fee-for-service and Medicare+Choice programs. He noted that the PPO demonstration project offers an opportunity to meet these enhanced beneficiary expectations and to both strengthen and improve the overall Medicare program.
Kreiss stated that CMS designed the project to offer an opportunity
to plans to share financial risk with CMS through negotiated arrangements.
He noted that the "risk corridor" approach utilized in the PPO project is a potential model for future Medicare products with broader applications. Mr. Kreiss stated that CMS worked with the U.S. Office of Management and Budget to develop a minimum set of risk assumption principles that all parties were measured by prior to negotiations. These included requirements that participating plans be: 1) established and financially secure; 2) subjected to a close review of historic administrative costs; and 3) willing to accept a minimum percentage of financial risk. Mr. Kreiss also emphasized that the demonstration project includes financial protections to ensure that beneficiaries will not be penalized for utilizing out of network services or providers.
Mr. Haggett provided an overview of government business products
offered by Independence Blue Cross (IBC), including HMO, PPO, and Medigap products.
He noted that IBC's Medicare PPO product was originally introduced during a 1997 risk adjustment demonstration project, became a full M+C program product in 2000, and has recently been approved to participate in the 2003 PPO demonstration project under a newly negotiated risk sharing arrangement. Mr. Haggett described demonstration projects as offering flexibility and opportunities for innovation. He stated the importance of a variety of coverage options, including PPO products, to provide services to a growing Medicare population with increasing
expectations of benefits. He also stated that PPOs offer an
opportunity to more closely align Medicare with the commercial market and noted that while "one size will not fit all, we must consider individual plans, beneficiaries and markets."
Mr. Ries noted that Anthem serves over 1.3 million beneficiaries
through the FEHB, Medicaid, M+C, and Medigap programs.
He noted that M+C program participation is becoming more difficult due to inadequate reimbursement rates and provider contracting difficulties. He said the willingness of CMS to consider differing payment mechanisms and risk sharing arrangements was crucial in convincing Anthem senior management to participate in the PPO project. Mr. Ries outlined PPO characteristics to include access to any Medicare provider with an associated level of cost sharing, expanded benefits including prescription drug coverage, and greater access to health information and education and disease management programs. Finally, Mr. Ries noted that Anthem hopes to increase its M+C market penetration through the PPO product.
In response to a question about pharmacy benefits in the new PPO
products, Mr. Ries stated that Anthem plans to offer a generic-based prescription drug benefit similar to Anthem's HMO M+C product. Mr. Haggett stated that IBC will offer a basic pharmacy benefit allowing
unlimited generic coverage and a buy-up option allowing up to $500 in brand name pharmaceutical coverage.
A representative from the Congressional Budget Office questioned data
requirements and projected beneficiary response to the project.
Mr. Kreiss responded that participating plans will not be relieved of current risk adjustment obligations and that the project included specific criteria that plans not draw beneficiaries out of current M+C product offerings. He stated that project participation applications required plans to demonstrate how they would achieve this market segmentation. He further stated that it is unclear how many beneficiaries will choose the PPO options (out of the 11 million who will have the option) and noted that the demonstration project will help CMS learn how other markets will respond to the option. All speakers agreed that the PPO option offers a middle price point between the current HMO options and Medigap supplemental products. Mr. Haggett noted that some beneficiaries may "buy down" from Medigap supplemental options to the PPO option due to the lower cost.
In response to a question about whether Medicare beneficiaries desire
additional coverage choices, Mr. Kreiss stated that the vast majority of beneficiaries currently purchase some type of supplemental coverage.
He noted that a new PPO option will offer more comprehensive coverage than current fee-for-service or M+C options without the need to purchase additional supplemental coverage..
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