Medicare Compliance & Reimbursement

Health plans are the clear victors in the new landmark legislation.

Health plans won a major victory when Congress finally passed a Medicare reform and prescription drug bill.

The bill will make Medicare an infinitely more attractive market for health plans, experts and associations agree. Not only will reimbursement rates increase, but in a few years managed care plans will be allowed to compete with fee-for-service Medicare, potentially opening the doors to millions of new customers.

The Medicare bill will give prescription drug coverage to Medicare beneficiaries, and health plans would be the likeliest candidates for extending these benefits. That means millions of benes are potential customers for managed care plans.

The new bill "will allow for a strong partnership between the government and private health insurers," said Karen Ignagni, president of the American Association of Health Plans/Health Insurance Association of America. "We look forward to partnering with Medicare."

"We're already looking at the beginnings of a resurgence in Medicare+Choice in 2004," says John Gorman, president of Gorman Health Group in Washington. He notes that plans have been increasingly optimistic about the program because of the positive buzz around the reform bill over the last five months.

"We're going to see plans that got out during the exodus in the last four years getting back in, and I think you're going to see more new entrants," Gorman predicts.

More good news for plans is the fact that Congress chose not to address the issue of region size. Earlier drafts of the bill would have required participating plans to cover large regions of the country, which would have made it challenging - if not impossible - for plans to negotiate acceptable rates with the many providers from both urban and rural areas within a region. It appears that Congress is leaving the specifics of region size, as well as the number of health plans that can compete in the same region, up to the Department of Health and Human Services to decide.

"We were very concerned that big multi-state regions were going to be a problem" based on the previous drafts of the legislation, explains Alissa Fox, executive director of public policy at the Blue Cross Blue Shield Association. Such regions would have discouraged participation by most PPOs, she said. Fox is confident that HHS Secretary Tommy Thompson, with input from the health plan industry, will be able to devise a workable plan for the PPO regions.

Critics of the bill say there are no provisions that would limit drug costs. But health plans will be able to use the same cost-containment techniques that they use with their commercial products, Gorman says - there's nothing in the bill barring plans from using strict formularies, for example. Legislators "want to see if private plans can administer this thing efficiently without the government having to set fee schedules" for drugs, he says.

BCBSA is "very pleased" by "the provisions in the bill that will work to get generics to market sooner," Fox says. The bill does a good job addressing the provisions in current law that delay the introduction of generics into the marketplace, which keeps drug prices high for health plans and consumers, Fox says.

The bill isn't without some problems for health plans, Fox says. BCBSA is particularly concerned about a new pharmacy appeals right under which beneficiaries could request that they receive a drug from the plans' non-preferred brand-name tier - the most expensive tier - for the considerably lower price of a generic drug.

The new bill would also implement an "any willing pharmacy" regulation, which would require health plans to include in their networks any pharmacies that agree to their terms. BCBSA will be taking a closer look at those two issues, Fox says.