Medicare Compliance & Reimbursement

With congressional negotiators debating how to involve more preferred provider organizations in Medicare, all eyes may soon be on the Centers for Medicare & Medicaid Services' demo designed to determine how best to pay and manage PPOs in Medicare. Much of the interest in attracting PPOs is tied to the hope that, with their less stringent requirements for assembling provider networks, the bigger, more loosely managed health plans would be a natural option for rural areas where few Medicare health maintenance organizations have established themselves.

Launched at the beginning of 2003, the demo's enrollment is still low, however. And plans are mostly available only to enrollees who also have access to a Medicare+Choice HMO. That leaves open the question of how easily PPOs would establish themselves in harder-to-serve rural areas, where a dearth of private Medicare plans thus far has cast a pall over free-market-analysts' hopes of turning much of the program over to private insurers.

As of Oct. 1, 75,431 beneficiaries had enrolled in 31 plans, according to CMS. Over half the demo enrollees belong to one New Jersey plan, Horizon. The 31 plans represent 17 different insurance companies, 16 of which also sponsor M+C HMOs. And "for the most part, demonstration plans are being offered in areas where Medicare+Choice already exists," according to analysis by Mathematica Policy Research, Inc.

All told, the demonstration PPOs are available to around 9 million beneficiaries, and will be available to just under 11 million beneficiaries in 28 geographical areas after several more PPOs with pending applications join the demonstration later this year, according to Mathematica analysts. At that point, seven areas will have more than one PPO available.

Mathematica also suggests that "to some extent," demo PPOs "appear to be targeting areas that are most promising for Medicare coordinated care now, as evidenced by growing enrollment or more stable offerings." Twenty-four percent of M+C coordinated-care-plan enrollees are in counties where such enrollment has grown between 1999 and 2002, but the corresponding figure is a significantly higher 31 percent for the PPO plans, says the analysis.