Medicare Compliance & Reimbursement

Early-adopting Medicare PPOs site some success, but many questions. 

If preferred provider organizations are indeed the future of Medicare, then now's the time to take a closer look at how the Medicare demonstration PPOs have been performing.

PPOs will be a more viable option in Medicare than HMOs have been, Leslie Norwalk, acting deputy administrator for the Centers for Medicare & Medicaid Services, said at the Medicare and Medicaid Conference held Oct. 21 by the American Association of Health Plans/Health Insurance Association of America. CMS is hoping to bring PPOs not just to the thickly settled areas that already have M+COs but to rural areas as well.

So far, however, most of the Medicare PPOs "are being offered in areas where Medicare+Choice already exists," according to a recent analysis by Mathematica Policy Research, Inc. As of Oct. 1, 75,431 beneficiaries had enrolled in 31 plans, according to CMS. Over half the demo enrollees belong to one plan, Horizon Blue Cross Blue Shield of New Jersey.

Seniors favor stability, predictability, and simplicity; that's the first lesson that Horizon has learned in its short experience offering a Medicare PPO, explained Christy Bell, senior vice president of the health plan, at the conference. Employers and members are losing patience and trust in the Medicare+Choice program, Bell said, and the PPO option has succeeded thus far because it is workable and flexible.

Enrollees are not having service problems and are not having trouble understanding the program, Bell said. As long as that continues, the PPO demonstration has a chance to retain its members and lure more.

Bell shared other lessons that Horizon has learned over the last few months. First of all, for a health plan to have a successful experience in Medicare, the plan must build a partnership with CMS; having an adversarial relationship, or trying to go it alone, is a recipe for failure.

Secondly, plans must aggressively market their Medicare products, Bell said. Potential enrollees are confused as to how a Medicare managed care plan would work and whether it's the right choice, and plans need to work hard to make their case.

But it's not all bad news. "There's a great deal of resiliency in the senior market," Bell told attendees. Seniors are always going to need coverage, and they want a stable plan. As plans achieve stability within Medicare, they will be able to attract more members and grow their Medicare products.

"PPOs allowed us to survive and thrive in the Medicare market," Bell said. If CMS hadn't started the PPO demonstration when it did, he said, Horizon might have had to exit Medicare entirely - a tough choice to make, since once a plan leaves it is so difficult to get back into the market.

Mainly because of the optimism surrounding the Medicare reform bill, health plans have been getting interested in Medicare+Choice again, explained Gary Bailey, deputy director of health plans at CMS' Center for Beneficiary Choices. Saying that there has been "increased participation" in M+C this year, Bailey noted that "we have awarded more Medicare contracts in the last year than in previous years." There have been 28 M+C service area expansions and 10 new contracts in 2003.

And unlike the last few years, September did not usher in a new wave of M+C exits. Bailey said. He joked that this is the first time he's referred to it as "renewal season" rather than "nonrenewal season."

Many Questions Remain 

It's still too early to tell if PPOs work for Medicare, said Stuart Lefkowicz, vice president of government programs for Group Health Incorporated. Because a Medicare PPO is basically an M+CO with an out-of-network benefit, it has many of the same problems as an M+CO, he said. Problem number one is reimbursement; costs are rising faster than government payments, so plans need help if they're to stick with the program.

Horizon doesn't have everything figured out yet, Bell said. "A lot of things are still in flux," he said, so plans entering the program need to be prepared for this. He added that seniors aren't the only ones who are looking for predictability from Medicare - health plans similarly want predictability from CMS and from Congress. That means predictable regulations and, most importantly, predictable funding.

Indeed, many questions remain, but Lefkowicz is optimistic that legislation will help. A Medicare PPO program that contains more regions with no limit on the number of participants will encourage more plans to participate, he said. And less restrictive adequacy requirements will make it easier for plans to enter rural areas.

"There are long-term financial issues that need to be resolved if we want to work this out," Lefkowicz said.

"We hear you when we you say you want more predictability and more money," Norwalk assured the attendees afterwards. She said CMS is working on getting health plans exactly that, though it needs Congress' help to do so.

Norwalk also said that CMS will work on figuring out what are appropriate access requirements for the program.