Premium rebates and the quiet consensus on market reform for Medicare.

Premium rebates allow beneficiaries who choose more efficient Medicare options to receive cash rebates, rather than extra benefits. That simple idea has been controversial. Without fanfare, however, premium rebates have become a key area of agreement in the debate on Medicare reform. Moreover, in legislation in late 2000, it became official policy: Medicare+Choice (M+C) plans will be allowed to offer rebates beginning in 2003. This article explores the economic rationale for premium rebates, provides a historical perspective on the rebate debate, discusses some of the implementation issues that need to be addressed before 2003, and reviews the implications of premium rebates for current legislative proposals for Medicare reform.

A tale of four cities: Medicare reform and competitive pricing.

The current payment system for Medicare + Choice (M + C) plans is based on prices calculated from administrative records. This system has been criticized as arbitrary, inefficient, and unfair. Most Medicare reform proposals would replace the current payment system with some form of competitive pricing. However, efforts over the past five years to demonstrate competitive pricing for M + C plans have been blocked repeatedly by Congress, even when the demonstrations were directly responsive to a congressional mandate. In the absence of political support, a demonstration of competitive pricing may be infeasible, and Congress could be forced to take the risky step of implementing broad Medicare reforms with very little information about their effects.

The Federal Employees Health Benefits Plan: implications for medicare reform.

This paper suggests that the Federal Employees Health Benefits Program (FEHBP) is perhaps a model for Medicare reform. First, we introduce the FEHBP and describe important features, such as the method for determining the government's premium contribution. Second, we examine the cost performance of the FEHBP program, and conclude that the FEHBP has out-performed private health insurance programs and Medicare in its ability to control costs. Third, we discuss the problem of adverse selection in the FEHBP. We conclude that the FEHBP has experienced some selection problems, but not enough to prevent it from offering a wide variety of choices without standardized benefits or direct risk adjustment. For a demonstration of competitive pricing in Medicare, the fourth section compares the FEHBP to two models of Medicare reform: "FEHBP for Medicare," proposed by Butler and Moffit; and the "Denver design."

Access for low-income children: is health insurance enough?

OBJECTIVE: The Balanced Budget Act of 1997 authorizes $20 billion for states to expand health insurance coverage among uninsured low-income children. This study identifies lessons learned from the Medicaid Extension Demonstration, which was authorized by Congress to experiment with innovative approaches to providing health care coverage for low-income children. The three programs compare and contrast a variety of features that may enhance or detract from access, including a traditional Medicaid expansion, a private indemnity model, and a comprehensive managed care delivery system. METHODOLOGY: Two waves of telephone surveys were conducted with a sample of parents of children participating in the Medicaid Extension Demonstration, and a comparison group of parents of children who were eligible but not participating. Descriptive and multivariate analyses were conducted to determine the impact of the demonstration on access to care. RESULTS: Compared with those who were uninsured, children in the managed care program were more likely to have a medical home and a physician visit and were less likely to have an emergency room visit, and had lower levels of unmet need. Outcomes across the other two demonstration programs were less favorable. CONCLUSIONS: This study suggests that simply providing a Medicaid card or private indemnity insurance card is not enough to ensure access to care. Future initiatives also need to consider the structure of the delivery system, especially the availability of a medical home (with adequate after-hours care), as well as the impact of discontinuous insurance coverage on access to and continuity of care.

Managing access: extending Medicaid to children through school-based HMO coverage.

This study explores how a health maintenance organization's (HMO) capacity and incentives to manage care might be used to improve access. In the early 1990s, the Florida Healthy Kids (FHK) demonstration extended Medicaid-like HMO coverage to indigent children in the public schools of Volusia County, Florida. The study finds that uninsured student months in area public schools were likely reduced by one-half. Utilization and cost levels for these indigent enrollees proved to be indistinguishable from commercial clients; and measures of access, utilization, and satisfaction for enrollees were in line with (and in some cases, superior to) non-enrollees with private insurance. Overall, these results suggest the value of using schools as a medium for providing coverage, and the importance of taking deliberate steps to manage access to reduce non-financial barriers to care.

The PACE evaluation: initial findings.

As of mid-1994 there were nine replications of the On Lok model operating under dual capitation payments as sites in the Program of All-inclusive Care for the Elderly (PACE). A tenth site had begun operating under capitation, but was unable to remain viable. The present descriptive study documents the growth and development of the first seven of these sites, all that had been operating under capitation during 1992. Comparisons among these sites and with On Lok are presented in the areas of organizational structure, client characteristics, approaches to case management, service delivery options, and financing. There is considerable variability in the implementation of the PACE model. Combined Medicare and Medicaid capitation monthly payments range from $2,147 to $5,973. These seven PACE sites (excluding On Lok) served a total of 888 current clients at the end of 1992, after a cumulative 136 months of experience under capitation. The very slow enrollment rates may imply that the target clients are less enthusiastic about this model than are its architects. The client selection process may suggest niche-marketing or skimming, but not the full representation of the nursing home population in their states. Given both the slow enrollment and the niche-marketing (the benevolent term) or skimming (the pejorative term) that has occurred, caution about the long-term viability of the PACE model may be warranted.

Medicare's prospective payment system: a critical appraisal.

Implementation of the Medicare prospective payment system (PPS) for hospital payment has produced major changes in the hospital industry and in the way hospital services are used by physicians and their patients. The substantial published literature that examines these changes is reviewed in this article. This literature suggests that most of the intended effects of PPS on costs and intensity of care have been realized. But the literature fails to answer fundamental questions about the effectiveness and equity of administered pricing as a policy tool for cost containment. The literature offers some hope that the worst fears about the effects of PPS on quality of care and the health of the hospital industry have not materialized. But because of data lags, the studies done to date seem to tell us more about the effects of the early, more generous period of PPS than about the opportunity costs of reducing hospital cost inflation.