Medicare provider-sponsored organizations : hearing before the Subcommittee on Health of the Committee on Ways and Means, House of Representatives, One Hundred Fifth Congress, first session, April 24, 1997

128 Pages·1999·9.1 MB·English

by  United States. Congress. House. Committee on Ways and Means. Subcommittee on Health

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MEDICARE PROVIDER-SPONSORED
ORGANIZATIONS
HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH
OF THE
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
FIRST SESSION
APRIL 24, 1997
Serial 105-76
Printed for the use of the Committee on Ways and Means
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COMMITTEE ON WAYS AND MEANS
BILL ARCHER, Texas, Chairman
PHILIP M. CRANE, IlUnois CHARLES B. RANGEL. New York
BILL THOMAS, CaUfornia FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida ROBERT T. MATSUI, CaUfornia
NANCY L. JOHNSON, Connecticut BARBARA B. KENNELLY, Connecticut
JIM RUNNING, Kentucky WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York SANDER M. LEVIN, Michigan
WALLY HERGER, CaUfornia BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana JIM McDERMOTT, Washington
DAVE CAMP, Michigan GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio XAVIER BECERRA, CaUfornia
PHILIP S. ENGLISH, Pennsylvania KAREN L. THURMAN, Florida
JOHN ENSIGN, Nevada
JON CHRISTENSEN, Nebraska
WES WATKINS, Oklahoma
J.D. HAYWORTH, Arizona
JERRY WELLER, IlUnois
KENNY HULSHOF, Missouri
AL. Singleton, ChiefofStaff
Janice Mays, Minority ChiefCounsel
Subcommittee on Health
BILL THOMAS, CaUfornia, Chairman
NANCY L. JOHNSON, Connecticut FORTNEY PETE STARK, California
JIM McCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
JOHN ENSIGN, Nevada GERALD D. KLECZKA, Wisconsin
JON CHRISTENSEN, Nebraska JOHN LEWIS, Georgia
PHILIP M. CRANE, IlUnois XAVIER BECERRA. CaUfornia
AMO HOUGHTON, New York
SAM JOHNSON, Texas
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, pubUc hearing records
of the Committee on Ways and Means are also pubUshed in electronic form. The printed
hearing record remains the official version. Because electronic submissions are used to
prepare both printed and electronic versions ofthe hearing record, the process ofconverting
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CONTENTS
Page
Advisories announcingthehearing 2
WITNESSES
Health Care Financing Administration, Kathleen Buto, Associate Adminis-
tratorforPolicy 11
Physician PaymentReview Commission, Hon. Gail R. Wilensky, Ph.D., Chair;
accompanied by David C. Colby, Ph.D., DeputyDirector 31
AmericanHospitalAssociation, John Brownlow 61
AmericanMedicalAssociation, Richard F. CorUn, M.D 83
Blue Cross and Blue ShieldAssociation, Mary Nell Lehnhard 71
Florida Hospital Healthcare System, John Brownlow 61
National Association of Insurance Commissioners, and Wisconsin Commis-
sionerofInsurance, JosephineW. Musser 41
SUBMISSIONS FOR THE RECORD
American Association ofHomes and Services for the Aging, Sheldon L. Gold-
berg, statement 106
AssociationofManaged Healthcare Organizations, Gordon B. Wheeler, letter 116
.
Premier, Inc., James L. Scott, statement 118
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MEDICARE PROVIDER-SPONSORED
ORGANIZATIONS
THURSDAY, APRIL 24, 1997
House of Representatives,
Committee on Ways and Means,
Subcommittee on Health,
Washington, DC.
The subcommittee met, pursuant to notice, at 1:40 p.m., in room
1100, Longworth House Office Building, Hon. Bill Thomas (chair-
man ofthe subcommittee) presiding.
[The advisories announcing the hearing follow:]
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ADVISORY
FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEEONHEALTH
FORIMMEDIATERELEASE CONTACT: [phone]
April 17, 1997
No.HL-11 , . ... Tr . .
Thomas Announces Hearing on
Medicare Provider-Sponsored Organizations
CongressmanBillThomas(R-CA),Chairman,SubcommitteeonHealthofthe
CommitteeonWaysandMeans,todayannouncedthattheSubcommitteewillholdahearingon
Medicareprovidersponsoredorganizations. ThehearingwilltakeplaceonThursday,
April24,1997,inroom1310LongworthHouseOfTlceBuilding,beginningat1:00p.m.
Inviewofthelimitedtimeavailabletohearwitnesses,oraltestimonyatthishearingwill
befrominvitedwitnessesonly. However,anyindividualororganizationnotscheduledforan
oralappearancemaysubmitawrittenstatementforconsiderationbytheCommitteeandfor
inclusionintheprintedrecordofthehearing.
BACKGROUND:
Provider-sponsoredorganizationswereakeycomponentincludedintheBalancedBudget
Actof1995(whichwasvetoedbythePresident)toincreasethearrayofprivateplanchoices
availabletoMedicarebeneficiaries. PresidentClintonalsoincludedaPSOinitiativeinhisFiscal
Year1998budgetproposal. Undercurrentlaw,theonlytypesofmanaged-careorganizations
qualifiedtoparticipateinMedicareareFederally-qualifiedhealthmaintenanceorganizations
(HMOs)andState-approvedcompetitivemedicalplans. HMOsandcompetitivemedicalplans
arerequiredbyMedicarelaw,amongotherthings,tobelicensedunderthelawsofaStateasa
conditionofparticipatinginMedicare,andmanystatesrequirePSOstomeetthesamelicensing
andoperatingrequirementsasHMOs.
PSOsgenerallyarecooperativeventuresofhospitalsandgroupsofphysiciansthat
eliminatethehealthinsurerormanaged-careplanasanintermediaryandofferhealthservices
andinsurancecoveragedirectlytopatients.
WhilethereisnowagrowingconsensusthatPSOsshouldbeallowedasanewoptionfor
Medicarebeneficiaries,theconditionsunderwhichPSOswillbeallowedtoparticipateinthe
Medicareprogramhavebeensubjecttoconsiderabledebate.
UndertheBalancedBudgetActof1995,PSOsweredefinedbroadlyaspublicorprivate
entitiesestablishedororganizedbyhealthcareprovidersorgroupsofaffiliatedproviders. The
BalancedBudgetActgenerallyrequiredaffiliatedproviderstoassumefiillfmancialriskona
prospectivebasisforallMedicarebenefits,andallowedPSOstomeetFederalsolvencyand
capitalstandardsdevelopedunderanegotiatedrulemakingprocess. PSOscouldseektemporary
waiversofStatelaws,otherthanforsolvency,undercertaincircumstances.
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WAYSANDMEANSSUBCOMMITTEEONHEALTH
PAGETWO
ThePresident'sPSOproposalwouldrequirePSOstobeaffiliatedwithhospitals,require
PSOstoassumesubstantialfinancialriskonlyundercertaincircumstances,andpreemptState
solvencylawsthatdifferfromFederalPSOsolvencystandards. ThePresident'sproposalwould
requireStatelicensureofPSOswhereStatestandardsaresubstantiallyequivalentor,after1999,
morestringentthantheFederalGovernment'sPSOlicensingrequirements. BoththeBalanced
BudgetActandthePresident'sproposalwouldreduceforPSOstheminimumnumberof
enroUeesnecessarytoparticipateintheMedicareprogramandwaivetherequirementunder
certaincircumstancesthatPSOshave50-percentnon-Medicareandnon-MedicaidenroUees.
Severalseparatebillsalsohavebeenintroducedinthe105*CongressbyMembersofboth
partiesintheHouseandSenatetomakePSOsavailableundertheMedicareprogram.
Inannouncingthehearing,Chairm^Thomasstated: "Expandingchoicebyallowing
beneficiariestoenrollinprovider-sponsoredorganizationsandotherprivatehealthplanswasa
keypointoftheRepublicanMedicarerestructuringplaninthe104*Congress. Iampleasedthat
thePresidenthasnowjoinedusinthegrowingconsensustogiveseniorsmorechoice. Because
thehealthcaremarketisconstantlychanging,however,weneedtoexaminemorecloselythe
properroleoftheFederalgovemmentandstandardsofparticipationforPSOsintheMedicare
program. Ibelievedoctorsandhospitalsoughttohavetherightincentivestojointogetherto
offertheirownhealthplanstoMedicarebeneficiaries."
FQCUSOFTHEHEARING:
ThehearingwillfocusontherolethatPSOsmayplayinofferingexpandedprivate
coverageoptionstoMedicarebeneficiariesandthestandardsofparticipationimderwhichPSOs
aremostlikelytooptimizebenefitstobeneficiaries.
PETAILSFORSUBMISSIONOFWRITTENCOMMENTS:
Anypersonororganizationwishingtosubmitawrittenstatementfortheprintedrecord
ofthehearingshouldsubmitatleastsix(6)copiesoftheirstatementanda3.5-inchdiskettein
WordPerfectorASCIIformat,withtheiraddressanddateofhearingnoted,bythecloseof
business,Thursday,May8,1997,toA.L.Singleton,ChiefofStaff,CommitteeonWaysand
Means,U.S.HouseofRepresentatives, 1102LongworthHouseOfficeBuilding,Washington,
D.C.20515. If thosefilingwrittenstatementswishtohavetheirstatementsdistributedtothe
pressandinterestedpublicatthehearing,theymaydeliver200additionalcopiesforthispurpose
totheSubcommitteeonHealthoffice,room 1136LongworthHouseOfficeBuilding,atleastone
hourbeforethehearingbegins.
FORMATTINGREQUIREMENTS
:
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incompliancewiththeseguidelineswillnotbeprinted,butwillbemaintainedintheCommitteefilesforreviewandusebytheCommittee.
excee1d.aloiaJoAfl1l0sptaatgeemsenitnsclaundidnagnayrtaaccchommepnaisnyiAntgtehxehitbaitMsCftorimptriwnrtiintgtemnusitUibeeiateyDptesdairnesitnagblaeistptaecdetoontlheegaClo-msimzietptaepee,rwaintdaemsasyetnaortemow
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3. Awitnessappearingatapublichearing,orsubmittingastatementfortherecordofapublichearing,orsubmittingwritten
commentsinresponsetoapublishedrequestforcommentsbytheCommittee,mustincludeonhisstatementorsubmissionalistofallclients,
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4. Asupplementalsheetmustaccompanyeachstatementlistingthename,fulladdress,atelephonenumberwherethewitnessor
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otherforms.
Note: AllCommitteeadvisoriesandnewsreleasesareavailableontheWorldWideWebat
'http://www.house.gov/ways_means/'.
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WAYSANDMEANSSUBCOMMITTEEONHEALTH
PAGETHREE
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***NOTICE - CHANGE IN ROOM AND TIME***
ADVISORY
FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEEONHEALTH
FORIMMEDIATERELEASE CONTACT: [phone]
April23, 1997
No.HL-11-Revised
Room and Time Change for Subcommittee Hearing on
Tliursday, April 24, 1997,
on Medicare Provider-Sponsored Organizations
CongressmanBillThomas,(R-CA),ChairmanoftheSubcommitteeonHealth,
CommitteeonWaysandMeans,todayannouncedthattheSubcommitteehearingonMedicare
provider-sponsoredorganizationspreviouslyscheduledforThursday,April24, 1997,at
1:00p.m.,in1310LongworthHouseOfficeBuilding,wilibeheldinsteadinthemain
Committeehearingroom,1100LongworthHouseOfficeBuildingbeginningat1:30p.m.
Allotherdetailsforthehearingremainthesame. (SeeSubcommitteepressrelease
No.HL-11,datedApril 17, 1997.)
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Chairman Thomas. The subcommittee will come to order.
Today's hearing is the 12th subcommittee hearing this year, and
this particular hearing v/ill focus on Medicare provider-sponsored
organizations. PSOs were among the private health plan options at
the heart ofthe Republican's plan during the 104th Congress to re-
form the Medicare program. While the Balanced Budget Act, which
contained those physician-sponsored organizations, was vetoed by
President Clinton, I am pleased to see that in the President's pro-
posal he has embraced PSOs as well.
I do strongly believe that doctors and hospitals should be encour-
aged to join together and offer private health plans directly to
Medicare beneficiaries. Health plans owned and controlled by doc-
tors and hospitals can provide a unique opportunity for providers
to furnish high-quality health care plans at affordable costs, par-
ticularly in rural America.
At the same time, however, we obviously need to assure bene-
ficiaries and taxpayers that these health plans are not only the
highest quality, but also are financially sound. It's easier to say
that than to figure out a structure under current knowledge to do
it at a very high comfort level.
While we should reduce obstacles that may deny doctors and hos-
pitals the opportunity to compete in the Medicare marketplace, we
obviously can't lower the bar so far that Medicare beneficiaries and
the Medicare Trust Fund are exposed to excessive financial risks
and disruptions in crucial health services.
Reasonable people can differ. There are a number of reasonable
bills in. What we want to do is to try to find as high a commonly-
accepted approach as we possibly can. I believe, over the last sev-
eral years, everyone has gained a better understanding of whether
or not what they initially assumed to be true was true or not.
That's why I look forward to today's testimony. I know it will help
guide us in creating a policy which balances these competing goals.
The gentleman from California.
Mr. Stark. Thank you, Mr. Chairman. I thank you for holding
this hearing.
I guess I could sum it up by saying that PSOs make me nervous.
It escapes me as to why we should take a rather loosely defined
group of providers and give them special exemption from the laws
that seem to be working throughout the country.
The New York Times documented abuses in a major national
hospital system's fee-for-service type operation, and I don't know
how we prevent those under capitated PSOs. I worry about rural
areas, where suddenly all of the resources may come under one
provider group and not refer out cases that may be beyond the
competence of, say, primary care or family physicians.
Then the question is, why did we consider overriding State law?
PSOs are happening. I don't know that they need special regula-
tions. I don't know that the regulations are more onerous when ap-
plied to professionals ofhigher skill.
I have trouble deciding whether one doctor in a chain ofhospitals
makes it a physician PSO, or one hospital and a group of physi-
cians makes it a hospital PSO. But we do have regulations that
seem to be working. I guess I have to be shown that t—here is some-
thing intrinsic in just saying you can take a group I mean, it