Medicare+Choice creates opportunities for PSOs.

Area of Science:

• Healthcare Policy
• Health Economics
• Managed Care

Background:

• The Balanced Budget Act of 1997 introduced the Medicare + Choice program.
• This program allows provider-sponsored organizations (PSOs) to contract with Medicare.
• Specific ownership and operational criteria must be met by PSOs.

Purpose of the Study:

• To inform healthcare providers and PSOs about the implications of the Medicare + Choice program.
• To detail the requirements for PSOs seeking to participate in Medicare + Choice.
• To outline the payment structures and solvency regulations within the program.

Main Methods:

• Analysis of the Balanced Budget Act of 1997 provisions related to Medicare + Choice.
• Examination of eligibility criteria for Provider-Sponsored Organizations (PSOs).
• Review of Medicare payment methodologies and state solvency requirements.

Main Results:

• PSOs must be established, operated, and majority-owned by healthcare providers furnishing substantial services.
• Medicare + Choice payments are aggregate and based on enrollee demographics and geographic location.
• Payments will gradually shift towards a more uniform national rate.
• Participants must meet state solvency rules or obtain a waiver from HCFA.

Conclusions:

• The Medicare + Choice program presents significant opportunities for PSOs.
• Understanding payment calculations and solvency requirements is crucial for participation.
• The next three years are critical for forming PSOs before HCFA's waiver authority expires.