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Medicare HMO risk contracts: background, problems, and prognosis
The Journal of Medical Practice Management : MPM
|March 5, 1988
Summary
The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) introduced capitated payments for health maintenance organizations (HMOs) in Medicare. This led to varied outcomes, including contract terminations due to quality of care issues.
Area of Science:
- Health Policy
- Healthcare Management
- Public Health
Background:
- The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) significantly altered Medicare reimbursement.
- Capitation models were introduced for health maintenance organizations (HMOs) serving Medicare beneficiaries starting in 1985.
Purpose of the Study:
- To analyze the implementation and outcomes of TEFRA's capitated reimbursement system for Medicare beneficiaries.
- To examine the implications of early experiences with Medicare risk contracts and managed care.
Main Methods:
- Review of legislative changes and program implementation under TEFRA.
- Analysis of enrollment data and contract performance of Medicare HMOs.
- Examination of reasons for contract termination, including quality of care concerns.
Main Results:
- By May 1987, approximately 900,000 individuals were enrolled in Medicare risk contracts with HMOs.
- Variability in program results was observed, including the termination of a major contract due to quality issues.
- The Health Care Financing Administration (HCFA) terminated its risk contract with International Medical Centers, Inc. in May 1987.
Conclusions:
- The introduction of capitation in Medicare demonstrated mixed results, highlighting challenges in quality assurance.
- Current proposals for a "private health plan option" (PHPO) build upon these capitated and managed care principles.
- Future Medicare policy may expand capitated reimbursement to a broader range of beneficiaries and providers.