Impact of the BBA on Medicare HMO payments for rural areas

The Balanced Budget Act (BBA) of 1997 radically changed the way Medicare risk plans are paid, replacing the adjusted average per capita cost (AAPCC) system with one in which county payment rates are set as the highest of (1) a local/national blended rate; (2) a national payment floor; or (3) a 2 percent minimum update from the prior year's rate. This DataWatch presents results of simulations of the likely impact of these changes throughout the BBA implementation period ending in 2003. The assessment considers urban/rural differences in payment levels, year-to-year rate volatility, the types of rates paid, and budget-neutrality issues.