This growth has slowed somewhat in the past 2 years. Our recent work has examined two aspects of the Medicare+Choice program—payments and consumer information initiatives. BBA provisions dealing with payments to Medicare+Choice plans acknowledge that Medicare’s prior managed care payment method for health maintenance organizations (HMO) and other risk plans failed to save the government money and created wide disparities in payment rates across counties. Other provisions addressing consumer information needs are designed to raise beneficiary participation in Medicare+Choice and promote more effective quality-based competition among plans. HCFA had to develop and report on the new risk adjuster by March 1 of this year and is required to put the method in place by January 2000. while some plans are dropping out of the program, others are interested in signing new contracts. Medicare+Choice Information Campaign

Context for BBA’s information campaign provisions: Capitalizing on changes in the delivery of health care, BBA’s introduction of new health plan options is intended to create a market in which different types of health plans compete to enroll and serve Medicare beneficiaries. The BBA also required HCFA to provide beneficiaries with a list of available participating plans and a comparison of these plans’ benefits. comparisons difficult for beneficiaries. Mandated PPSs will alter how reimbursements are made to SNFs, HHAs, hospital outpatient departments, and rehabilitation facilities. Our work on SNF and home health benefits shows the importance of the design and implementation details of PPSs to achieving expected BBA savings and ensuring that Medicare beneficiaries have access to appropriate services. administrative overhead. The BBA called for phasing in a PPS for SNF care beginning after July 1, 1998, to bring program spending under control. Even if additional audits were to uncover significant inappropriate costs, HCFA maintains that it has no authority to adjust the base rates after the implementation of the new system. HCFA has no plans to undertake as extensive a monitoring effort. However, without adequate vigilance, inaccurate, inappropriate, and even fraudulent assessments could compromise the benefits of the PPS. To control spending while ensuring the appropriate provision of services, the BBA mandated important changes in the payment method and provider requirements for home health services. Design, implementation, and impact issues: Under the interim payment system, which took effect October 1, 1997, HHAs are paid their costs subject to the lower of two limits. The first limit builds on the existing aggregate per-visit cost limits but makes them more stringent. The closures could be a market correction for overexpansion in light of the BBA’s signal that Medicare would not support the double-digit increases in spending of the previous few years. We have attempted to monitor the impact of the interim payment system on access for this Committee as well as for the House Committees on Commerce and Ways and Means. Conclusions

The brief experience with some of the major Medicare provisions of the BBA demonstrates the challenges to implementing meaningful reform. At the same time, various provider groups have increasingly come to the Congress for relief. We believe that any significant alterations to key BBA provisions should be based on thorough analysis or sufficient experience to fully understand their effects.
Why GAO Did This Study

Pursuant to a congressional request, GAO discussed the implementation and impact of the Medicare provisions in the Balanced Budget Act of 1997 (BBA), focusing on: (1) the Medicare Choice program, particularly the payment method and consumer information efforts; and (2) prospective payment systems (PPS) for skilled nursing facilities (SNF) and home health agencies (HHA) in Medicare's traditional fee-for-service program.

What GAO Found

GAO noted that: (1) changes of the magnitude of those in the BBA require significant efforts to implement well and are subject to continual scrutiny; (2) GAO recently reported that the efforts of the Health Care Financing Administration (HCFA) to put the BBA provisions in place have been extensive and noteworthy, and the agency has made substantial progress in implementing the majority of the Medicare-related BBA mandates; (3) at the same time, it has encountered obstacles; (4) intense pressure to resolve year 2000 computer compliance issues has slowed HCFA's efforts; (5) in undertaking certain major initiatives, the agency has had to cope with inadequate experience and insufficient information; (6) thus, achieving the objectives of the BBA will require HCFA to refine and build on its initial efforts; (7) reforms of the payment methods for Medicare Choice plans are under way; (8) the withdrawal of some managed care plans has raised questions about how to maintain desired access for beneficiaries while implementing needed changes to plan payments and participation requirements; (9) HCFA has also initiated an information campaign to provide beneficiaries with new tools to make informed health plan choices and create stronger, quality-based competition; (10) some aspects of the campaign have only been piloted and certain problems did develop; refining these efforts to make them more useful and effective for beneficiaries is now critical; (11) the BBA's mandate to replace cost-based reimbursement methods with PPS constitutes another major program reform; (12) the phase-in of the PPS for SNFs began on schedule on July 1, 1998; (13) design flaws and inadequate underlying data used to establish the payment rates may compromise the system's ability to meet the twin objectives of slowing spending growth while promoting appropriate beneficiary care; (14) GAO has not found evidence that the closures or the interim payment system has significantly affected beneficiary access to home health care; (15) GAO's monitoring of potential access problems is continuing as more data on any effects of the interim system become available; (16) the impact of BBA's significant transformations of Medicare could generate pressure to undo many of the act's provisions; (17) in this environment, Congress will face difficult decisions that could pit particular interests against a more global interest in preserving Medicare for the long term; and (18) GAO believes that it would be a mistake to significantly modify BBA's provisions without thorough analysis or giving them a fair trial over a reasonable period of time.