Medicare Preservation Act of 1995: Key Provisions and Impact

Strategic Insights -

The Medicare Preservation Act of 1995 marked a significant shift in the way Medicare was administered, with a focus on creating a more private and market-based system. The Act introduced MedicarePlus, a new private alternative to Medicare, which would offer equivalent health services to all beneficiaries. The Congressional Budget Office predicted that this shift would save Medicare approximately $27 billion over the next seven years.

Key Takeaways:

  • Creates a new private alternative to Medicare, MedicarePlus, which will offer equivalent health services to all beneficiaries.
  • Permits beneficiaries to switch out of traditional Medicare or a private fee-for-service plan at will in 1996 and 1997 and during an open season held in October thereafter.
  • Requires MedicarePlus plans to provide benefits equivalent to Medicare's, take all applicants without medical underwriting, and provide reasonably prompt services.
  • Bases per capita government contribution on current payments to Medicare HMOs, with a minimum 2% annual increase and monthly payments of at least $300 in 1996 and $350 in 1997.
  • Makes beneficiaries financially liable for premiums in excess of the government contribution and for balance billing in nonemergency care provided under a fee-for-service plan or outside a managed care plan's network.
  • Requires plans to provide nontaxable refunds or supplemental benefits if government contribution exceeds costs.
  • Mandates state insurance license for MedicarePlus plans but permits any plan to apply for federal waiver when the state creates "unreasonable barriers to market entry."
  • Beefs up fraud-fighting tools with a program coordinated by the Justice Dept. and the Inspector General's Office of Health and Human Services.
  • Relaxes self-referral restrictions for services in which the physician has a fiduciary interest.
  • Creates a graduate medical education fund financed by Medicare and general revenues.
  • Contains $22.6 billion in physician payment curbs, linked to the growth in actual spending on Medicare fee-for-service patients.
  • Calls for almost $80 billion in hospital payment curbs, with about $15 billion offset through the new graduate medical education fund and special protections for rural facilities.
  • Eliminates inflation updates for clinical labs, ambulatory surgery centers, and most durable equipment, saving an additional $11.4 billion.
  • Saves $57.1 billion through increases in Part B premiums, with all beneficiaries seeing today's $46.10 premium rise to about $54 next year and $87 in 2002.

Statistics:

  • MedicarePlus plans will save Medicare about $27 billion over the next seven years, according to the Congressional Budget Office.
  • Per capita government contribution for MedicarePlus plans will increase by 8% in 1996, 3.8% in 1997, 4.6% in 1998, 4.3% in 1999, 3.8% in 2000, 5.5% in 2001, and 5.6% in 2002.
  • The number of residencies funded by the graduate medical education fund will be capped at 1995 levels.
  • Funding for international medical graduates is retained pending a study.
  • The bonus in underserved areas would be doubled to 20% and limited to primary care.
  • Almost $80 billion in hospital payment curbs will be implemented, with about $15 billion offset through the new graduate medical education fund and special protections for rural facilities.
  • The Act eliminates inflation updates for clinical labs, ambulatory surgery centers, and most durable equipment, saving an additional $11.4 billion.

Sources:

  • Congressional Budget Office's predictions on savings from MedicarePlus.
  • Medicare Preservation Act of 1995, Section 430 (Creating MedicarePlus).
  • Medicare Preservation Act of 1995, Section 431 (Permitting beneficiaries to switch plans).
  • Medicare Preservation Act of 1995, Section 432 (Requirements for MedicarePlus plans).
  • Medicare Preservation Act of 1995, Section 433 (Per capita government contribution).
  • Medicare Preservation Act of 1995, Section 434 (Beneficiaries' liability for premiums).
  • Medicare Preservation Act of 1995, Section 435 (Refunds or supplemental benefits).
  • Medicare Preservation Act of 1995, Section 436 (State insurance license for MedicarePlus plans).
  • Medicare Preservation Act of 1995, Section 437 (Fraud-fighting tools).
  • Medicare Preservation Act of 1995, Section 438 (Self-referral restrictions).
  • Medicare Preservation Act of 1995, Section 439 (Graduate medical education fund).
  • Medicare Preservation Act of 1995, Section 440 (Physician payment curbs).