May 06,1999


Medicare and other Group Health Insurance Programs to be Examined

WASHINGTON -- Senate Finance Committee Chairman William V. Roth Jr. (R-DE) today announced the Committee will meet on Wednesday, May 12, 1999 at 10:00 a.m. in 215 Dirksen Senate Office Building, to hear testimony on Medicare reform, focusing on the key differences between Medicare and other group health insurance programs. Some of these differences include benefits, premiums, non-insurance payments to providers, coordination with Medicaid, and administrative structures and constraints.

The following witnesses are expected to testify before the Committee:

I. Harry P. Cain II, Ph.D. Executive Vice President, Blue Cross & Blue Shield Association; Chicago, IL

P. Anthony Hammond, A.S.A. Senior Actuary, Institute for Health Policy Solutions; Washington, D.C.

Christy Ferguson, Director of the Rhode Island Department of Human Services; Providence, RI (Invited)

Paul B. Ginsburg, Ph.D. President, Center for Studying Health System Change; Washington, D.C.

II. Murray N. Ross, Ph.D., Executive Director, Medicare Payment Advisory Commission; Washington, D.C.

Keith Mueller, Ph.D., Director, Nebraska Center for Rural Health Research; Omaha, NE

David Blumenthal, M.D., M.P.P., Executive Director, The Commonwealth Fund Task Force on Academic Health Centers and Director, Institute for Health Policy at Massachusetts General Hospital; Boston, MA


The first panel will discuss the differences in benefits, premiums, and the management of Medicare compared to other insurance programs. These presentations will lay the ground work for the consideration of reform proposals in future hearings by setting forth lessons that can be learned from other public and private insurance programs. Specific questions to be addressed will include: What is state-of-the-art benefit design? How can those benefits be coordinated with other insurers, such as Medicaid or employer-provided retiree health insurance? How do other programs use subscriber premiums to encourage prudent consumer behavior? What are the administrative constraints and/or advantages of the current HCFA structure compared to other insurance administrators?

One key difference between Medicare and private sector insurance plans that will be drawn out in the first panel is the role of the Medicaid program. For low-income Medicare beneficiaries, Medicaid serves as a provider of wrap-around benefits and cost-sharing supports, filling in Medicare's gaps. A consideration of the state-of-the-art in benefit design is complicated by the connections between Medicare and Medicaid benefits.

The second panel will focus on other non-insurance payments made to providers. These include payments that are made to fulfill other social goals, beyond simply paying health insurance claims, such as special payments for graduate medical education, disproportionate share hospitals, and rural areas. The current fee-for-service program includes these payments as part of the claims payment process. The panel will describe how these payments might be administered under different reform scenarios.

Graduate Medical Education (GME). Medicare pays teaching hospitals for its share of the costs of providing Graduate Medical Education. Direct GME payments are based on a hospital's per resident costs and the number of full time-equivalent residents the hospital employs. The indirect costs are reimbursed through the indirect medical education (IME) adjustment, which compensates teaching institutions for their relatively higher costs due to specialized services and the expense of resident physician involvement in patient care.

Disproportionate Share Hospital (DSH) Payments. DSH payments assist hospitals which provide care to a disproportionate share of low-income patients. The DSH adjustment is designed to protect access to care for Medicare beneficiaries by providing additional funds to hospitals that serve large numbers of low income patients.

Rural Hospitals. The Medicare program also includes special payments for certain rural hospitals and healthcare programs in order to maintain beneficiary access to health care services and providers. These programs include the Regional Referral Centers (RRC); Sole Community Hospitals (SCH); Medicare Dependent Hospitals (MDH); Critical Access Hospitals (CAH); Rural Health Care Transition Grants; various provider bonuses for those practicing in rural regions; and payments to Rural Health Clinics (RHC).