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Fact Sheet

For Immediate Release: Contact:
Monday, February 22, 1999 CMS Office of Public Affairs

For questions about Medicare please call 1-800-MEDICARE or visit


Overview: The Health Care Financing Administration (HCFA) has made solid progress in implementing the landmark Balanced Budget Act of 1997 (BBA). The BBA made sweeping changes to Medicare and generates savings that are critical to extending the life of the Medicare Trust Fund for 10 years. It established the new state Children's Health Insurance Program, which provides another landmark opportunity to improve the health of children. In Medicaid, the BBA created new eligibility options, expanded assistance for low-income Medicare beneficiaries, and set new quality standards for Medicaid managed care plans.

BBA implementation is an enormous effort that requires HCFA to balance many competing priorities within existing resources. HCFA has already fully implemented more than half of the more than 300 individual BBA provisions affecting HCFA programs.


Medicare+Choice. The Medicare+Choice program offers beneficiaries more health care options than ever before. HCFA is encouraging plan participation in the program and last summer held outreach sessions for plans; more than 1,500 plan representatives attended. Since November 1998, the agency has approved a total of 10 new plans and 10 service area expansions for existing plans. The newly approved plans include the first provider-sponsored organization, one of the new types of plans allowed under the Medicare+Choice program.

As part of the Medicare+Choice program, HCFA also developed new beneficiary and plan enrollment systems, payment systems, appeals and grievance procedures, and quality assurance mechanisms reflecting provisions of the Patient's Bill of Rights. The agency has begun implementation, on a phased-in basis, of a more accurate risk adjustment payment method that will, for the first time, begin to reflect the health status of Medicare beneficiaries. In addition, HCFA will publish refinements to regulations in early 1999 that address plan concerns and further facilitate participation.

One of the greatest challenges in implementing Medicare+Choice is informing Medicare beneficiaries about the many options available to them. HCFA has launched the National Medicare Education Campaign to ensure that beneficiaries receive accurate and unbiased information about their benefits, rights and options. The campaign includes mailings to explain new benefits and health plan options, and to allow comparisons among local plans. It includes a toll-free 1-800-MEDICARE call center being phased in across the country in 1999, with live operators to answer questions.

HCFA also launched a consumer-friendly Internet Web site; a program to teach counselors in other organizations that serve Medicare beneficiaries how to explain the changes; enhanced beneficiary counseling from State Health Insurance Advisory Programs; a multitude of state and local outreach efforts; and a comprehensive assessment of these efforts early in the campaign.

The education campaign began in 1998 on a pilot basis in five states. HCFA is working with beneficiaries in those and other states to learn more about their preferences. That feedback will be used in a full-scale, national campaign for the 1999 open enrollment period beginning in the fall.

New Preventive Care Benefits. HCFA has implemented new preventive care benefits under the BBA. Medicare now covers test strips and education programs to help all diabetics control their disease, bone density measurement for beneficiaries at risk of osteoporosis, and several colorectal cancer screening tests. Medicare also now covers a screening pap smear, pelvic exam and clinical breast exam every three years for most women, screening pap smears and pelvic exams every year for women at high risk for cervical or vaginal cancer. Medicare also now covers annual screening mammograms for all women age 40 and over, and a one-time initial, or baseline, mammogram for women ages 35-39. Medicare pays for these tests whether or not beneficiaries have met their annual deductibles.

DME Competitive Bidding Demonstration. The BBA authorizes a competitive bidding demonstration to ensure competitive durable medical equipment prices. Polk County, Florida, will be the first test site. HCFA held meetings in Polk County in the summer of 1998 to explain the project to local suppliers and beneficiary advocates and selected a beneficiary ombudsman. A toll-free hotline also is available to answer questions about the project. Bidding documents should be issued soon, and a conference for potential bidders will be held shortly thereafter.

Medicare+Choice Competitive Pricing. Congress directed HCFA to implement up to seven demonstrations designed to change the current administrative method for paying managed care plans, based on fee-for-service, to one based on the competitive market price. The private sector and some states currently use competitive pricing extensively. A Competitive Pricing Advisory Committee, composed of pricing experts, is designing the demonstration and an Area Advisory Committee, composed of local stakeholders, is advising on implementation issues. The first two demonstrations to be implemented in Kansas City and Phoenix will begin in January 2000.

New Payment Systems. HCFA has implemented a new prospective payment system that will help control skilled-nursing facility costs by creating incentives to provide care efficiently by relating payments to the needs of the patient. Similar prospective-payment systems are being developed for rehabilitation hospitals and outpatient hospital care.

While HCFA is implementing the more than 300 BBA provisions affecting its programs, it also is meeting one of the most important Year 2000 computer challenges in all of government. Independent computer experts advised HCFA to postpone any other computer systems changes that could interfere with Year 2000 work. The vast majority of BBA provisions are unaffected.

However, these necessary postponements include some BBA provisions that require complex systems changes or which would have occurred in a critical window of vulnerability from October 1, 1999 through April 1, 2000. A prospective payment system for outpatient hospital care, consolidated billing for services in nursing homes, and a new fee schedule for ambulance services may need to be delayed.


HCFA has approved 50 Children's Health Insurance Program (CHIP) plans as of February 1, 1999. By September 2000, states expect to cover more than 2.5 million children, most of whom are in working families that do not earn enough to afford coverage for their children. Amendments expanding state plans have been approved for nine states, and more than a dozen others have indicated that they also intend to grow beyond their initial programs. HCFA developed a standard application format to help states provide all the information required for plan approval.

The agency held conferences with elected officials across the county, sent more than a dozen letters to state officials regarding specific policy issues, including outreach, financial issues and cost sharing. The agency also released five sets of detailed answers to key policy questions for states as they develop these important new programs.


HCFA proposed regulations for implementing strong, new Medicaid managed care patient protection and quality improvement requirements on September 29, 1998. About half of all Medicaid beneficiaries nationwide are now enrolled in managed care. The proposed rules would implement the new law but also build on the work of leading state Medicaid programs. Health plans would have to provide Medicaid enrollees with comprehensive, easy-to-understand information about how the plan operates, including the names of all participating providers and their locations. Plans would have to cover emergency care costs for all situations in which a "prudent layperson" would consider emergency care necessary, and they would be barred from requiring prior approval or requiring enrollees to go only to approved facilities for emergency care.

Medicaid patients with chronic or severe medical conditions would be guaranteed direct access to medical specialists within a managed care organization's provider network. Patients would have the right to appeal plan decisions to deny, limit or terminate coverage of services. Plans would be required to resolve grievances in a timely manner. And states that require managed care enrollment would have to offer most Medicaid beneficiaries a choice of at least two plans. The agency now is reviewing public comments on the proposed regulations before issuing final rules.

To implement other BBA Medicaid provisions, HCFA has sent state Medicaid directors more than 50 letters with guidance as these provisions became effective. These letters address provisions that let states cover working disabled people with incomes up to 250 percent of poverty, help states expand assistance to low-income Medicare beneficiaries, allow states to mandate that most Medicaid beneficiaries enroll in managed care without obtaining a federal waiver, and many others.

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