Medicare Managed Care Organizations

Medicare Part C offers several options for health care coverage, including MCOs. As of July 1998, about 16% (6 million) of persons eligible for Medicare had enrolled in Medicare MCOs.

Advantages of Medicare MCO plans over traditional fee-for-service programs include full Medicare benefits with lower deductibles and copayments plus other benefits--not usually part of Medicare coverage--that vary among MCOs. These other benefits include preventive care; reimbursement for prescription drugs, eyeglasses, and hearing aids; health education and promotion programs; and discounts on or improved access to transportation, day care, respite care, assisted living, and long-term care insurance. Medicare MCOs do not have fee-for-service restrictions on reimbursement to providers, allowing payments for nontraditional services, such as geriatric assessment by an interdisciplinary team.

MCOs may be run by payers (eg, insurers) or by providers (eg, hospital systems). They may offer tightly managed health maintenance organization (HMO) plans or more loosely managed point-of-service plans, preferred provider plans, or managed indemnity plans.

Relationships between MCOs and providers may follow the staff model, in which MCOs employ physicians; the group model, in which MCOs contract almost exclusively with large multispecialty or primary care groups; or, most commonly, the independent practitioner association (IPA) model, in which MCOs contract with an IPA.

In the IPA model, physicians retain, to varying degrees, ownership of their practices. An MCO may contract with multiple IPAs (network model) or with individual physicians in a single IPA. Geriatric care management is often more difficult in individual IPA models than in the other models because physicians frequently contract with several payers. These physicians typically have an insufficient number of patients from any one payer to commit substantially to that payer's geriatric care management program. However, some IPAs develop their own geriatric care programs, particularly when they have financial incentives for effective medical management.

The method of physician payment affects the ability of an MCO to implement geriatric care management. Physicians may be paid for individual services (fee-for-service programs) or through various capitation models, in which a budget is negotiated between payers and providers that covers health care costs for individuals or groups of individuals over a fixed time (usually 1 year). Full or global capitation refers to a contract in which a physician group is responsible for all medical costs, usually including hospitalization. Professional or primary care capitation refers to a contract in which physicians are solely at risk for their own services. Many variations of these contracts exist.

In capitation models, physicians are responsible for managing care within a budget, which involves financial risk. Physicians can lose money if patients are not well managed or if medical costs exceed the budget. On the other hand, they can profit if patients are well managed and preventive care is effective, resulting in care being delivered at less than budget. Unburdened by traditional Medicare fee-for-service regulations and restrictions, capitation creates incentives for the redesign of health care in ways that are innovative and cost-effective (eg, payments for geriatric care teams). However, underutilization of needed services is a risk (eg, a physician may be reluctant to hospitalize a patient because of the expense involved). Usually, physicians successfully adjust to capitation, although the transition from fee-for-service may be difficult due to the problems involved in managing a finite medical budget and due to a lack of knowledge concerning population-based medicine.

Various important services, many of which are mandated by the federal government, are provided by Medicare MCOs. Generally, only large MCOs can effectively provide all of the functions listed in Table 16-1.

An effective medical director is required for the relationship between an MCO and a provider to be successful. The Medicare MCO medical director should be a geriatrician or a physician with experience in geriatric care. Knowledge of geriatric medicine is key in the treatment of frail elderly patients, who account for most health care expenditures in Medicare MCOs. The medical director interacts with other departments of the MCO (eg, government relations, regulatory affairs, network development and contracting, quality improvement, member and physician education). Geriatric care providers (eg, geriatric nurse practitioners, geriatric social workers) can help the medical director in medical management, particularly with regard to supervision and education of care managers.