Medicare

Under an ongoing demonstration project authorized by 1987 legislation, a maximum of three employment-related groups, such as employers or unions, can agree to pay for Medicare beneficiaries' covered health care services in exchange for a fixed per-capita payment from Medicare. The idea was that such projects, which are known as Medicare Insured Groups, could combine Medicare benefits with supplemental ones offered by an employer or union, reducing costs for both by managing the combined benefits better than could be done separately. In this third status report on the projects, GAO indicates that three companies had completed studies about the feasibility of establishing Medicare Insured Groups for their retirees. Two of the companies decided not to develop such group projects because of concerns that the operations might not be financially viable. The other company has submitted a proposal to develop a group project, which was being evaluated by Medicare administrators. Two additional Medicare Insured Group projects are active. In December 1990, a health care provider began trying to pool a group of employers to form a group project, and a year later was continuing this effort. A union-related Medicare Insured Group project continues to develop the health network necessary for the group project to become operational.

GAO found that: (1) two of the three MIG sponsors that completed feasibility analysis phases decided not to proceed to the development phase, while the third had submitted a proposal for it; (2) in 1989, one of the three sponsors completed its feasibility analysis phase and terminated its MIG project because it found that MIG could not operate at a profit; (3) in July 1991, another sponsor decided not to proceed past the feasibility analysis phase, because it was concerned about its ability to control enrollee health costs; (4) since September 1988, HCFA has extended the development phase five times for one sponsor and the phase was scheduled to end in December 1991; (5) the reason most often cited for the delay in completing the development phase was the difficulty in negotiating a contract for health care delivery; (6) another active MIG project involved a health care provider trying to pool a group of employers to form a MIG; and (7) as of November 1991, HCFA had not decided how to update experience-based payment rates, but was waiting for prospective MIG to present a payment updating method for the agency to evaluate.