BACKUP DOCUMENTATION (savings negative, costs positive) BUDGET CATEGORY Medicare Working Policy. Offset for Medicare-Eligible Employed Beneficiaries, and Medicare-Eligible Spouses and Dependents of Working Individuals BUDGET PROJECTIONS Fiscal Yrs 1995 1996 1997 1998 1999 2000 1995-2000 -1,000 -3,000 -8,000 -8,000 -8,000 -28,0000 POLICY DESCRIPTION Policy is described in detail in the attached specifications. KEY TECHNICAL ASSUMPTION HCFA actuarial estimate is based upon the attached specifications. The Office of the Actuary assumes the Medicare working policy would result in about 5.4 million beneficiaries obtaining primary coverage in FY 1996 through their employment (or as a dependent or spouse of an employee) -- up from about 2.2 million who would have primary coverage from group health insurance under current law. All 5.4 million would retain Medicare Part A for secondary coverage; about 5 million out of the 5.4 million beneficiaries are projected to retain Medicare Part B secondary coverage. The remaining 400,000 who would not enroll in Part B are largely high-income beneficiaries who would be required to pay a higher, income-related premium to receive Part B wrap-around coverage. Pricing assumes 15% phased into alliances in FY 96, 40% in FY 97, and fully phased-in FY 98. Includes Medicare as Secondary Payer (MSP) savings associated with the drug benefit. Does not include savings from the MSP proposals in the $124 billion Medicare savings package. Interactions with the income-related Part B premium and savings proposals in the $124 billion Medicare savings package are taken into account within the $124 billion package. [Page 22] MSP POLICY o Medicare beneficiaries who are working or have a spouse that is working or who are a dependent of someone who is working would be required to enroll in the alliance if the individual working worked forty or more hours in each of the previous two calendar months and would be working in the third month. (An exception would be provided in the case of a person who retired in the month prior to the month in which Medicare coverage begins.) Coverage in the alliance would begin on the first day of the third month. This policy is a variation on the coverage rules for non-Medicare beneficiaries under which the employer is required to make a payment on behalf of an individual if the individual worked more than 40 hours in a month. o Medicare would make the following payments on behalf of beneficiaries enrolled in alliances: + Medicare would fill in all cost sharing if the individual was enrolled in Part B or cost sharing only for Part A covered services if the individual did not enroll in Part B. + Medicare would pay the remainder of the employer share that would otherwise be the responsibility of the worker, if the employment was for less than 30 hours per week. (Discounts that would otherwise apply if the individual was paying part of the employer share would not apply.) o If the tie to employment is terminated prior to the end of the year, the individual would stay in the alliance and Medicare would pay the entire employer share for the remaining months. At the end of the year, the individual would have the option of Medicare coverage or opting to remain in the alliance under the opt-in rules. o Existing limitations on the working aged provisions to firms with at least 20 employees and on the disabled provisions to large group health plans would be eliminated. The ESRD MSP provisions would be conformed to the revised aged and disabled provisions. The existing limitation of 18 months for ESRD MSP would be eliminated. (Savings from extension of the authority for the disability provision, reduction of the employer threshold from 100 to 20, and extension of the 18-month provision for ESRD are included as part of the Medicare savings, rather than under this proposal.) [Page 23] BACKUP DOCUMENTATION (savings negative, costs positive) (Outlays in $ millions) BUDGET CATEGORY Medicare. Reimbursements to physician assistants, nurse practitioners, and clinical nurse specialists (Sec. 4022) BUDGET PROJECTIONS Fiscal Yrs 1995 1996 1997 1998 1999 2000 1995-2000 0 250 450 500 600 650 2,450 POLICY DESCRIPTION Sec. 4022 of HR 3600 would expand the sites and areas in which services from Medicare's physician fee schedule could be furnished by physician assistants, nurse practitioners, and clinical nurse specialists. Separate billings for these services (i.e., fee-for-service payment) would be more widely available to these non-physician practitioners or their employers. Effective January 1, 1996, services furnished by the specified non-physician practitioners would be separately reimbursable as follows: physician assistants -- services furnished in all settings and all areas; nurse practitioners -- services furnished in all settings except to inpatients of hospitals located in urban areas; clinical nurse specialists -- services furnished in all settings except to inpatients of hospitals, nursing facilities, and skilled nursing facilities located in urban areas. KEY TECHNICAL ASSUMPTIONS HCFA actuary pricing assumes that outlays would increase because of greater beneficiary access to these non-physician practitioners' services (predominantly primary care) in more settings and more areas of the country. The actuary also assumes that some substitution for higher-cost physician-furnished services would occur, reducing the net costs of the provision. Interactions with other relevant provisions of the Health Security Act, e.g., Medicare savings provisions, Medicare incentives for provision of primary care services, and between Health Alliances and the Medicare beneficiary population still being considered. [Page 24] ---------------- BACKUP DOCUMENTATION (savings negative, costs positive) (Outlays in $ millions) BUDGET CATEGORY Medicare savings proposals BUDGET PROJECTIONS Fiscal Yrs 1994 1995 1996 1997 1998 Medicare savings proposals -150 -2,480 -9,875 -14,373 -22,815 BUDGET PROJECTIONS (continued) Fiscal Yrs 1999 2000 1994-2000 Medicare savings proposals -33,000 -41,721 -124,414 POLICY DESCRIPTION HR 3600 contains a package of provisions to reduce the rate of growth of Medicare program costs that will result in seven-year savings of over $124 billion. The provisions include changes to payment rates, enrollee cost-sharing, and other changes to current law. These changes will be made in the context of both universal coverage and slower growth in private sector health costs, reducing the likelihood of cost-shifting and adverse effects on beneficiaries. A significant portion of these savings would come from reducing payments originally intended to ease financial pressures created by uncompensated care, the rationale for which is virtually eliminated under the universal coverage ensured by the Health Security Act. The provisions will also strengthen the Medicare Trust Funds and ease upward pressure on beneficiary cost-sharing. KEY TECHNICAL ASSUMPTIONS Provides back-up documentation for estimates in the 1994-2000 window. See attached document. Estimates are sensitive to interaction with other provisions affecting Medicare; effect and magnitude of Medicare enrollees opting into managed care plans; net effect of all relevant provisions on Medicare spending. [Page 25] MEDICARE SAVINGS PROPOSALS for HEALTH REFORM ($ in millions) PART A PROPOSALS Reduce the Hospital Market Basket Index (HMBI) Update by 2% in FY 1997-2000. Medicare changes the inpatient per-discharge standardized amount by a certain amount every year to reflect input cost changes and Congressional direction. OBRA 93 reduced the HMBI in FYs 94 - 97 by 2.5, 2.5, 2, and 0.5 percentage points respectively, to reflect greater efficiencies in hospitals. This proposal would reduce the market basket updates by 2% for FY 1997 - FY 2000. Since the market basket is projected to increase 5% annually, and case mix is projected to increase 2% per year, hospitals can still expect an overall 5% increase per year. Savings 1996 1997 1998 1999 2000 1996-2000 $0 930 2,870 5,610 8,750 $18,160 Reduce Indirect Medical Education (IME) Adjustment to 3.0% in FY 1996. A portion of the IME is intended to compensate hospitals for uncompensated care. Universal coverage, however, will ensure payment for all patients and essentially eliminate uncompensated care. In 1996, the IME adjustment will be lowered to 3.0% under this proposal. Beginning in FY 1997, the aggregate amount of IME payments will be increased by the projected national average increase in premiums for the under-65 population for those States that opt into the reformed system; by 1998, all Medicare IME payments will be made in this fashion. These payments will be appropriated to a national pool to finance the higher costs of academic health centers. The cash flow effect for IME payments is built into these estimates. Savings 1996 1997 1998 1999 2000 1996-2000 2,470 3,110 3,470 4,130 4,660 $17,840 [Page 26] Adjust Inpatient Capital Payments to Reflect Better Cost Data. This proposal combines three inpatient capital payment adjustments to reflect more accurate base year data and cost projections. The first piece would reduce inpatient capital payments to hospitals excluded from Medicare's prospective payment system (PPS) by 15% for FY 1996 - 2000. PPS-excluded hospitals, currently paid at full costs, do not have an incentive for efficiency. The second piece would reduce PPS Federal capital payments by 7.31 percent and hospital-specific amount by 10.41 percent to reflect new data on the FY 1989 capital cost per discharge and the increase in Medicare inpatient costs from FY 1990 to FY 1992. The last piece would reduce payments for hospital inpatient capital through a 22.1% reduction to the FY 1996 - 2000 updates of the capital rates. Current data indicate that Medicare inpatient capital cost per discharge increased 77.5% during the years immediately before the introduction of prospective payment for capital-related costs (FY 1986 - FY 1991). The identifiable variables for capital costs only increased 38.2% over the same period. This proposal would reduce the update to the capital rates by 4.9% each year during FY 1996 - 2000 to recover excess capital spending. Savings 1996 1997 1998 1999 2000 1996-2000 $995 1,400 2,005 2,610 3,315 $10,325 Revise the Disproportionate Share Hospital (DSH) Adjustment. Hospitals that treat a disproportionate share of low-income patients receive an additional payment. Studies show that the additional payment overcompensates for the higher costs associated with treating low-income Medicare patients. In the reformed system with universal coverage, DSH can be reduced. This proposal would replace the current DSH program with a new program as States come into the new system. The new program would assist hospitals serving the largest share of low-income patients. Savings 1996 1997 1998 1999 2000 1996-2000 $430 1,330 3,670 4,390 4,810 $14,630 [Page 27] Moratorium on PPS-Exempt Long-Term Care Hospitals. Long-term care hospitals, which have an average length of stay of over 25 days, are currently exempt from the PPS system, receiving cost-based reimbursement from Medicare, subject to a rate-of-increase limit. This proposal would pay new long-term care hospitals under the PPS system. Alternatively, these hospitals could seek reclassification as psychiatric or rehabilitation hospitals, or become certified as skilled nursing facilities (SNFs), for example, and be paid under the SNF cost limit structure. Savings 1995 1996 1997 1998 1999 2000 1995-2000 $20 40 70 100 130 170 $530 Extend OBRA 93 Provision: Eliminate Catch-Up after SNF Freeze Expires. OBRA 93 established a two-year freeze on updates to the cost limits for skilled nursing facilities (SNFs). A "catch-up," however, is allowed after the SNF freeze expires on October 1, 1995; new cost limits would be established that do not reflect the effects of the freeze. This proposal would eliminate the "catch-up" by recalculating the percent of the mean that would serve as the cost limit. The recalculation would be calibrated to result in the same amount of savings as a continuation of the freeze. Savings 1996 1997 1998 1999 2000 1996-2000 $80 160 180 200 210 $830 [Page 28] Graduate Medical Education: Effect of National Pool. Under the legislation, Medicare would pay into two national pools: one for direct medical education, and one for academic health centers. The projected Medicare spending for direct and indirect medical education would be transferred to the Secretary for those States that have opted into the reformed system; by 1998, all States will be folded into the new system. These funds will be transferred out of the Trust Funds faster than they are currently paid to hospitals. This will result in a slight cost to Medicare. The costs displayed here are the cash flow effect for direct graduate medical education. Costs 1996 1997 1998 1999 2000 1996-2000 -30 -60 -150 -20 -20 -$280 Interaction Costs PART A INTERACTION $0 -110 -300 -510 -730 -$1,650 [Page 29] PART A REVENUE PROPOSAL Subject All State and Local Employees to Hospital Insurance Tax. State and local jurisdictions can opt to pay the HI payroll tax for State and local workers hired before April 1, 1986, but are not required to do so. The proposal would extend the payroll tax to all remaining exempt State and local workers, who would thus be treated like all other covered workers. Additional revenues would exceed benefit payments for a long time, since 90% of retired State and local workers already receive Medicare benefits through other covered jobs or spousal employment; only about 70%, however, worked in State or local government jobs on which HI taxes were paid. Savings 1996 1997 1998 1999 2000 1996-2000 $1,535 1,518 1,470 1,420 1,366 $7,309 (Estimates for this proposal were calculated by Treasury Department staff.) [Page 30] PART B PROPOSALS Base MVPS on Real GDP Per Capita. This proposal would change the statutory formula that is used to determine the Medicare Volume Performance Standard (MVPS), a target for the rate of growth in Medicare physicians expenditures. Currently, the MVPS is based on the average annual growth in the volume and intensity of physicians' services over the preceding five fiscal years. This proposal would substitute the five-year average growth in real GDP per capita for this volume and intensity factor and the performance standard factor. This change would directly connect MVPS to the growth rate of the national economy. The MVPS for all three categories of physician services (surgical, primary care, and all other) would continue to be adjusted for projected increases in physicians' fees, beneficiary enrollment, and changes resulting from regulatory and legislative activity. The MVPS for primary care services would be given an additional 1-1/2 percentage point upward adjustment. Under current law, there is no upper limit on physician fee increases, but fees cannot decrease by more than five percentage points. This proposal would eliminate the floor on physician fee reductions. Savings 1996 1997 1998 1999 2000 1996-2000 $0 275 1,075 1,975 2,775 $6,100 Establish Cumulative Growth Targets for Physician Services. Currently, the MVPS for each year is based on the prior year's actual rate of growth in outlays, without regard to the prior year's target rate of growth in outlays. This process weakens the ability of the MVPS to serve as a meaningful target for sustainable growth in Medicare physician spending. Under this proposal, the MVPS for each category of physician services would be built on a designated base-year MVPS (FY 1995). This initial target would be updated annually for changes in the beneficiary enrollment and inflation, but not for actual outlay growth above or below the target. Essentially, physician fee changes in any one year would no longer distort the MVPS for the following years. The annual process for calculating physician fee updates would not change from current law. Savings 1996 1997 1998 1999 2000 1996-2000 $0 (85) 1,825 2,475 1,600 $5,815 [Page 31] Reduce the Medicare Fee Schedule Conversion Factor by 3% in 1995, Except Primary Care Services. The conversion factor is a dollar amount that converts the fee schedule's relative value units (RVUs) into a payment amount for each physician service. This proposal would reduce the conversion factor by 3% in CY 1995 to account for the excessively high FY 1992 target and 1994 update that is anticipated, except that primary care services would not be reduced. Savings 1995 1996 1997 1998 1999 2000 1996-2000 $250 475 525 550 575 600 $2,975 Eliminate Formula-Driven Overpayment in Hospital Outpatient Departments. Under current law, Medicare pays for hospital outpatient ambulatory surgery, radiology, and other diagnostic services using a blended payment methodology. Because of a flaw in the statutory payment formula, which assumes a lower coinsurance payment than is actually made, hospitals receive more than the intended payment amount. This proposal would eliminate the flaw in the payment methodology and the resulting overpayments, effective July 1, 1994. In addition, the current payment method gives hospitals strong incentives to increase charges for these services, thus raising beneficiary coinsurance liabilities. Fixing the formula-driven overpayment would mitigate the hospital incentive to raise the charges to Medicare enrollees. Savings 1994 1995 1996 1997 1998 1999 2000 1996-2000 $150 1,050 1,300 1,690 2,190 2,750 3,480 $12,610 Contract Competitively for All Part B Laboratory Services. The Secretary would be required to establish the same kind of competitive acquisition system for Medicare laboratory services as for other selected Part B items and services beginning January 1, 1995. Pricing assumes that competitive contracting will reduce the price of laboratory services by 10%. Medicare laboratory payments currently are projected to grow by 15% to 18% per year. This proposal seeks to curtail the growth rate by lowering the price of tests and reducing the profit incentive for physicians to order unnecessary tests. If the competitive system does not result in a reduction of at least 10 percent in the price of all laboratory services from the price that would otherwise occur in 1996, then the Secretary would reduce Medicare fees for these selected services to achieve an overall 10 percent reduction in price. Savings 1995 1996 1997 1998 1999 2000 1996-2000 $140 220 260 290 320 360 $1,590 [Page 32] Competitively Bid Selected Medicare Part B Items and Services. This proposal would require the HHS Secretary to contract competitively for Medicare services and supplies, based on quality and other standards. The initially planned items for competitive procurement are MRIs, CAT scans, oxygen services, and enteral nutrients. Pricing assumes a 10% reduction in price for these services and supplies. If the competitive system does not result in a reduction of at least 10 percent in the price of all laboratory services from the price that would otherwise occur in 1996, then the Secretary would reduce Medicare fees for these selected services to achieve an overall 10 percent reduction in price. Savings 1995 1996 1997 1998 1999 2000 1996-2000 $110 190 210 240 270 300 $1,320 Income-Related Part B Premium, Fully Phased-in to 75%. Currently, all Medicare enrollees pay the same Part B premium, regardless of income. This premium is set at approximately 25% of program costs, beginning in 1996; the balance is paid by general revenues. This proposal would charge high-income enrollees a premium up to 75% of program costs. The increase in the premium for single individuals would begin at modified adjusted gross incomes (plus taxable Social Security benefits) of $90,000 and phase up to 75% for those individuals with incomes equal to or above $105,000. The increase for couples would begin at $115,000, with the maximum 75% premium being paid by couples in which both are eligible for Medicare with a combined income of over $130,000. Savings (includes interaction) 1996 1997 1998 1999 2000 1996-2000 $350 935 900 985 1,070 $4,240 Re-establish 20% Coinsurance for Laboratory Services. This proposal would re-establish a 20% coinsurance on all physician office, outpatient, and independent laboratory tests under Medicare Part B, effective January 1, 1995. Congress eliminated the required coinsurance on laboratory services for independent labs and those in hospital outpatient departments in 1984. In 1985, Congress eliminated coinsurance for physician office laboratory services. Clinical laboratory services are the only services provided under Medicare Part B for which no coinsurance is now required. Savings 1995 1996 1997 1998 1999 2000 1996-2000 $650 1,070 1,230 1,380 1,540 1,720 $7,590 [Page 33] Extend OBRA 93 Provision: 25% SMI Premium. OBRA 93 established the Part B premium collections at 25% for program costs for 1996-1998. This proposal would extend the OBRA 93 provision requiring that Part B premium collections cover an estimated 25% of program costs. Savings 1996 1997 1998 1999 2000 1996-2000 0 0 0 1770 4310 $6080 Interaction (710) (1090) (2140) (2770) (3180) ($9,890) NET (710) (1090) (2140) (1000) 1130 ($3,810) Limit Payments to High-Cost Medical Staffs. This proposal would establish limits on Medicare physician payments per inpatient hospital admission, similar to limits used in other parts of Medicare. The proposal would take effect in 1998. Payment limits would be established based on the median of hospital-specific case-mix adjusted relative value units per admission. For urban hospitals, the limit would be 125% of the national median in 1998 and 1999, and 120% in 2000 and thereafter. For rural hospitals, the limit would be 140% of the national median in 1998 and thereafter. Annually, a hospital-specific per admission relative value would be projected for the upcoming year for each hospital. This projection would be adjusted for each hospital's teaching status and disproportionate share. At the beginning of each year, Medicare would establish a 15% withhold for medical staffs projected to be over the national limit. After the end of each year, Medicare would compare the actual RVUs per admission per hospital to the limit for that year. For medical staffs above the limit, either none or only a portion of the withhold would be returned. For medical staffs below the limit, the entire withhold would be returned. Savings 1995 1996 1997 1998 1999 2000 1996-2000 $0 0 0 500 780 1,040 $2,320 [Page 34] Prohibition on Balance Billing. Physicians and other providers of Part B services are said to "accept assignment" on Medicare claims when they accept the Medicare approved amount as payment in full for covered services. Balance-billing (also called extra-billing) occurs when providers charge more than the Medicare-approved amount -- Medicare pays 80% of the approved amount and the beneficiary or other payor (e.g. Medigap insurance) is responsible for paying the balance. Balance-billing is prohibited under current law for most Part A and B services. Physicians may not charge more than 15% over the Medicare approved amount for their services, and only about 6% of all physician dollars are billed on an unassigned basis. Elimination of balance-billing remaining in Medicare will make for consistent treatment of all services with Medicare and between Medicare and the health alliance-approved plans serving the under-65 population. It will also reduce beneficiary confusion, enhance beneficiaries' financial protection, and simplify carrier administration. This proposal will mandate assignment and prohibit all balance-billing by providers of Part B services effective January 1, 1996. The costs from this proposal arise largely from elimination of the participating physician payment differential. Costs 1996 1997 1998 1999 2000 1996-2000 ($130) (250) (260) (270) (290) ($1,200) [Page 35] PARTS A AND B PROPOSALS Extend OBRA 93 Provision: Eliminate Catch-Up after Home Health Freeze Expires. OBRA 93 eliminated the inflation adjustment to the home health limits for two years, FY 1994-1995. This proposal would eliminate the inflation "catch-up" -- currently allowed after the freeze expires on July 1, 1996 -- by recalculating the percent of the mean that would produce the same amount of savings as if the freeze continued. HCFA actuaries estimate this to be 100% of the mean. Savings 1996 1997 1998 1999 2000 1996-2000 $0 480 600 650 690 $2,420 Lower Home Health Limits to 100% of Median. Home health is projected to rise over 10% a year through 1998, including 33% growth in 1994. This proposal would lower the cost limits to 100% of the median for cost reporting periods beginning on or after July 1, 1997. In other words, Medicare would reimburse home health agencies at a rate no higher than the costs encountered by half of the agencies. Savings 1996 1997 1998 1999 2000 1996-2000 $0 10 160 230 250 $650 Require a 10% Copayment on All Home Health Visits other than Those Occurring 30 Days after a Hospital Discharge. Home health is one of the fastest growing benefits in Medicare, with a projected increase in home health outlays of nearly 33% in 1994. Medicare enrollees do not currently pay cost-sharing on home health care. This provision would charge a copayment on all home health visits except those received within 30 days of an inpatient hospital discharge; these visits are less discretionary and more intensively rehabilitative. Enrollees who receive home health without an inpatient stay would pay 10% copayment on all services. The copayment would be equal to 10% of the average cost per visit. Savings 1995 1996 1997 1998 1999 2000 1996-2000 $230 1,400 1,560 1,680 1,800 1,920 $8,590 [Page 36] Expand Centers of Excellence. HCFA has initiated two bundled payment demonstration projects that show potential for Medicare savings. These projects involve contracting with "Centers of Excellence" that perform coronary artery bypass graft (CABG) surgery and cataract surgery. By expanding this concept to all urban areas, contracting with individual centers using a flat payment rate for all services associated with the cataract or CABG surgery, Medicare would be able to reduce costs. The Secretary also would be granted the authority to designate other services that lend themselves to this approach. Beneficiaries would not be required to receive services at these centers, but would be encouraged to do so through rebates representing 10% of the government's savings from the center. Pricing assumes a 10% discount in the price of services for the 20 percent of beneficiaries who are assumed to use the centers. Savings 1996 1997 1998 1999 2000 1996-2000 Part A 60 70 70 70 70 $340 Part B 40 40 40 40 40 $200 Extend OBRA 93 Provision: Medicare Secondary Payor (MSP) Data Match with SSA and IRS. OBRA 93 included an extension of the data match between HCFA, IRS, and the Social Security Administration to identify the primary payers for Medicare enrollees with health care coverage in addition to Medicare. This proposal would extend that provision beyond its scheduled expiration date of 1998. Savings 1996 1997 1998 1999 2000 1996-2000 $0 0 0 195 330 $525 [Page 37] Establish a Threshold of 20 Employees for MSP for the Disabled. OBRA 93 extended through 1998 an OBRA 90 provision making Medicare the secondary payor for disabled employees with employer-based health insurance. The provision is applicable to all employers with 100 or more employees. This proposal would lower the employee threshold from 100 to 20 employees beginning on January 1, 1998. With community rating under health care reform, small employers will no longer be vulnerable to paying higher premiums for covering disabled or other high-risk individuals. A separate provision in the Health Security Act addressing alliance enrollment of Medicare beneficiaries who work or whose spouses work would eliminate the employee threshold. The provision would require all employer-sponsored plans to cover workers, dependents of workers and workers' spouses who are eligible for Medicare. Savings 1996 1997 1998 1999 2000 1996-2000 0 0 150 240 260 $650 Extend OBRA 93 Provision: MSP for Disabled. OBRA 93 extended through 1998 an OBRA 90 provision making Medicare the secondary payor for disabled beneficiaries with employer-based health insurance. This proposal would extend this provision permanently. Savings 1996 1997 1998 1999 2000 1996-2000 $0 0 0 990 1,340 $2,330 Extend OBRA 93 Provision: Medicare Secondary Payor Provisions for ESRD Patients. OBRA 93 extended through FY 1998 a provision that makes Medicare the secondary payor for individuals with end stage renal disease (ESRD) enrolled in employer group health plans for 18 months after they become eligible for Medicare benefits. This provision permanently extends the MSP provision for individuals with ESRD. A separate provision in the Health Security Act addressing alliance enrollment of Medicare beneficiaries who work or whose spouses work would provide coverage of all individuals with end stage renal disease for as long as the individual requires care. The provision would require all employer-sponsored plans to cover workers, dependents of workers, and workers' spouses who are eligible for Medicare. Savings 1996 1997 1998 1999 2000 1996-2000 $0 0 0 75 150 $180 [Page 38] HMO Payment Improvement. Medicare pays 95% of the average adjusted per capita cost (AAPCC) for Medicare enrollees in Medicare-contracted HMOs. This proposal would establish a range around the Part A and Part B components of the AAPCC that would presumably encourage HMOs to participate in Medicare while establishing reasonable limits on reimbursement for high-cost counties. The ceiling would be 150% of the national average Part B component of the AAPCC and 170% for the Part A component of the AAPCC, with a floor established at 80%. The range would be phased-in over a four-year period, beginning in 1995. Savings 1995 1996 1997 1998 1999 2000 1996-2000 $30 90 165 250 350 400 $1,285 TOTAL SAVINGS 1994 1995 1996 1997 1998 1999 2000 1996-2000 $150 2,480 9,875 14,373 22,815 33,000 41,721 $124,414 [Page 39]