Alternative Delivery Systems and Medicare

Abstract

Prologue: After a prolonged debate, Congress enacted legislation several years ago that authorized Medicare to negotiate contracts with health maintenance organizations (HMOs) that would enable them to enroll elderly beneficiaries. The history of HMOs' courting of the vast Medicare market was long and tortured, dating as it did to the earliest days of the program and even before its enactment. For more than fifteen years, Medicare refused to deal with HMOs on the same payment basis that HMOs dealt with private purchasers. Not until 1982, a full decade after the government began promoting HMOs as a good value for the private sector, did Congress finally agree to authorize Medicare to negotiate prospective, per capita arrangements with organized medical plans. In this article, Paul Ginsburg and Glenn Hackbarth, respected Washington health policy analysts, report on the status of the current relationship between Medicare and HMOs and recommend future policy changes. As the chief health policy analyst of the Congressional Budget Office (CBO) for six years (1978-1984), Ginsburg established a solid reputation as a nonpartisan participant in policymaking. Ginsburg, who holds a Ph.D. in economics from Harvard University, was an associate professor at Duke University before joining CBO. Ginsburg departed the budget office in mid-1984 to join the Rand Corporation. At Rand, Ginsburg has worked on a study of preferred provider organizations and has consulted with the Health Care Financing Administration on Medicares prospective hospital payment system. Hackbarth, who holds a master's degree in public policy and a law degree from Duke University, worked at the Department of Health and Human Services during the Reagan administrations first term. Hackbarth was centrally involved in developing the legislation that now authorizes Medicare to negotiate risk contracts with HMOs. Hackbarth became the Washington counsel of Intermountain Health Care, Inc. in 1984 to advise the organization on changes in federal policy and assist it in deciding whether or not to seek a Medicare HMO contract.