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TRANSCRIPT
TH
E G
EO
RG
E
WA
SH
ING
TO
N
UN
IVE
RS
ITY
M
ED
ICA
L C
EN
TE
R
SC
HO
OL
OF
PU
BL
IC H
EA
LT
H &
HE
AL
TH
SE
RV
ICE
S
DE
PA
RT
ME
NT
OF
HE
AL
TH
PO
LIC
Y
CE
NT
ER
FO
R H
EA
LT
H S
ER
VIC
ES
RE
SE
AR
CH
& P
OL
ICY
PA
YM
EN
TS
TO
ME
DIC
AR
E A
DV
AN
TA
GE
PL
AN
S E
XC
EE
D F
EE
-FO
R-S
ER
VIC
E C
OST
S:
OP
TIO
NS
FO
R M
ED
ICA
RE
SA
VIN
GS
FR
OM
200
7 T
HR
OU
GH
201
1
BR
IAN
BIL
ES
and
EM
ILY
AD
RIO
N
DE
PA
RT
ME
NT
OF
HE
AL
TH
PO
LIC
Y
TH
E G
EO
RG
E W
AS
HIN
GT
ON
UN
IVE
RS
ITY
S
CH
OO
L O
F P
UB
LIC
HE
AL
TH
& H
EA
LT
H S
ER
VIC
ES
Sep
tem
ber
15,
20
06
The
aut
hors
wou
ld li
ke t
o ac
know
ledg
e th
e C
omm
onw
ealt
h F
und
for
its s
uppo
rt o
f the
ana
lysi
s o
f Med
icar
e A
dvan
tage
pay
men
ts.
PA
YM
EN
TS
TO
ME
DIC
AR
E A
DV
AN
TA
GE
PL
AN
S E
XC
EE
D F
EE
-FO
R-S
ER
VIC
E C
OS
TS
:
OP
TIO
NS
FO
R M
ED
ICA
RE
SA
VIN
GS
FR
OM
200
7 T
HR
OU
GH
201
1
Bri
an B
iles
an
d E
mil
y A
drio
n S
epte
mbe
r 15
, 200
6
I
2
For
mor
e in
form
atio
n on
this
rep
ort,
plea
se c
onta
ct D
r. B
rian
Bil
es a
t bbi
les@
gwu.
edu
or E
mil
y A
drio
n at
ead
rion
@gw
u.ed
u.
I'
3
CO
NT
EN
TS
Intr
od
uct
ion
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7
Pri
mer
on
Ext
ra P
aym
ents
to M
A P
lan
s...
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13
MA
cou
nty
benc
hmar
k ra
tes.
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. 13
In
dire
ct M
edic
al E
duca
tion
(IM
E)
pay
men
ts..
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14
Bud
get n
eutr
al r
isk
adju
stm
ent p
aym
ents
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...
15
MA
pla
n b
ids.
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16
Reg
iona
l PPO
sta
biliz
atio
n fu
nd
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19
Opt
ions
for
Med
icar
e Sa
ving
s in
200
7 th
roug
h 2
01
1..
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21
Med
icar
e sa
ving
s fr
om t
he b
ench
mar
k ex
tra
pay
men
ts..
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..
21
Opt
ion
la.
Set M
A p
lan
stat
utor
y/be
nchm
ark
extr
a pa
ymen
ts a
t 10
0% o
f cou
nty
FFS
cost
s...
....
...
21
Opt
ion
1 b. P
hase
-out
MA
pla
n st
atut
ory/
benc
hmar
k ex
tra
paym
ents
at 2
5% p
er y
ear.
....
....
....
....
. 23
O
ptio
n 1 c
. Dec
linin
g ce
iling
on
extr
a pa
ymen
ts f
rom
200
7 to
20
10
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...
24
Med
icar
e sa
ving
s fr
om I
ME
ext
ra p
aym
ents
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25
Opt
ion
2. R
emov
e IM
E e
xtra
pay
men
ts f
rom
MA
ben
chm
arks
in
2007
and
fut
ure
year
s...
....
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...
25
Med
icar
e sa
ving
s fr
om D
RA
bud
get n
eutr
al r
isk
adju
stm
ent p
aym
ents
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26
Opt
ion
3a. E
limin
ate
BN
RA
pay
men
ts i
n 20
07 a
nd f
utur
e y
ears
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..
26
Opt
ion
3b. P
hase
-out
ofB
NR
A p
aym
ents
at 2
5% p
er y
ear.
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....
27
Med
icar
e sa
ving
s fr
om t
he r
egio
nal P
PO s
tabi
lizat
ion
fun
d..
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28
Opt
ion
4. E
limin
ate
MM
A r
egio
nal
stab
iliza
tion
fun
d..
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28
Co
ncl
usi
on
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31
Ii
4
FIG
UR
ES
Fig
ure
1.
Proj
ecte
d P
aym
ents
to M
A P
lans
in E
xces
s of
FF
S C
osts
, 200
7 to
20
11
....
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....
....
....
....
....
....
....
....
....
....
....
....
9
Fig
ure
2.
Est
imat
ed A
nnua
l E
xtra
Pay
men
ts to
MA
Pla
ns p
er P
lan
Enr
olle
e, 2
00
7..
....
....
....
....
....
....
....
....
....
....
....
....
....
. 10
Fig
ure
3.
Est
imat
ed S
hare
of T
otal
$4.
7 B
illi
on in
Ext
ra P
aym
ents
to M
A P
lans
by
Cou
nty
Pay
men
t Cat
egor
y, 2
00
7..
....
....
. ...
11
Fig
ure
4.
Est
imat
ed E
xtra
Pay
men
ts to
MA
Pla
ns f
ollo
win
g 4%
Red
uctio
n D
ue to
Bid
s 16
% B
elow
Ben
chm
arks
, 2
00
7..
....
....
18
AB
ST
RA
CT
The
Med
icar
e M
oder
niza
tion
Act
of2
00
3 (
MM
A)
and
the
Def
icit
Red
ucti
on A
ct (
DR
A)
of20
05 i
nclu
de p
rovi
sion
s in
tend
ed t
o in
crea
se th
e ro
le o
f pri
vate
hea
lth
plan
s in
Med
icar
e. T
hese
pro
visi
ons
set M
edic
are
Adv
anta
ge p
lan
paym
ent r
ates
at
leve
ls h
ighe
r th
an a
vera
ge c
osts
wou
ld b
e in
trad
itio
nal
fee-
for-
serv
ice
Med
icar
e in
eve
ry c
ount
y in
the
nati
on.
The
tot
al a
mou
nt o
f ext
ra p
aym
ents
to
Med
icar
e A
dvan
tage
pla
ns r
esul
ting
fro
m t
hese
pro
visi
ons
is p
roje
cted
at $
5.7
bill
ion
in 2
007
and
near
ly $
30 b
illi
on o
ver
the
five
ye
ar p
erio
d, 2
007
to 2
011.
5
Thi
s br
iefi
ng p
aper
out
line
s th
e sp
ecif
ic M
MA
and
DR
A p
rovi
sion
s th
at g
ener
ate
thes
e ex
tra
paym
ents
and
pre
sent
s op
port
unit
ies
for
revi
sed
poli
cies
that
can
red
uce
Med
icar
e sp
endi
ng in
exc
ess
of f
ee-f
or-s
ervi
ce c
osts
. T
he o
ptio
ns e
xplo
red
here
add
ress
the
four
bas
es
for
Med
icar
e A
dvan
tage
pla
n ex
tra
paym
ents
: M
MA
sta
tuto
ry p
rovi
sion
s, i
nclu
ding
cou
nty
benc
hmar
k ex
tra
paym
ent r
ates
and
In
dire
ct M
edic
al E
duca
tion
pay
men
ts th
at in
crea
se th
e co
unty
ben
chm
ark
rate
s; b
udge
t neu
tral
ris
k ad
just
men
t pay
men
ts;
and
paym
ents
fro
m a
reg
iona
l P
PO
sta
bili
zati
on f
und.
In v
iew
of c
once
rns
abou
t the
Fed
eral
bud
get d
efic
it o
f ove
r $2
50 b
illi
on a
yea
r an
d ot
her
mor
e sh
ort-
term
con
cern
s fa
cing
Med
icar
e,
such
as
the
cost
sav
ings
nee
ded
to p
ay f
or a
mod
ific
atio
n o
f the
Sus
tain
able
Gro
wth
Rat
e (S
GR
) po
lici
es s
o th
at M
edic
are
paym
ents
to
phys
icia
ns d
o no
t dec
line
by
5 pe
rcen
t in
200
7, r
educ
tion
s in
ext
ra p
aym
ents
to M
edic
are
Adv
anta
ge p
lans
cou
ld p
rovi
de s
ubst
anti
al
Med
icar
e sa
ving
s. F
urth
erm
ore,
red
ucti
ons
in e
xtra
pay
men
ts to
Med
icar
e A
dvan
tage
pla
ns m
ay b
e se
en a
s ap
prop
riat
e, a
s th
ese
extr
a pa
ymen
ts c
lear
ly r
un c
ount
er to
the
oft
-sta
ted
purp
ose
of
incr
easi
ng th
e en
roll
men
t of
bene
fici
arie
s in
pri
vate
pla
ns: t
o lo
wer
tota
l M
edic
are
cost
s.
I'
6
r
PA
YM
EN
TS
TO
ME
DIC
AR
E A
DV
AN
TA
GE
PL
AN
S E
XC
EE
D F
EE
-FO
R-S
ER
VIC
E C
OST
S:
OP
TIO
NS
FO
R M
ED
ICA
RE
SA
VIN
GS
FR
OM
200
7 T
HR
OU
GH
201
1
Bri
an B
iles
and
Em
ily
Adr
ion
Sept
embe
r 15
, 200
6
INT
RO
DU
CT
ION
Pro
visi
ons
of t
he M
edic
are
Mod
erni
zati
on A
ct o
f200
3 (M
MA
) ar
e in
tend
ed to
inc
reas
e th
e ro
le o
f pri
vate
hea
lth
plan
s in
Med
icar
e.
Par
t of t
he s
trat
egy
to a
ccom
plis
h th
is i
s an
incr
ease
in
paym
ents
to M
edic
are
Adv
anta
ge (
MA
) pl
ans.
7
Und
er th
ese
poli
cies
, Med
icar
e no
w p
ays
priv
ate
MA
pla
ns m
ore
per
enro
llee
tha
n av
erag
e co
sts
wou
ld b
e in
tra
diti
onal
fee
-for
se
rvic
e (F
FS
) M
edic
are.
Thi
s di
ffer
ence
-he
re r
efer
red
to a
s ex
tra
paym
ents
-is
ant
icip
ated
to a
vera
ge I
0.9
per
cent
, or
$828
per
MA
pl
an e
nrol
lee,
in
2007
. T
he to
tal
amou
nt o
f ext
ra p
aym
ents
to M
A p
lans
is p
roje
cted
at $
5.7
bill
ion
in 2
007
and
near
ly $
30 b
illi
on
duri
ng t
he f
ive
year
s 20
07 th
roug
h 20
11.
Ext
ra p
aym
ents
to M
A p
lans
occ
ur a
gain
st th
e ba
ckgr
ound
of a
per
sist
ent i
nter
est i
n M
edic
are
cost
sav
ings
.
One
im
med
iate
dif
ficu
lty
faci
ng t
he M
edic
are
prog
ram
is t
he p
roje
cted
dec
reas
e in
pay
men
ts to
phy
sici
ans
in 2
007
caus
ed b
y th
e S
usta
inab
le G
row
th R
ate
(SG
R)
poli
cies
in t
he B
alan
ced
Bud
get A
ct o
f 19
97.
The
SG
R w
ill,
if n
ot m
odif
ied,
red
uce
phys
icia
n pa
ymen
ts b
y 5
perc
ent i
n 20
07 a
nd s
ubse
quen
t yea
rs.1
Som
e be
liev
e th
at a
red
ucti
on in
Med
icar
e pa
ymen
ts to
phy
sici
ans
wil
l re
duce
th
e ac
cess
to p
hysi
cian
s by
sen
iors
and
the
disa
bled
.
Rec
entl
y, p
ropo
sals
hav
e be
en d
iscu
ssed
tha
t wou
ld m
odif
y th
e S
GR
for
2007
by
sett
ing
the
upda
te f
rom
0 to
1.5
per
cent
. T
hese
pr
opos
als
have
bee
n es
tim
ated
to c
ost,
over
fiv
e ye
ars,
bet
wee
n $1
0.8
and
$18.
4 bi
llio
n.
Giv
en th
e F
eder
al b
udge
t def
icit
of o
ver
$250
bi
llio
n, th
ere
is s
ome
pres
sure
to p
ay f
or t
hese
inc
reas
ed c
osts
by
off-
sett
ing
savi
ngs
from
oth
er p
arts
of t
he M
edic
are
prog
ram
. S
ome
SG
R p
ropo
sals
hav
e in
clud
ed a
red
ucti
on in
ext
ra p
aym
ents
to M
A p
lans
as
the
pay-
for
poli
cy.2
11
As
a pr
eced
ent,
last
yea
r th
e D
efic
it R
educ
tion
Act
(D
RA
) pr
ovid
ed a
SG
R fi
x o
f no
decr
ease
in
phys
icia
n fe
es p
lus
a ne
t fiv
e ye
ar
redu
ctio
n o
f Med
icar
e sp
endi
ng o
f $6.
4 bi
llio
n.
The
DR
A a
chie
ved
its n
et M
edic
are
savi
ngs
from
a r
educ
tion
in p
roje
cted
pay
men
ts
to M
A p
lans
of $
6.5
bill
ion
in F
Y s
07 t
hrou
gh 1
0.
Thi
s M
A p
aym
ent p
rovi
sion
cod
ifie
d in
sta
tute
a r
educ
tion
in M
A p
lan
budg
et
neut
ral
risk
adj
ustm
ent p
aym
ents
in 2
007
-20
11 t
hat h
ad b
een
anno
unce
d by
CM
S i
n ea
rly
2005
and
mod
ifie
d in
Sep
tem
ber
2005
.
8
Bey
ond
the
shor
t-te
rm c
ost s
avin
gs n
eede
d to
pay
for
a s
olut
ion
to t
he S
GR
pro
blem
, the
Fed
eral
bud
get d
efic
it o
f ove
r $2
50 b
illi
on a
ye
ar h
as l
ed to
dis
cuss
ions
of m
ore
sign
ific
ant r
educ
tion
s in
fut
ure
Fed
eral
spe
ndin
g in
a m
ajor
bud
get r
econ
cili
atio
n bi
ll s
imil
ar to
the
on
es a
dopt
ed i
n 19
90,
1993
, and
199
7. A
ll o
f tho
se b
ills
der
ived
sub
stan
tial
sav
ings
fro
m r
educ
tion
s in
pro
ject
ed M
edic
are
spen
ding
. B
BA
'97
achi
eved
73
perc
ent o
f its
net
sav
ings
fro
m M
edic
are.
3 4
In l
ight
of t
he c
onsi
dera
tion
of p
ossi
ble
Med
icar
e sa
ving
s fo
r 20
07, t
his
brie
fing
pap
er d
escr
ibes
the
spe
cifi
c M
MA
and
DR
A p
olic
ies
that
pro
vide
ext
ra p
aym
ents
to M
A p
lans
in
2007
and
fut
ure
year
s. It
revi
ews
a se
ries
of o
ptio
ns to
red
uce
the
extr
a pa
ymen
ts to
MA
pl
ans
and
proj
ects
the
am
ount
s o
f pos
sibl
e re
duct
ions
in
Med
icar
e sp
endi
ng f
rom
200
7 -
2011
.
Thi
s an
alys
is f
ocus
es o
n M
A e
xtra
pay
men
ts r
elat
ed to
thr
ee p
olic
ies:
• M
MA
sta
tuto
ry M
A c
ount
y be
nchm
ark
paym
ent r
ates
tha
t are
the
bas
is f
or t
he b
ench
mar
k-ba
sed
plan
bid
ding
sys
tem
;
• T
he D
RA
sta
tuto
ry p
rovi
sion
s th
at c
onti
nue,
wit
h a
phas
e-ou
t, th
roug
h 20
11 t
o pr
ovid
e ad
diti
onal
pay
men
ts to
MA
pla
ns to
m
ake
the
new
ris
k ad
just
men
t sy
stem
bud
get n
eutr
al;
• M
MA
aut
hori
zed
paym
ents
fro
m a
nat
iona
l st
abil
izat
ion
fund
to
regi
onal
PP
Os
in a
ddit
ion
to t
heir
bas
ic M
A p
aym
ents
fro
m
2007
to 2
013.
The
se th
ree
poli
cies
pro
vide
a p
roje
cted
$30
bil
lion
in e
xtra
pay
men
ts to
MA
pla
ns f
rom
200
7 th
roug
h 20
11.
The
cou
nty
benc
hmar
ks
cont
ribu
te a
lmos
t $17
bil
lion
, the
BN
RA
pay
men
ts $
6 bi
llio
n an
d re
gion
al s
tabi
liza
tion
fun
d pa
ymen
ts $
6 bi
llio
n.
9
Fig
ure
1.
Pro
jec
ted
Pa
ym
en
ts t
o M
A P
lan
s i
n E
xc
es
s o
f F
FS
Co
sts
, 2
00
7 t
o 2
011
2007
-11
2007
20
08
2009
20
10
2011
5-
yr T
ota
l
To
tal
MA
ext
ra p
aym
ents
$5
.7 b
5.
6 b
5.
5 b
5.
2 b
7.
5 b
MM
A s
tatu
tory
/ben
chm
ark
$2.7
3.
1
3.4
3.7
3.9
DR
A B
NR
A p
has
e-o
ut1
$2.0
1.
4 0.
9 0.
2 2.
2
Reg
ion
al P
PO
sta
bili
zati
on
fu
nd
$1
.0
1. 1
1.
2 1.
3 1.
4
1 N
ote:
Th
e D
RA
ph
ase
-ou
t of t
he
bu
dg
et
neut
ral r
isk
ad
just
me
nt p
rovi
des
a co
ding
int
ensi
ty a
dju
stm
en
t onl
y fo
r 20
07 -
10.
Thi
s D
RA
pro
visi
on
resu
lts in
hig
he
r pr
ojec
ted
paym
ents
to
MA
pla
ns in
201
1 an
d su
bseq
uent
yea
rs.
5
$29.
5 b
$16.
8 b
$6.7
b
$6.0
b
The
pro
ject
ed c
osts
pre
sent
ed h
ere
are
base
d on
our
ana
lysi
s o
f ext
ra p
aym
ents
to M
A p
lans
in
2007
. T
he a
mou
nt o
f the
ext
ra
paym
ents
in 2
007
are
proj
ecte
d to
sub
sequ
ent y
ears
bas
ed o
n th
e C
ongr
essi
onal
Bud
get O
ffic
e's
Mar
ch 2
006
esti
mat
es o
f the
inc
reas
e in
Med
icar
e P
art A
and
B c
osts
and
the
enr
ollm
ent i
n M
A p
lans
to 2
011.
6
As
disc
usse
d be
low
, the
cou
nty
benc
hmar
k sy
stem
set
s M
A ra
tes
at d
iffe
rent
lev
els
for
seve
n ca
tego
ries
of c
ount
ies.
In
Fig
ures
2 a
nd
3, c
ount
ies
are
grou
ped
acco
rdin
g to
the
MM
A b
ench
mar
k po
licy
und
er w
hich
MA
pla
ns in
the
cou
ntie
s re
ceiv
e th
e hi
ghes
t pay
men
t ra
tes.
F
igur
e 2
pres
ents
est
imat
ed a
vera
ge e
xtra
pay
men
ts a
bove
fee
-for
-ser
vice
cos
ts p
er e
nrol
lee
for
MA
pla
ns in
the
se s
even
ca
tego
ries
for
200
7. F
igur
e 3
pres
ents
the
esti
mat
ed s
hare
of t
otal
ext
ra p
aym
ents
in 2
007
for
each
of t
hese
sev
en c
ateg
orie
s o
f co
unti
es. 7
As
illu
stra
ted
in F
igur
e 3,
an
esti
mat
ed 4
2 pe
rcen
t of t
otal
MA
ext
ra p
aym
ents
wil
l go
to
plan
s in
urb
an f
loor
cou
ntie
s in
200
7. T
his
is
an a
vera
ge o
f $1,
382
in a
nnua
l ex
tra
paym
ents
for
eac
h o
f the
1.4
mil
lion
MA
pla
n en
roll
ees
in t
hese
cou
ntie
s.
Ove
r 24
per
cent
of
tota
l ex
tra
paym
ents
go
to p
lans
in t
he 1
00 p
erce
nt o
fFF
S in
200
5 co
unti
es w
ith
$514
per
enr
olle
e in
ext
ra p
aym
ents
and
2.2
mil
lion
en
roll
ees.
r:
Fig
ure
2.
Est
ima
ted
An
nu
al
Ext
ra P
aym
en
ts t
o M
A P
lan
s p
er
Pla
n E
nro
llee
, 2
00
7
$1
,60
0
$1
,40
0
$1
,38
2
$1
,20
0
$1
,00
0
Nat
ion
al A
vera
ge
= $8
28
$8
00
$6
00
$4
00
$2
00
$
45
$0
R
ura
l U
rba
n
Ble
nd
M
inim
um
10
0%F
FS
10
0%F
FS
100
% F
FS
F
loo
r F
loo
r U
pd
ate
in
200
4 in
200
5 in
200
7
Sour
ce:
GW
U a
naly
sis
of C
ente
rs f
or M
edic
are
and
Med
icai
d S
ervi
ces
Med
icar
e M
anag
ed C
are
Qua
rter
ly S
tate
, Cou
nty,
Pla
n D
ata
File
for
the
quar
ter
endi
ng D
ecem
ber 2
005
and
Med
icar
e A
dvan
tage
200
7 R
ate b
ook.
N
ote:
Fig
ures
abo
ve i
nclu
de B
NR
A a
nd F
FS n
orm
aliz
atio
n. A
ssum
es p
lan
bids
in a
ll co
untie
s fa
ll 16
% b
elow
the
benc
hmar
k.
10
Fig
ure
3.
Est
ima
ted
Sha
re o
f To
tal
$4.7
Bill
ion
in E
xtra
Pa
yme
nts
to
M
A P
lan
s b
y C
ou
nty
Pa
yme
nt C
ate
go
ry,
2007
Urb
an
Flo
or,
42
.0%
Ble
nd
, 6.
8%
Min
imu
m U
pd
ate
, 7.
8%
100%
FFS
200
4,
10.0
%
100%
FF
S 2
005,
24
.7%
__
_ 10
0% F
FS
200
7,
0.4%
Rur
al F
loo
r, 8
.3%
Sou
rce:
Ge
org
e W
ash
ing
ton
Uni
vers
ity a
naly
sis
of C
ente
rs f
or
Me
dic
are
and
Med
icai
d S
ervi
ces
Me
dic
are
Man
aged
Ca
re Q
ua
rte
rly
Sta
te,
Co
un
ty P
lan
Dat
a F
ile f
or
the
qu
art
er
en
din
g D
ece
mb
er
2005
, M
ed
ica
re M
an
ag
ed
Ca
re
Qu
art
erl
y S
tate
Co
un
ty M
arke
t P
enet
ratio
n F
ile f
or
the
qu
art
er
endi
ng D
ece
mb
er
20
05
and
Me
dic
are
Ad
van
tag
e 2
00
7 R
ateb
ook.
Not
e: F
igur
es a
bo
ve in
clud
e B
NR
A a
nd F
FS
nor
mal
izat
ion.
Ass
um
es
plan
bid
s in
all
coun
ties
fall
16%
be
low
the
ben
chm
ark.
11
12
T
EX
TR
A P
AY
ME
NT
S T
O M
A P
LA
NS
In 2
005
and
earl
ier
year
s, M
A p
lans
wer
e pa
id a
t the
lev
el o
f the
cou
nty
benc
hmar
k. B
egin
ning
in 2
006,
the
MM
A s
peci
fies
tha
t M
edic
are
pay
MA
pla
ns o
n a
benc
hmar
k-ba
sed
bidd
ing
syst
em.
13
Und
er th
is s
yste
m, C
MS
cal
cula
tes
a co
unty
ben
chm
ark
each
yea
r fo
r ea
ch c
ount
y.
Thi
s be
nchm
ark
is t
hen
adju
sted
by
a bu
dget
ne
utra
l ri
sk a
djus
tmen
t fac
tor.
The
res
ulti
ng f
igur
e is
ess
enti
ally
the
base
rat
e ag
ains
t whi
ch M
A p
lans
bid
. E
very
MA
pla
n fi
les
a bi
d ea
ch J
une
to p
rovi
de A
and
B s
ervi
ces
for
the
next
cal
enda
r ye
ar th
at r
efle
cts
the
cost
s to
the
pla
n o
f pro
vidi
ng P
art A
and
B s
ervi
ces
in th
e ca
lend
ar y
ear.
8
Thi
s se
ctio
n w
ill
exam
ine
the
four
fac
tors
res
pons
ible
for
the
lev
el o
f ext
ra p
aym
ents
to M
A p
lans
in
2007
and
fut
ure
year
s:
MA
co
unty
ben
chm
ark
rate
s; !
ME
pay
men
ts th
at i
ncre
ase
coun
ty b
ench
mar
ks;
budg
et n
eutr
al r
isk
adju
stm
ent p
aym
ents
; an
d M
A p
lan
bids
.
MA
cou
nty
ben
chm
ark
rat
es.
The
MM
A p
rovi
des
spec
ific
ins
truc
tion
s fo
r C
MS
to f
ollo
w e
ach
year
whe
n it
pos
ts M
A c
ount
y le
vel
benc
hmar
ks a
s th
e fo
unda
tion
for
the
cal
cula
tion
of M
edic
are
paym
ents
to M
A p
lans
.
Fol
low
ing
MM
A p
olic
ies,
the
MA
cou
nty
benc
hmar
k ra
tes
for
2007
, po
sted
by
CM
S i
n A
pril
200
6, a
re m
ore
than
the
aver
age
cost
s in
F
FS
in
ever
y co
unty
in t
he n
atio
n.9
Cou
nty
benc
hmar
k ra
tes
in 2
007
are
proj
ecte
d to
exc
eed
FF
S c
osts
by
an a
vera
ge o
f $1,
161
per
M
A e
nrol
lee
or 1
4.9
perc
ent.
Ben
chm
ark
rate
s va
ry f
rom
$1,
693
mor
e th
an F
FS
cos
ts i
n th
e ur
ban
floo
r co
unti
es to
jus
t $42
7 m
ore
in
the
coun
ties
pai
d ac
cord
ing
to 1
00 p
erce
nt o
f 200
7 F
FS
cos
ts.10
MM
A p
rovi
sion
s sp
ecif
y th
at th
e M
A b
ench
mar
k pa
ymen
t rat
e fo
r ea
ch c
ount
y is
set
at t
he h
ighe
st o
f se
ven
diff
eren
t am
ount
s fo
r 20
07.
The
sev
en c
ount
y pa
ymen
t typ
es a
re:11
• A
rur
al f
loor
rat
e fo
r ru
ral
coun
ties
set
at,
incl
udin
g B
NR
A,
$8,0
73 i
n 20
07;
• A
n ur
ban
floo
r ra
te i
n ur
ban
coun
ties
wit
h a
popu
lati
on o
f mor
e th
an 2
50,0
00 s
et a
t, in
clud
ing
BN
RA
, $8
,992
in
2007
;
• A
ble
nded
rat
e fo
r th
e co
unty
cal
cula
ted
as t
he a
vera
ge o
f 50
perc
ent o
f loc
al F
FS
cos
ts a
nd 5
0 pe
rcen
t of n
atio
nal
FF
S i
n 20
04
tren
ded
forw
ard
to 2
007;
14
• A
min
imum
inc
reas
e ra
te b
ased
on
the
coun
ty p
aym
ent
leve
l in
200
3 tr
ende
d fo
rwar
d to
200
7;
• 10
0 pe
rcen
t of a
vera
ge F
FS
cos
ts i
n th
e co
unty
in 2
004
tren
ded
forw
ard
to 2
007;
• 10
0 pe
rcen
t of a
vera
ge F
FS
cos
ts in
the
cou
nty
in 2
005
tren
ded
forw
ard
to 2
007;
and
• 10
0 pe
rcen
t of a
vera
ge c
ount
y F
FS
cos
ts in
the
coun
ty in
200
7 12
Indi
rect
Med
ical
Edu
cati
on (
IME
) pa
ymen
ts.
MM
A d
irec
ts t
hat p
aym
ents
to t
each
ing
hosp
ital
s fo
r th
e co
sts
of i
ndir
ect m
edic
al
educ
atio
n (!
ME
) be
inc
lude
d in
the
calc
ulat
ion
of p
er c
apit
a FF
S co
sts
for
sett
ing
the
MA
pla
n co
unty
ben
chm
ark
rate
s. H
owev
er, a
n ea
rlie
r M
edic
are
poli
cy e
nact
ed in
199
7 pr
ovid
es f
or M
edic
are
to p
ay te
achi
ng h
ospi
tals
dir
ectl
y fo
r th
e !M
E c
osts
of M
A p
lan
enro
llee
s w
ho a
re i
npat
ient
s, r
athe
r tha
n le
avin
g th
e de
term
inat
ion
of t
hose
pay
men
ts to
the
MA
pla
ns.
As
a re
sult
, M
edic
are
now
ef
fect
ivel
y pa
ys tw
ice
for
the
!ME
cos
ts o
f MA
pla
n m
embe
rs.13
In th
e ag
greg
ate,
ext
ra p
aym
ents
est
imat
ed d
ue t
o th
e do
uble
pay
men
t for
!M
E a
ccou
nt f
or s
omew
hat l
ess
than
20
perc
ent o
f the
tot
al
MA
pla
n pa
ymen
ts i
n ex
cess
of F
FS
cos
ts,
whe
n av
erag
ed a
cros
s th
e co
untr
y.
!ME
pay
men
ts a
re e
stim
ated
at $
800
mil
lion
in 2
007
and
$5 b
illi
on o
ver
five
yea
rs i
nclu
ding
the
redu
ctio
n o
f pay
men
ts to
acc
ount
for
M
A p
lan
bids
.14
Bec
ause
the
!ME
pay
men
t am
ount
s ar
e in
clud
ed in
the
ben
chm
ark
paym
ent r
ates
, the
se p
aym
ents
are
inc
orpo
rate
d in
est
imat
es o
f the
am
ount
of e
xtra
pay
men
ts d
ue t
o th
e be
nchm
ark-
base
d bi
ddin
g sy
stem
dis
cuss
ed a
bove
.
Sin
ce te
achi
ng h
ospi
tals
are
not
spr
ead
even
ly a
cros
s ge
ogra
phic
are
as, !
ME
pay
men
ts a
nd,
cons
eque
ntly
, the
con
trib
utio
n o
f!M
E
paym
ent a
mou
nts
to e
xtra
pay
men
ts to
MA
pla
ns,
vary
sub
stan
tial
ly b
y ar
ea.
In N
ew Y
ork,
!M
E e
xtra
pay
men
ts to
MA
pla
ns in
som
e co
unti
es a
re e
stim
ated
at 6
per
cent
, or
$600
per
cap
ita;
in
othe
r st
ates
wit
h lo
wer
!M
E p
aym
ents
for
FF
S i
npat
ient
s, s
uch
as F
lori
da
and
Tex
as, !
ME
ext
ra p
aym
ents
to p
lans
are
est
imat
ed a
t un
der
1 pe
rcen
t, o
r $9
0 pe
r ca
pita
; in
sti
ll o
ther
are
as, !
ME
pay
men
ts h
ave
alm
ost n
o ef
fect
on
Med
icar
e sp
endi
ng.
As
a sh
are
of e
xtra
pay
men
ts to
MA
pla
ns, t
here
is
also
gre
at v
aria
tion
by
coun
ty p
aym
ent t
ype.
In
the
100
perc
ent o
f FFS
cou
ntie
s,
!ME
cos
ts a
ccou
nt f
or a
ll o
f the
ben
chm
ark
extr
a pa
ymen
ts to
MA
pla
ns a
nd a
ppro
xim
atel
y 59
per
cent
of t
otal
ext
ra p
aym
ent r
ates
. In
ur
ban
floo
r co
unti
es, !
ME
cos
ts a
re e
stim
ated
to a
ccou
nt f
or l
ess
than
10
perc
ent o
f tot
al e
xtra
pay
men
t rat
es t
o M
A p
lans
.
I'
Bu
dge
t Neu
tral
Ris
k A
djus
tmen
t (B
NR
A)
paym
ents
. T
he D
efic
it R
educ
tion
Act
inc
lude
d pr
ovis
ions
that
spe
cifi
ed th
at b
udge
t ne
utra
l pa
ymen
ts to
MA
pla
ns s
houl
d be
con
tinu
ed i
n 20
07 w
ith
a ph
ase-
out t
hrou
gh 2
011.
T
his
poli
cy p
rovi
des
for
MA
pay
men
ts
over
and
abo
ve t
he b
ench
mar
k ex
tra
paym
ents
spe
cifi
ed b
y th
e M
MA
, as
par
t of t
he i
mpl
emen
tati
on o
f the
new
ris
k ad
just
men
t sy
stem
that
is i
nten
ded
to a
djus
t eac
h pl
an's
pay
men
ts f
or t
he a
ntic
ipat
ed c
ostl
ines
s o
f its
enr
olle
es.15
15
The
new
ris
k ad
just
men
t sys
tem
, whi
ch is
bas
ed o
n re
tros
pect
ive
clin
ical
dat
a on
eac
h en
roll
ee,
is m
ore
accu
rate
tha
n th
e pr
evio
us
syst
em,
whi
ch w
as b
ased
onl
y on
a f
ew b
road
dem
ogra
phic
cha
ract
eris
tics
and
was
use
d un
til
1997
. T
he i
mpl
emen
tati
on o
f the
new
sy
stem
was
exp
ecte
d to
mak
e pa
ymen
ts to
pla
ns m
ore
clos
ely
refl
ect t
he a
ntic
ipat
ed c
ostl
ines
s o
f the
ir e
nrol
lees
, the
reby
red
ucin
g th
e ad
vers
e in
cent
ive
unde
r th
e pr
evio
us s
yste
m f
or p
lans
to a
void
enr
olli
ng b
enef
icia
ries
exp
ecte
d to
hav
e hi
gh c
osts
(e.
g.,
olde
r be
nefi
ciar
ies
and
bene
fici
arie
s w
ith
chro
nic
cond
itio
ns)
and
recr
uit
bene
fici
arie
s an
tici
pate
d to
hav
e lo
w c
osts
. B
ecau
se r
esea
rch
indi
cate
d th
at p
lans
did
, in
fac
t, te
nd to
enr
oll
bene
fici
arie
s w
ith
low
er r
isk
of h
igh
cost
s, r
isk
adju
stm
ent w
as e
xpec
ted
to r
educ
e pl
an
paym
ents
.
To
mit
igat
e th
e ef
fect
of t
his
chan
ge o
n pl
ans,
CM
S ph
ased
-in
the
new
cli
nica
lly-
base
d sy
stem
as
a bl
end
wit
h th
e ol
der
dem
ogra
phic
sy
stem
; in
200
5, th
e ri
sk a
djus
ter
was
app
lied
to 5
0 pe
rcen
t of t
he M
A p
aym
ent r
ate,
wit
h th
e pr
opor
tion
ris
ing
to 7
5 pe
rcen
t in
2006
an
d I 0
0 pe
rcen
t in
200
7 an
d th
erea
fter
.
In a
n ad
min
istr
ativ
e po
licy
dec
isio
n, C
MS
im
plem
ente
d th
e ne
w r
isk
adju
stm
ent s
o th
at it
wou
ld n
ot r
educ
e ag
greg
ate
paym
ents
to
MA
pla
ns b
egin
ning
in 2
000.
16
Thi
s w
as d
one
by i
ncre
asin
g pa
ymen
ts to
all
MA
pla
ns b
y a
unif
orm
per
cent
age
-th
e B
NR
A
paym
ent -
to c
ompe
nsat
e fo
r th
e fa
ct t
hat t
he a
vera
ge M
A e
nrol
lee
has
a lo
wer
ris
k sc
ore
(is
anti
cipa
ted
to b
e le
ss c
ostl
y) t
han
the
aver
age
FFS
bene
fici
ary.
Bec
ause
of t
he B
NR
A p
aym
ents
, Med
icar
e pa
ys M
A p
lans
mor
e th
an th
e ri
sk a
djus
tmen
t mod
el i
ndic
ates
it w
ould
be
expe
cted
to p
ay
for
the
sam
e be
nefi
ciar
ies
in F
FS
.
In J
anua
ry o
f200
5, C
MS
ind
icat
ed, a
s pa
rt o
f the
pre
sent
atio
n o
f Med
icar
e in
the
bud
get f
or F
Y 2
006,
tha
t it
inte
nded
to p
hase
-out
the
BN
RA
pay
men
ts f
rom
200
7 th
roug
h 20
11.
Thi
s ph
ase-
out p
olic
y w
as r
evis
ed i
n S
epte
mbe
r o
f 200
5 by
CM
S to
a s
ligh
tly
mor
e ra
pid
phas
e-ou
t.
The
Def
icit
Red
ucti
on A
ct (
OR
A)
enac
ted
in F
ebru
ary
2006
cod
ifie
d in
sta
tute
the
Sep
tem
ber
2005
CM
S B
NR
A p
olic
y.
Ii
16
The
DR
A m
anda
ted
phas
e-ou
t con
tinu
es t
he e
arli
er p
olic
y in
200
6 by
app
lyin
g th
e B
NR
A a
djus
tmen
t to
75 p
erce
nt o
f the
MA
pa
ymen
t rat
es c
onsi
sten
t wit
h th
e ne
w r
isk
adju
ster
app
lyin
g to
75
perc
ent o
f the
MA
pay
men
t rat
es.
The
DR
A p
olic
y w
ould
beg
in to
ph
ase
out t
he B
NR
A a
djus
tmen
t by
app
lyin
g it
to o
nly
55 p
erce
nt o
f the
MA
pay
men
t rat
es i
n 20
07,17
40 p
erce
nt in
200
8, 2
5 pe
rcen
t in
200
9, 5
per
cent
in 2
010
and
0 pe
rcen
t in
201
1.18
19
Ext
ra p
aym
ents
to M
A p
lans
are
pro
ject
ed to
inc
reas
e in
201
1 be
caus
e th
e D
RA
pha
se-o
ut o
f the
bud
get n
eutr
al r
isk
adju
stm
ent
spec
ific
ally
pro
vide
s fo
r a
codi
ng i
nten
sity
adj
ustm
ent f
or p
aym
ents
to M
A p
lans
onl
y fo
r 20
07 -
I 0.
Thi
s D
RA
pro
visi
on r
esul
ts i
n hi
gher
pro
ject
ed p
aym
ents
to M
A p
lans
of $
2.2
bill
ion
in 2
011
and
mor
e in
sub
sequ
ent y
ears
.20
In 2
007,
the
MA
pla
n bu
dget
neu
tral
ris
k ad
just
men
t (B
NR
A)
poli
cy w
ill a
dd a
n es
tim
ated
3 p
erce
nt to
MA
pla
n pa
ymen
ts a
nd t
he
tota
l co
st o
f the
BN
RA
pol
icy
is p
roje
cted
to b
e ab
out $
2 bi
llio
n. 21
T
he t
otal
am
ount
of e
xtra
pay
men
ts to
MA
pla
ns i
n 20
07 t
o 20
11
prov
ided
by
the
curr
ent B
NR
A p
olic
y is
pro
ject
ed a
t $6.
7 bi
llio
n.
MA
pla
n bi
ds.
Beg
inni
ng in
200
6, t
he M
MA
pro
vide
s th
at p
aym
ents
to M
A p
lans
cha
nge
from
a s
yste
m t
hat p
ays
plan
s at
the
leve
l o
f the
cou
nty
benc
hmar
ks p
lus
BN
RA
pay
men
ts to
one
tha
t com
bine
s co
unty
ben
chm
arks
plu
s B
NR
A p
aym
ents
wit
h a
bid
by e
ach
indi
vidu
al M
A p
lan.
22
F
or th
e re
mai
nder
of t
his
sect
ion,
the
ter
m 'c
ount
y be
nchm
ark'
wil
l in
clud
e B
NR
A p
aym
ents
. In
200
7, t
he
BN
RA
wil
l add
3 .9
per
cent
to e
very
cou
nty
benc
hmar
k.
The
new
ben
chm
ark-
base
d bi
ddin
g sy
stem
in 2
006
allo
cate
s 75
per
cent
of t
he d
iffe
renc
e be
twee
n th
e co
unty
ben
chm
ark
and
the
MA
pl
an b
id to
the
pla
n an
d 25
per
cent
to t
he F
eder
al g
over
nmen
t. M
A p
lans
mus
t use
the
ir 7
5 pe
rcen
t sha
re to
pro
vide
add
itio
nal
bene
fits
to
MA
pla
n en
roll
ees.
Ana
lyst
s w
ho h
ave
stud
ied
Med
icar
e pr
ivat
e pl
an p
aym
ents
and
cos
ts h
ave
esti
mat
ed th
at th
e av
erag
e M
A p
lan
bid
is a
ppro
xim
atel
y 16
per
cent
less
tha
n th
e co
unty
ben
chm
ark
in 2
006.
23
If th
e bi
ds c
onti
nue
to a
vera
ge 1
6 pe
rcen
t les
s th
an t
he b
ench
mar
ks, t
here
wou
ld b
e an
ave
rage
red
ucti
on i
n M
A p
lan
paym
ents
of 4
pe
rcen
tage
poi
nts,
whi
ch w
ould
red
uce
the
aver
age
leve
l o
fMM
A s
tatu
tory
ext
ra p
aym
ents
fro
m 1
4.9
perc
ent t
o 10
.9 p
erce
nt in
200
7.
Wit
h bi
ds a
t thi
s le
vel,
MM
A s
tatu
tory
ext
ra p
aym
ents
are
est
imat
ed a
t $4.
7 bi
llio
n in
200
7 an
d $2
4 bi
llio
n ov
er th
e fi
ve y
ears
200
7 th
roug
h 20
11.
n
17
The
im
pact
of t
he b
id p
roce
ss w
ill
like
ly v
ary
by i
ndiv
idua
l M
A p
lan
and
by l
ocat
ion.
E
ven
if th
e na
tion
al a
vera
ge d
iffe
renc
e be
twee
n th
e be
nchm
ark
rate
s an
d th
e pl
an b
ids
nati
onw
ide
is 1
6 pe
rcen
t, th
ere
wil
l be
wid
e va
riat
ion
by p
lans
aro
und
this
ave
rage
, de
pend
ing
on th
e co
unty
ben
chm
ark
paym
ent r
ate,
the
am
ount
by
whi
ch th
e co
unty
ben
chm
ark
exce
eds
FFS
cost
s, t
he M
A p
lan'
s m
anag
emen
t of
heal
th p
rice
s an
d ut
iliz
atio
n, a
nd t
he a
mou
nt o
f com
peti
tion
am
ong
MA
pla
ns in
eac
h m
arke
t.
If an
MA
pla
n bi
d is
4 p
erce
nt le
ss t
han
the
benc
hmar
k, th
e M
edic
are
paym
ent w
ould
be
redu
ced
by 1
per
cent
age
poin
t whi
le a
bid
th
at is
20
perc
ent l
ess
than
the
benc
hmar
k w
ould
red
uce
the
Med
icar
e pa
ymen
t by
5 pe
rcen
tage
poi
nts.
The
im
pact
of t
he n
ew b
iddi
ng s
yste
m o
n ex
tra
paym
ents
to M
A p
lans
wil
l, o
f cou
rse,
var
y by
the
extr
a pa
ymen
ts a
vail
able
to p
lans
in
each
type
of c
ount
y.
For
exa
mpl
e, a
16
perc
enta
ge p
oint
dif
fere
nce
betw
een
plan
bid
s an
d th
e co
unty
ben
chm
ark
stil
l wou
ld l
eave
pay
men
ts to
MA
pla
ns in
ru
ral
floo
r, u
rban
flo
or,
blen
d an
d 10
0 pe
rcen
t of2
00
4 F
FS
cos
t cou
ntie
s m
ore
than
10
perc
ent a
bove
ave
rage
FFS
cos
ts.
App
roxi
mat
ely
60 p
erce
nt o
f MA
ext
ra p
aym
ents
in 2
007
go t
o pl
ans
in t
hese
cou
ntie
s.
In c
ontr
ast,
a 16
per
cent
age
poin
t dif
fere
nce
betw
een
plan
bid
s an
d th
e co
unty
ben
chm
ark
in c
ount
ies
in t
he 1
00 p
erce
nt o
f 200
7 F
FS
cos
ts c
ateg
ory
wou
ld l
eave
pla
n pa
ymen
ts
less
tha
n 1
perc
ent a
bove
ave
rage
FF
S c
osts
. (F
igur
e 4)
.
I'
18%
12%
6%
0%
Fig
ure
4.
Est
ima
ted
Ext
ra P
aym
en
ts t
o M
A P
lan
s F
ollo
win
g 4
%
Re
du
ctio
n D
ue t
o B
ids
16%
Be
low
Be
nch
ma
rks,
200
7
19.8
%
Ru
ral F
loo
r U
rba
n F
loo
r B
len
d
Min
imu
m
Up
da
te
Na
tion
al A
vera
ge
= 1
0.9o
/o
0.5%
100%
FF
S
100%
FF
S
100%
FF
S
in 2
004
in 2
005
in 2
007
Sou
rce:
Ge
org
e W
ash
ing
ton
Uni
vers
ity a
naly
sis
of C
ente
rs f
or
Me
dic
are
and
Med
icai
d S
ervi
ces
Med
icar
e M
anag
ed C
are
Qu
art
erl
y S
tate
, C
ou
nty
Pla
n D
ata
File
fo
r th
e q
ua
rte
r e
nd
ing
De
cem
be
r 20
05,
Me
dic
are
Ma
na
ge
d
Car
e Q
uarte
rly S
tate
Cou
nty
Mar
ket
Pen
etra
tion
File
for t
he q
uarte
r end
ing
Dec
embe
r 200
5 an
d M
edic
are
Adv
anta
ge 2
007
Rat
eboo
k; T
ran
scri
pt
of P
ub
lic M
eetin
g, M
ed
ica
re P
aym
en
t Ad
viso
ry C
omm
issi
on,
Apr
il 21
, 20
05.
Not
e: F
igur
es a
bo
ve in
clud
e B
NR
A a
nd F
FS
nor
mal
izat
ion.
Ass
um
es
plan
bid
s in
all
coun
ties
fall
16%
be
low
the
be
nch
ma
rk.
18
Ext
ra p
aym
ents
thr
ough
the
reg
iona
l PP
O s
tabi
lizat
ion
fund
. In
add
itio
n to
the
sta
tuto
ry p
rovi
sion
s th
at p
rovi
de s
peci
fic
extr
a pa
ymen
ts to
all
MA
pla
ns, t
he M
MA
als
o pr
ovid
es C
MS
wit
h th
e au
thor
ity
to m
ake
extr
a pa
ymen
ts to
new
reg
iona
l P
PO
s fr
om a
st
abil
izat
ion
fund
bet
wee
n 20
07 a
nd 2
013.
Pay
men
ts f
rom
the
fun
d du
ring
thi
s pe
riod
may
tota
l up
to
$10
bill
ion.
24
CM
S d
esig
nate
d 28
sta
te a
nd m
ulti
-sta
te r
egio
ns f
or t
he r
egio
nal
PP
Os
that
beg
an o
pera
tion
in 2
006.
CM
S m
ay u
se t
he r
egio
nal
PP
O s
tabi
liza
tion
fun
d to
mak
e ex
tra
paym
ents
to r
egio
nal
PP
Os
in t
hree
ins
tanc
es:
• T
he f
irst
spo
nsor
ofr
egio
nal P
P O
s in
eve
ry r
egio
n in
the
nat
ion
wou
ld r
ecei
ve a
bon
us o
f 3 p
erce
nt o
f the
ben
chm
ark
in e
ach
regi
on;
• R
egio
nal
PP
Os
that
wou
ld b
e th
e fi
rst
to s
erve
a r
egio
n m
ay b
e pr
ovid
ed e
xtra
pay
men
ts;
and
• R
egio
nal
PP
Os
that
indi
cate
the
y pl
an to
lea
ve a
reg
ion
resu
ltin
g in
few
er t
han
two
regi
onal
PP
Os
plan
s in
the
reg
ion
may
be
prov
ided
ext
ra p
aym
ents
.
The
pat
tern
of r
egio
nal
PP
Os
mea
ns t
hat C
MS
may
mak
e pa
ymen
ts to
reg
iona
l P
PO
s un
der
each
of t
hese
thr
ee c
ondi
tion
s. I
n 20
06,
ther
e is
no
spon
sor
ofre
gion
al P
PO
s in
eve
ry r
egio
n; t
here
are
fiv
e re
gion
s w
itho
ut a
ny r
egio
nal
PP
O p
lans
; an
d th
ere
are
no r
egio
ns
wit
h m
ore
than
two
regi
onal
PP
O p
lans
.
It is
im
?ort
ant t
o no
te t
hat C
MS
rep
orte
d th
ere
wer
e ap
prox
imat
ely
50,0
00 e
nrol
lees
in
Reg
iona
l P
PO
s na
tion
wid
e as
of M
ay 2
5,
2006
.2
19
The
dis
cret
iona
ry n
atur
e o
f the
PP
O s
tabi
liza
tion
fun
d an
d th
e le
ngth
of t
he t
ime
peri
od i
nv
olv
ed-2
00
7 to
201
3 -m
akes
it d
iffi
cult
to
proj
ect t
he c
osts
of t
he f
und
in s
peci
fic
year
s.
One
rea
sona
ble
assu
mpt
ion
is t
hat C
MS
may
use
the
se f
unds
at
roug
hly
equa
l am
ount
s o
f $1
-$1
.4 b
illi
on i
n ea
ch o
f the
sev
en y
ears
of t
he f
und'
s av
aila
bili
ty.
Und
er th
is a
ssum
ptio
n, th
e to
tal
amou
nt o
f ext
ra p
aym
ents
to
MA
pla
ns in
200
7 to
201
1 pr
ovid
ed b
y th
e re
gion
al P
PO
sta
bili
zati
on f
und
poli
cy is
pro
ject
ed a
t $6.
0 bi
llio
n.
20
r·
21
OP
TIO
NS
FO
R M
ED
ICA
RE
SA
VIN
GS
IN
200
7 T
HR
OU
GH
201
1
Ext
ra p
aym
ents
to M
A p
lans
are
pro
ject
ed to
tot
al m
ore
than
$5
bill
ion
in 2
007
and
as m
uch
as $
30 b
illi
on in
the
five
yea
r pe
riod
fro
m
2007
thro
ugh
2011
.
The
spe
cifi
c M
MA
and
DR
A p
rovi
sion
s th
at g
ener
ate
thes
e ex
tra
paym
ents
pre
sent
opp
ortu
niti
es f
or r
evis
ed p
olic
ies
that
can
red
uce
this
Med
icar
e sp
endi
ng in
exc
ess
ofF
FS
cos
ts.
The
opt
ions
des
crib
ed h
ere
are
grou
ped
acco
rdin
g to
the
thr
ee b
ases
for
MA
pla
n ex
tra
paym
ents
: M
MA
sta
tuto
ry p
rovi
sion
s; D
RA
bud
get n
eutr
al r
isk
adju
stm
ent p
olic
es;
and
the
regi
onal
PP
O s
tabi
liza
tion
fun
d.
Dep
endi
ng o
n th
e ex
tent
and
the
tim
ing
of a
ny n
ew p
olic
ies,
the
am
ount
of s
avin
gs f
rom
200
7 to
201
1 co
uld
tota
l fr
om a
few
to t
ens
of b
illi
ons
of d
olla
rs.
Med
icar
e sa
ving
s fr
om t
he
ben
chm
ark
ex
tra
paym
ents
. M
edic
are
savi
ngs
may
be
achi
eved
by
chan
ging
the
MM
A p
olic
es t
hat
expl
icit
ly s
et c
ount
y be
nchm
arks
at
leve
ls a
bove
ave
rage
FFS
cos
ts.
Pos
sibl
e fi
ve y
ear
savi
ngs
of u
p to
$16
bil
lion
are
pos
sibl
e fr
om
sett
ing
MA
pay
men
t cou
nty
benc
hmar
ks c
lose
r to
FF
S c
osts
.
Opt
ion
la.
The
gre
ates
t sa
ving
s fr
om r
evis
ing
the
MM
A e
xtra
pay
men
t pro
visi
ons
wou
ld b
e ge
nera
ted
by e
lim
inat
ing
all
benc
hmar
k ex
tra
paym
ents
as
of J
anua
ry 2
007.
The
new
pol
icy
coul
d sp
ecif
y th
at th
e M
A p
lan
benc
hmar
ks w
ould
be
set a
t 10
0 pe
rcen
t of t
he
cost
s o
f FFS
at t
he c
ount
y le
vel.
Any
Fed
eral
sav
ings
fro
m p
lan
bids
bel
ow th
e ne
w b
ench
mar
ks w
ould
con
trib
ute
tow
ard
pay-
for
perf
orm
ance
pay
men
ts to
MA
pla
ns.
Sav
ings
wou
ld b
e m
ost s
igni
fica
nt in
the
urb
an f
loor
cou
ntie
s w
here
ann
ual
Med
icar
e M
A p
aym
ents
abo
ve F
FS c
osts
wou
ld b
e re
duce
d by
an
aver
age
of o
ver
$1,0
00.
Thi
s op
tion
is p
roje
cted
to r
educ
e M
edic
are
spen
ding
by
$2.7
bil
lion
in
2007
and
ove
r $1
6 bi
llio
n ov
er f
ive
year
s.
22
Op
tio
n 1
a: S
et M
A P
lan
Sta
tuto
ry/B
ench
mar
k P
aym
ents
at
100%
of
Co
un
ty F
FS
Co
sts
in 2
007
and
Fu
ture
Yea
rs
2007
-11
2007
20
08
2009
20
10
2011
Cu
rren
t b
asel
ine:
MM
A s
tatu
tory
/ben
chm
ark
extr
a p
aym
ents
$2
.7
3.1
3.4
3.7
3.9
Res
idu
al M
edic
are
cost
s: b
ench
mar
k at
100
% o
f F
FS
-0
--0
--0
--0
--0
-
Med
icar
e sa
vin
gs
$2.7
3.
1 3.
4 3.
7 3.
9
Not
e:
Ass
um
es
MA
pla
n be
nchm
ark
is s
et a
t 10
0% o
f cou
nty
FF
S c
osts
in 2
007
and
sub
seq
ue
nt y
ears
. A
ssu
me
s th
at a
ll fu
nds
tha
t re
sult
from
MA
pla
n bi
ds a
t le
ss t
han
the
benc
hmar
k ar
e re
turn
ed t
o M
A p
lans
as
pay-
for-
perf
orm
ance
pay
men
ts.
5-yr
T
ota
l
$16.
8 b
-0-
$16.
8 b
Sou
rce:
Geo
rge
Was
hing
ton
Uni
vers
ity a
naly
sis
of C
ente
rs f
or M
edic
are
and
Med
icai
d S
ervi
ces
Med
icar
e M
anag
ed C
are
Qua
rter
ly S
tate
, C
ount
y, P
lan
Dat
a F
ile
for
the
qu
art
er
endi
ng D
ece
mb
er
2005
, M
edic
are
Man
aged
Car
e Q
uart
erly
Sta
te C
ount
y M
ark
et P
enet
ratio
n F
ile f
or th
e q
ua
rte
r en
ding
De
cem
be
r 20
05 a
nd
Med
icar
e A
dvan
tage
Rev
ised
200
7 R
ateb
ook;
Med
icar
e P
aym
en
t Ad
viso
ry C
omm
issi
on,
Med
icar
e A
dvan
tage
Be
nch
ma
rks
an
d P
aym
en
ts C
om
pa
red
with
A
vera
ge
Fee
-For
-Ser
vice
Spe
ndin
g (W
ashi
ngto
n, D
.C.:
Med
PA
C,
Jun
e 2
006)
.
r:
23
Opt
ion
lb.
An
appr
oach
to t
he g
radu
al r
educ
tion
of t
he M
MA
ext
ra p
aym
ents
wou
ld b
e to
pha
se-d
own
the
benc
hmar
k ex
tra
paym
ents
ove
r a
num
ber
of y
ears
. A
red
ucti
on o
fMM
A b
ench
mar
k ex
tra
paym
ents
cou
ld b
egin
in
2007
and
run
ove
r fo
ur y
ears
at
25
perc
ent p
er y
ear.
U
nder
this
app
roac
h, b
ench
mar
k ex
tra
paym
ents
in
ever
y co
unty
wou
ld d
ecli
ne f
rom
the
200
6 le
vels
to
75 p
erce
nt i
n 20
07,
50 p
erce
nt in
200
8, a
nd 2
5 pe
rcen
t in
2009
, w
ith
paym
ents
at
100
perc
ent o
f ave
rage
cou
nty
FF
S c
osts
in
2010
and
sub
sequ
ent
year
s.
Thi
s ap
proa
ch w
ould
pro
vide
sub
stan
tial
Med
icar
e sa
ving
s w
hile
giv
ing
plan
s in
the
coun
ties
wit
h th
e gr
eate
st e
xtra
pay
men
ts f
our
year
s to
gra
dual
ly ti
ghte
n m
anag
emen
t pra
ctic
es a
nd r
evis
e th
eir
prov
ider
pay
men
ts a
nd b
enef
it p
acka
ges.
Thi
s op
tion
is p
roje
cted
to r
educ
e M
edic
are
spen
ding
by
arou
nd $
12 b
illi
on o
ver
five
yea
rs.
Op
tio
n 1
b: P
has
e-o
ut
MA
Pla
n S
tatu
tory
/Ben
chm
ark
Ext
ra P
aym
ents
at
25%
per
yea
r fr
om
200
7 to
201
O
Cu
rren
t b
asel
ine:
MM
A s
tatu
tory
/ben
chm
ark
extr
a p
aym
ents
Res
idu
al M
edic
are
cost
s: b
ench
mar
k p
has
e-d
ow
n a
t 25
%
Med
icar
e sa
vin
gs
2007
$2.7
2.0
$0.7
2008
3.1
1.5
1.5
2009
20
10
2011
3.4
3.7
3.9
0.9
-0-
-0-
2.5
3.7
3.9
2007
-11
5-yr
T
ota
l
$16.
8 b
$4.5
b
$12.
3 b
Not
e: A
ssu
me
s M
A b
ench
mar
k ra
tes
are
phas
ed-d
own
at th
e co
unty
lev
el f
rom
100
% M
MA
sta
tuto
ry le
vels
to
100%
of c
ount
y F
FS
cos
ts a
t th
e p
ace
of 7
5% o
f diff
eren
ce in
20
07,
50%
of d
iffer
ence
in 0
8, 2
5%
in 0
9, 0
% in
10
an
d 1
1.
Ass
um
es
tha
t all
fund
s th
at
resu
lt fr
om M
A p
lan
bids
at
less
tha
n th
e b
en
chm
ark
are
ret
urne
d to
MA
pla
ns a
s p
ay
for-
perf
orm
ance
pay
men
ts.
Sou
rce:
Geo
rge
Was
hing
ton
Uni
vers
ity a
naly
sis
of C
ente
rs f
or M
edic
are
and
Med
icai
d S
ervi
ces
Med
icar
e M
anag
ed C
are
Qua
rter
ly S
tate
, C
ount
y, P
lan
Dat
a F
ile
for
the
qu
art
er
endi
ng D
ece
mb
er 2
005,
Med
icar
e M
anag
ed C
are
Qua
rter
ly S
tate
Cou
nty
Ma
rke
t Pen
etra
tion
File
for
the
qu
art
er
endi
ng D
ece
mb
er
2005
and
M
edic
are
Adv
anta
ge R
evis
ed 2
007
Rat
eboo
k; M
edic
are
Pay
men
t Ad
viso
ry C
omm
issi
on,
Med
icar
e A
dva
nta
ge
Be
nch
ma
rks
an
d P
aym
en
ts C
om
pa
red
with
A
vera
ge
Fee
-For
-Ser
vice
Spe
ndin
g (W
ashi
ngto
n, D
.C.:
Med
PA
C,
Jun
e 2
006)
.
24
Opt
ion
le.
Ano
ther
app
roac
h to
the
gra
dual
red
ucti
on o
f the
MM
A e
xtra
pay
men
ts w
ould
be
to s
et a
dec
lini
ng c
eili
ng o
n co
unty
be
nchm
ark
rate
s ov
er a
num
ber
of y
ears
. A
dec
lini
ng c
eili
ng o
n be
nchm
ark
coun
ty r
ates
in
exce
ss o
fFF
S c
osts
cou
ld b
egin
at
15
perc
ent i
n 20
07 a
nd d
ecli
ne to
10
perc
ent i
n 20
08,
5 pe
rcen
t in
2009
, and
zer
o in
201
0 an
d su
bseq
uent
yea
rs.
Thi
s ap
proa
ch w
ould
pro
vide
sub
stan
tial
Med
icar
e sa
ving
s w
hile
giv
ing
plan
s un
til
2011
to
plan
for
cou
nty
rate
s at
the
leve
l o
ffee
fo
r-se
rvic
e co
sts
in t
he c
ount
y.
Und
er th
is a
ppro
ach,
pla
ns in
the
cou
ntie
s w
ith
benc
hmar
k ra
tes
the
grea
test
exc
ess
of r
ates
--
mos
tly
urba
n fl
oor
coun
ties
--
wou
ld
have
a g
radu
al t
hree
yea
r ph
ase-
out f
rom
200
7 to
20
I 0 o
f the
ir e
xtra
pay
men
ts t
hat a
re n
ow e
stim
ated
to
aver
age
over
15
perc
ent m
ore
than
FF
S c
osts
bef
ore
BN
RA
. P
lans
in
the
I 00
perc
ent o
f 200
5 fe
e-fo
r-se
rvic
e co
sts
coun
ties
, w
ith
coun
ty b
ench
mar
k ra
tes
that
are
es
tim
ated
to a
vera
ge a
roun
d 2
perc
ent m
ore
than
FF
S c
osts
in
2007
bef
ore
BN
RA
, w
ould
not
be
affe
cted
unt
il 2
011.
Thi
s ap
proa
ch is
pro
ject
ed to
red
uce
Med
icar
e sp
endi
ng b
y ne
arly
$I 0
bil
lion
ove
r fi
ve y
ears
.
Op
tio
n 1
c: D
eclin
ing
Cei
ling
on
Ext
ra P
ay
me
nts
fro
m 2
00
7 t
o 2
01
0
Cu
rren
t b
asel
ine:
MM
A s
tatu
tory
/ben
chm
ark
extr
a p
aym
ents
Res
idu
al M
edic
are
cost
s: c
eilin
g o
n ex
tra
pay
men
ts
Med
icar
e sa
vin
gs
2007
$2.7
2.7
$0.0
3
2008
20
09
3.1
3.4
2.4
1.8
0.7
1.6
2007
-11
5-yr
20
10
2011
T
ota
l
3.7
3.9
$16.
8 b
-0-
-0-
$6.9
b
3.7
3.9
$9.9
b
Not
e: A
ssu
me
s M
A p
lan
be
nch
ma
rk is
pha
sed-
dow
n at
the
coun
ty l
evel
fro
m 1
00%
MM
A s
tatu
tory
leve
ls t
o 10
0% o
f cou
nty
FF
S c
osts
with
a c
eilin
g se
t at
115
% o
f FF
S c
osts
in
2007
, 11
0% in
08,
105
% in
200
9 an
d 10
0% in
201
0.
Ass
um
es
tha
t all
fund
s th
at
resu
lt fr
om M
A p
lan
bids
at
less
than
the
be
nch
ma
rk a
re r
etur
ned
to M
A p
lans
as
pay-
for
perf
orm
ance
pay
men
ts.
Ass
um
es
plan
bid
s in
all
coun
ties
fall
16%
be
low
the
benc
hmar
k. F
igur
es d
o n
ot in
clud
e B
NR
A.
Sou
rce:
Geo
rge
Was
hing
ton
Uni
vers
ity a
naly
sis
of C
ente
rs f
or M
edic
are
and
Med
icai
d S
ervi
ces
Med
icar
e M
anag
ed C
are
Qua
rter
ly S
tate
, C
ount
y, P
lan
Dat
a F
ile
for
the
qu
art
er
endi
ng D
ece
mb
er
2005
, M
edic
are
Man
aged
Car
e Q
uart
erly
Sta
te C
ou
nty
Ma
rke
t P
enet
ratio
n F
ile f
or th
e q
ua
rte
r en
ding
De
cem
be
r 20
05 a
nd
Med
icar
e A
dvan
tage
Rev
ised
200
7 R
ateb
ook;
Med
icar
e P
aym
en
t Ad
viso
ry C
omm
issi
on,
Med
icar
e A
dvan
tage
Be
nch
ma
rks
an
d P
aym
en
ts C
om
pa
red
with
A
vera
ge
Fee
-For
-Ser
vice
Spe
ndin
g (W
ashi
ngto
n, D
.C.:
Med
PA
C,
Jun
e 2
006)
.
I'
25
Med
icar
e sa
ving
s fr
om I
ME
ext
ra p
aym
ents
. A m
ore
focu
sed
appr
oach
to t
he r
educ
tion
ofM
MA
ext
ra p
aym
ents
wou
ld r
evis
e th
e cu
rren
t pol
icy
that
pro
vide
s do
uble
pay
men
t for
Ind
irec
t Med
ical
Edu
cati
on c
osts
at t
each
ing
hosp
ital
s fo
r M
A p
lan
enro
llee
s.
Opt
ion
2.
IME
cos
ts c
ould
be
elim
inat
ed f
rom
the
cal
cula
tion
of M
A c
ount
y be
nchm
ark
rate
s, s
ince
Med
icar
e di
rect
ly p
ays
teac
hing
ho
spit
als
for
the
cost
s o
f Med
icar
e in
pati
ents
tha
t be
long
to M
A p
lans
.
Thi
s IM
E p
olic
y w
ould
red
uce
paym
ents
to M
A p
lans
by
abou
t 2
perc
ent i
n th
e ag
greg
ate
alth
ough
pay
men
ts in
a f
ew c
ount
ies
wou
ld
be r
educ
ed b
y as
muc
h as
6 p
erce
nt.
The
cou
ntie
s w
ith
the
grea
test
red
ucti
on in
rat
es w
ould
be
in N
ew Y
ork,
Bos
ton,
and
oth
er a
reas
w
ith
high
con
cent
rati
ons
of t
each
ing
hosp
ital
s.
The
sho
rt-t
erm
im
pact
of t
his
poli
cy m
ight
be
mit
igat
ed b
y li
mit
ing
the
redu
ctio
n in
an
indi
vidu
al M
A c
ount
y be
nchm
ark
rate
s to
2
perc
ent i
n an
y on
e ye
ar.
Thi
s w
ould
pha
se-d
own
paym
ents
ove
r tw
o or
mor
e ye
ars
to M
A p
lans
in
the
smal
l num
ber
of c
ount
ies
wit
h hi
gher
am
ount
s o
f ext
ra p
aym
ents
rel
ated
to I
ME
cos
ts.
The
eli
min
atio
n o
fIM
E d
oubl
e pa
ymen
ts w
ould
red
uce
Med
icar
e sp
endi
ng b
y an
est
imat
ed $
800
mil
lion
in
2006
and
$5
bill
ion
over
fi
ve y
ears
.
Op
tio
n 2
: R
emo
ve l
ME
Ext
ra P
aym
ents
fro
m M
A B
ench
mar
ks i
n 20
07 a
nd
Fu
ture
Yea
rs
2007
-11
5-yr
20
07
2008
20
09
2010
20
11
To
tal
Cu
rren
t b
asel
ine:
lM
E P
aym
ents
$0
.8
0.9
1.0
1.1
1.2
$5.0
b
Res
idu
al M
edic
are
cost
s: R
emo
ve I
ME
fro
m b
ench
mar
ks
-0-
-0-
-0-
-0-
-0-
-0-
Med
icar
e sa
vin
gs
$0.8
0.
9 1.
0 1.
1 1.
2 $5
.0 b
Not
e: A
ssum
es t
hat
MA
pla
n pa
ymen
ts in
urb
an a
nd r
ural
flo
or c
ount
ies
are
redu
ced
by IM
E c
osts
in t
he s
peci
fic c
ount
y.
Ass
umes
pla
n bi
ds in
all
coun
ties
fall
16°/o
bel
ow th
e be
nchm
ark.
Sou
rce:
Geo
rge
Was
hing
ton
Uni
vers
ity a
naly
sis
of C
ente
rs f
or M
edic
are
an
d M
edic
aid
Ser
vice
s M
edic
are
Man
aged
Car
e Q
uart
erly
Sta
te,
Cou
nty,
Pla
n D
ata
File
fo
r th
e q
ua
rte
r en
ding
De
cem
be
r 20
05,
Med
icar
e M
anag
ed C
are
Qua
rter
ly S
tate
Cou
nty
Ma
rke
t Pen
etra
tion
File
for
the
qu
art
er e
ndin
g D
ece
mb
er 2
00
5 a
nd M
edic
are
Adv
anta
ge R
evis
ed
2007
Rat
eboo
k.
26
Med
icar
e sa
ving
s fr
om D
RA
bud
get
neut
ral
risk
adj
ustm
ent
extr
a pa
ymen
ts.
Med
icar
e sa
ving
s w
ere
incl
uded
in t
he D
RA
by
prov
idin
g th
at B
NR
A e
xtra
pay
men
ts w
ould
be
phas
ed-o
ut o
ver
the
next
five
yea
rs.
DR
A p
rovi
des
that
the
sche
dule
for
the
pha
se-o
ut
of t
he B
NR
A p
aym
ents
is 5
5 pe
rcen
t in
2007
, 40
perc
ent
in 2
008,
25
perc
ent i
n 20
09,
5 pe
rcen
t in
20
!0 a
nd z
ero
perc
ent i
n 20
11.
A m
ore
rapi
d ph
ase-
out o
f BN
RA
pay
men
ts w
ould
pro
vide
Med
icar
e sa
ving
s o
f ove
r $5
bil
lion
in 2
007
-20
11.
The
se s
avin
gs w
ould
in
clud
e ov
er $
2 bi
llio
n in
201
1 th
at w
ould
res
ult f
rom
the
ext
ensi
on o
f the
DR
A c
odin
g in
tens
ity
adju
stm
ent p
olic
y.
Opt
ion
3a.
The
gre
ates
t sa
ving
s fr
om r
evis
ing
the
DR
A B
NR
A p
rovi
sion
s w
ould
be
gene
rate
d by
the
elim
inat
ion
of a
ll B
NR
A e
xtra
pa
ymen
ts a
s o
f Jan
uary
200
7. T
he n
ew p
olic
y co
uld
spec
ify
that
no
MA
BN
RA
ext
ra p
aym
ents
wou
ld b
e pa
id i
n 20
07 o
r su
bseq
uent
ye
ars
and
the
DR
A c
odin
g in
tens
ity
adju
stm
ent p
olic
y w
ould
be
exte
nded
to 2
011.
A
ny s
avin
gs f
rom
pla
n bi
ds b
elow
the
new
be
nchm
arks
wou
ld b
e re
turn
ed to
pla
ns a
s pa
y-fo
r-pe
rfor
man
ce p
aym
ents
.
Op
tio
n 3
a: E
lim
inat
e B
NR
A P
aym
ents
in
2007
an
d F
utu
re Y
ears
Cu
rren
t B
asel
ine:
DR
A B
NR
A p
has
e-o
ut
pay
men
ts 1
Res
idu
al M
edic
are
cost
s: e
lim
inat
e B
NR
A p
aym
ents
Med
icar
e sa
vin
gs
2007
$2.0
-0-
$2.0
2008
20
09
1.4
0.9
-0-
-0-
1.4
0.9
2007
-11
5-yr
20
10
2011
T
ota
l
0.2
2.2
$6.7
b
-0-
-0-
-0-
0.2
2.2
$6.7
b
1 The
DR
A p
ha
se-o
ut o
f th
e b
ud
ge
t ne
utra
l ris
k a
dju
stm
en
t pro
vide
s a
codi
ng i
nten
sity
ad
just
me
nt o
nly
for
2007
-1
0.
Thi
s D
RA
pro
visi
on r
esul
ts in
hig
he
r pr
ojec
ted
paym
ents
to
MA
pla
ns in
201
1 a
nd
su
bse
qu
en
t yea
rs.
Not
e:
Ass
um
es
base
line
for
calc
ulat
ion
of s
avin
gs is
DR
A p
aym
ents
at 7
5% o
f ful
l B
NR
A c
osts
in 2
006,
55%
in 0
7, 4
0% in
08,
25%
in 0
9, a
nd 5
% in
201
0 an
d 0%
in
11;
optio
n as
sum
es e
limin
atio
n of
BN
RA
pay
men
ts in
Jan
uary
of 2
007
and
futu
re y
ears
and
the
ext
ensi
on o
f the
MA
cod
ing
inte
nsity
adj
ustm
ent
for
2011
.
Sou
rce:
Geo
rge
Was
hing
ton
Uni
vers
ity a
naly
sis
of C
ente
rs f
or M
edic
are
and
Med
icai
d S
ervi
ces
Med
icar
e M
anag
ed C
are
Qua
rter
ly S
tate
, C
ount
y, P
lan
Dat
a F
ile f
or th
e q
ua
rte
r en
ding
De
cem
be
r 20
05,
Med
icar
e M
anag
ed C
are
Qua
rter
ly S
tate
Cou
nty
Ma
rke
t P
enet
ratio
n F
ile f
or th
e q
ua
rte
r en
ding
De
cem
be
r 20
05 a
nd M
edic
are
Ad
van
tag
e R
evis
ed
2007
Rat
eboo
k.
27
Opt
ion
3b.
The
sch
edul
e fo
r th
e ph
ase-
in o
fBN
RA
ext
ra p
aym
ent w
as,
in r
ecen
t yea
rs,
set a
t an
incr
ease
of2
5 p
erce
nt p
er y
ear:
25
perc
ent
in 2
004,
50
perc
ent i
n 20
05 a
nd 7
5 pe
rcen
t in
2006
. A
par
alle
l pha
se-o
ut o
fBN
RA
ext
ra p
aym
ents
wou
ld b
e at
the
rate
of2
5
perc
ent p
er y
ear.
Thi
s w
ould
be
set B
NR
A p
aym
ents
at 7
5 pe
rcen
t in
200
6, 5
0 pe
rcen
t in
2007
, 25
perc
ent
in 2
008,
and
zer
o pe
rcen
t in
200
9 an
d su
bseq
uent
yea
rs.
The
DR
AM
A c
odin
g in
tens
ity
adju
stm
ent
poli
cy w
ould
be
exte
nded
to 2
011.
Med
icar
e sa
ving
s w
ould
beg
in in
200
7 an
d w
ould
be
$3.2
bil
lion
thro
ugh
2010
wit
h th
e ex
tens
ion
of t
he D
RA
cod
ing
inte
nsit
y ad
just
men
t pol
icy
2011
con
trib
utin
g $2
.2 b
illi
on in
201
1 fo
r a
tota
l o
f $5
.4 b
illi
on.
A t
hree
-yea
r ph
ase-
out s
ched
ule
wou
ld p
rovi
de M
edic
are
savi
ngs
from
the
DR
A f
ive
year
sch
edul
e w
hile
con
tinu
ing
to g
ive
MA
pl
ans
until
200
9 to
ful
ly a
ccom
mod
ate
to t
he c
hang
es f
irst
ann
ounc
ed in
200
5.
Op
tio
n 3
b: P
has
e-o
ut
of
BN
RA
Pay
men
ts a
t 25
% p
er y
ea
r fr
om
200
7 to
200
9
2007
20
08
2009
20
10
2011
Cu
rren
t b
asel
ine:
OR
A B
NR
A p
has
e-o
ut
pay
men
ts 1
$2.0
1.
4 0.
9 0.
2 2.
2
Res
idu
al M
edic
are
cost
s: B
NR
A p
has
e-o
ut
at 2
5%
1.0
0.3
-0-
-0-
-0-
Med
icar
e sa
vin
gs
$1.0
1.
1 0.
9 0.
2 2.
2
1 The
OR
A p
ha
se-o
ut o
f th
e b
ud
ge
t ne
utra
l ris
k ad
just
men
t pr
ovid
es a
cod
ing
inte
nsity
ad
just
me
nt o
nly
for
2007
-10
. T
his
OR
A p
rovi
sion
res
ults
in
hig
he
r pr
ojec
ted
paym
ents
to
MA
pla
ns in
201
1 an
d su
bseq
uent
yea
rs.
Not
e: A
ssu
me
s ba
selin
e fo
r ca
lcul
atio
n o
f sav
ings
is O
RA
pay
men
ts a
t 75
% o
f ful
l B
NR
A c
osts
in 2
006.
55%
in 0
7, 4
0%
in 0
8, 2
5%
in 0
9, a
nd 0
%
in 2
01
0 a
nd 1
1; o
ptio
n as
sum
es p
ha
se-o
ut o
f B
NR
A p
aym
en
ts a
t rat
e o
f 75%
in 0
6, 5
0% in
07,
25%
in 0
8, 0
% i
n 09
, 20
10,
and
11.
2007
-11
5-yr
T
ota
l
$6.7
b
$1.3
b
$5.4
b
Sou
rce:
Geo
rge
Was
hing
ton
Uni
vers
ity a
naly
sis
of C
ente
rs f
or M
edic
are
and
Med
icai
d S
ervi
ces
Med
icar
e M
anag
ed C
are
Qua
rter
ly S
tate
, C
ount
y, P
lan
Dat
a F
ile f
or th
e q
ua
rte
r en
ding
De
cem
be
r 20
05,
Med
icar
e M
anag
ed C
are
Qua
rter
ly S
tate
Co
un
ty M
arke
t P
enet
ratio
n F
ile f
or th
e q
ua
rte
r en
ding
De
cem
be
r 20
05 a
nd M
edic
are
Adv
anta
ge R
evis
ed
2007
Rat
eboo
k.
28
Med
icar
e sa
ving
s fr
om
th
e re
gion
al P
PO
sta
bili
zati
on f
und.
M
edic
are
savi
ngs
from
the
$I 0
bil
lion
reg
iona
l P
PO
sta
bili
zati
on f
und
may
be
gene
rate
d by
eli
min
atin
g on
e or
mor
e o
f the
thre
e pu
rpos
es f
or w
hich
the
fun
d m
ay b
e us
ed.
Sav
ings
of a
ppro
xim
atel
y $5
bi
llio
n m
ay b
e po
ssib
le i
n th
is a
rea.
Op
tio
n 4
. T
he e
lim
inat
ion
of a
ll t
hree
pur
pose
s fo
r su
ppor
t fro
m t
he f
und
-na
tion
wid
e re
gion
al P
PO
, P
PO
pla
ns e
nter
ing
regi
ons,
an
d P
PO
pla
ns th
reat
enin
g to
lea
ve r
egio
ns -
wou
ld p
rovi
de t
he l
arge
st s
pend
ing
redu
ctio
n.
Und
er th
is p
olic
y, r
egio
nal
PP
Os
wou
ld
cont
inue
to r
ecei
ve e
xtra
pay
men
ts b
y co
unty
at t
he s
ame
leve
l as
oth
er M
A p
lans
.
To
the
exte
nt th
at P
PO
s em
phas
ize
serv
ice
to b
enef
icia
ries
in r
ural
are
as, t
he P
PO
s w
ould
sti
ll b
enef
it f
rom
MA
ext
ra p
aym
ents
in
rura
l fl
oor
coun
ties
tha
t ar
e es
tim
ated
at
17 p
erce
nt a
nd $
1,10
0 an
nual
ly i
n 20
07.
Thi
s ne
w p
olic
y w
ould
pro
vide
for
PP
Os
to c
ompe
te
wit
h lo
cal
PP
Os
and
othe
r M
A p
lans
on
a le
vel
play
ing
fiel
d.
The
pos
sibl
e 20
07 to
201
1 M
edic
are
savi
ngs
for
the
elim
inat
ion
of a
utho
rity
for
the
PP
O s
tabi
liza
tion
fun
d co
uld
be $
6 bi
llio
n, o
r ju
st
unde
r tw
o-th
irds
of t
he $
10 b
illi
on a
utho
rize
d to
be
expe
nded
bet
wee
n 20
07 a
nd 2
013.
A m
ore
focu
sed
appr
oach
to
savi
ngs
from
reg
iona
l P
PO
sta
bili
zati
on w
ould
ret
ain
CM
S a
utho
rity
to m
ake
extr
a pa
ymen
ts to
reg
iona
l P
PO
s th
at w
ere
the
firs
t to
ser
ve a
reg
ion
whi
le e
lim
inat
ing
the
extr
a pa
ymen
ts to
the
fir
st n
atio
nwid
e re
gion
al P
PO
and
to r
egio
nal
PP
Os
that
ind
icat
e th
ey p
lan
to l
eave
a r
egio
n.
Thi
s ap
proa
ch m
ight
res
ult
in p
oten
tial
Med
icar
e sa
ving
s o
f ove
r $4
bil
lion
bet
wee
n 20
07 a
nd 2
011.
Op
tio
n 4
: E
limin
ate
MM
A R
eg
ion
al
PP
O S
tab
iliza
tio
n F
un
d
Cu
rre
nt
ba
selin
e:
reg
ion
al s
tab
iliza
tio
n f
un
d
Re
sid
ua
l M
ed
ica
re c
ost
s: e
limin
ate
sta
bili
zati
on
fu
nd
Me
dic
are
sa
vin
gs
Sou
rce:
Geo
rge
Was
hing
ton
Uni
vers
ity
2007
$1.0
-0-
$1.0
2008
1.1
-0-
1.1
2009
20
10
1.2
1.3
-0-
-0-
1.2
1.3
29
2007
-11
5-y
r 20
11
To
tal
1.4
$6.0
b
-0-
-0-
1.4
$6
.0 b
Not
e: F
or
mor
e in
form
atio
n on
th
e r
egio
nal
PP
O s
tabi
lizat
ion
fund
, se
e: M
edic
are
Pay
men
t Adv
isor
y C
omm
issi
on,
Re
po
rt to
the
Con
gres
s: I
ssue
s in
a M
od
ern
ize
d
Med
icar
e P
rogr
am.
(Was
hing
ton,
D.C
.: M
edP
AC
, Ju
ne 2
005)
.
30
31
CO
NC
LU
SIO
N
Thr
ee b
road
set
s o
f Med
icar
e po
lici
es,
incl
uded
in t
he M
MA
and
DR
A,
now
set
MA
pay
men
t rat
es a
t le
vels
hig
her
than
FFS
cos
ts i
n ev
ery
coun
ty in
the
nati
on.
As
a re
sult
of t
hese
pro
visi
ons,
Med
icar
e no
w p
ays
Med
icar
e A
dvan
tage
pla
ns o
ver
$5 b
illi
on a
yea
r m
ore
than
cos
ts i
n tr
adit
iona
l fe
e-fo
r-se
rvic
e M
edic
are.
Ext
ra p
aym
ents
to M
A p
lans
in 2
007
are
proj
ecte
d to
am
ount
to a
dif
fere
ntia
l o
f $8
28 p
er p
lan
enro
llee
. M
A e
xtra
pay
men
ts a
re p
roje
cted
at n
earl
y $3
0 bi
llio
n fr
om 2
007
thro
ugh
2011
.
At t
his
tim
e, t
here
are
eff
orts
to i
dent
ify
sour
ces
of s
avin
gs in
the
Med
icar
e pr
ogra
m.
In th
e sh
ort-
run,
the
se e
ffor
ts f
ocus
on
sum
s to
of
f-se
t the
cos
ts o
f mod
ifyi
ng th
e ph
ysic
ian
paym
ent S
usta
inab
le G
row
th R
ate
(SO
R)
so t
hat M
edic
are
paym
ents
to p
hysi
cian
s do
not
de
clin
e by
5 p
erce
nt in
200
7. I
n th
e lo
ng-r
un, t
here
are
con
cern
s ab
out
Fed
eral
def
icit
s in
exc
ess
of $
250
bill
ion
a ye
ar.
In 2
005,
ove
rall
def
icit
con
cern
s le
d to
the
Def
icit
Red
ucti
on A
ct o
f200
5 th
at r
educ
ed M
edic
are
spen
ding
by
$6.4
bil
lion
and
Fed
eral
M
edic
aid
spen
ding
by
$4.7
bil
lion
fro
m 2
006
to 2
010.
Pre
side
nt B
ush'
s bu
dget
for
FY
200
7 co
ntin
ued
this
eff
ort b
y pr
opos
ing
$36
bill
ion
in M
edic
are
spen
ding
red
ucti
ons
betw
een
2007
and
201
1.
Am
ong
the
area
s th
at m
ay b
e id
enti
fied
for
pot
enti
al M
edic
are
savi
ngs
are
the
curr
ent p
olic
es th
at p
ay M
A p
lans
mor
e th
an c
osts
in
FFS
Med
icar
e. R
epre
sent
ativ
e M
icha
el B
urge
ss,
a m
embe
r o
f the
Hou
se E
nerg
y an
d C
omm
erce
Com
mit
tee,
inc
lude
d pr
ovis
ions
to
redu
ce s
pend
ing
from
MA
pay
men
ts a
ssoc
iate
d w
ith
!ME
pay
men
ts a
nd t
he R
egio
nal
PP
O s
tabi
liza
tion
fun
d as
the
pay
-for
in H
R
5866
, a b
ill t
o ad
dres
s th
e S
OR
phy
sici
an p
aym
ent d
ecre
ase
for
2007
.26
Sen
ator
Cha
rles
Gra
ssle
y, th
e C
hair
of t
he S
enat
e F
inan
ce C
omm
itte
e, m
enti
oned
pos
sibl
e re
duct
ions
in
extr
a pa
ymen
ts to
MA
pla
ns
in h
is s
tate
men
t in
resp
onse
to t
he P
resi
dent
's F
Y 2
007
budg
et:
"Con
gres
s ju
st fi
nish
ed r
educ
ing
the
grow
th o
f Med
icar
e an
d M
edic
aid
by $
11.1
bil
lion
ove
r the
nex
t fiv
e ye
ars,
and
it w
asn'
t an
easy
leg
isla
tive
acc
ompl
ishm
ent.
Any
mor
e re
duct
ions
of a
si
gnif
ican
t sco
pe c
ould
be
diff
icul
t thi
s ye
ar.
If M
edic
are
redu
ctio
ns d
o en
d up
on
the
tabl
e, t
he M
edic
are
Adv
anta
ge r
egio
nal
stab
iliz
atio
n fu
nd h
as t
o be
fro
nt a
nd c
ente
r. "27
Red
ucti
on i
n pa
ymen
ts to
MA
pla
ns i
n ex
cess
of f
ee-f
or-s
ervi
ce c
osts
may
be
seen
as
appr
opri
ate
sinc
e ex
tra
paym
ents
to p
riva
te M
A
plan
s cl
earl
y co
ntra
st w
ith
the
ofte
n st
ated
goa
l th
at"
... p
riva
te p
lans
and
com
peti
tion
wil
l he
lp d
rive
dow
n th
e ex
plos
ive
grow
th o
f M
edic
are
spen
ding
."28
T
he e
arli
est p
ropo
sal t
o de
velo
p H
MO
s by
the
Nix
on A
dmin
istr
atio
n in
197
1 re
port
ed th
at "
... H
MO
s ar
e sa
ving
as
muc
h as
15
perc
ent o
n th
eir
elde
rly
enro
llee
s, i
n co
mpa
riso
n w
ith
cost
s un
der
trad
itio
nal
mod
es o
fpra
ctic
e."29
32
Red
ucti
ons
in e
xtra
pay
men
ts to
MA
pla
ns w
ould
be
cons
iste
nt w
ith
the
Bus
h A
dmin
istr
atio
n's
cita
tion
of t
he r
ecom
men
dati
ons
of t
he
Med
icar
e P
aym
ent A
dvis
ory
Com
mis
sion
as
a ba
sis
for
Med
icar
e sa
ving
s, a
s M
edP
AC
has
con
sist
entl
y re
com
men
ded
that
MA
pla
ns
be p
aid
amou
nts
cons
iste
nt w
ith
aver
age
cost
s in
the
fee-
for-
serv
ice
syst
em.
Set
ting
MA
cou
nty
benc
hmar
ks a
t 10
0 pe
rcen
t of a
vera
ge F
FS
cos
ts i
n 20
07 a
nd l
ater
yea
rs c
ould
red
uce
Med
icar
e sp
endi
ng b
y ov
er
$16.
8 bi
llio
n fr
om 2
007
to 2
011.
A
dvan
cing
the
phas
e-ou
t of t
he b
udge
t neu
tral
ris
k ad
just
men
t pay
men
ts p
rovi
ded
by th
e D
RA
and
el
imin
atin
g th
e st
abil
izat
ion
fund
aut
hori
ty f
or e
xtra
pay
men
ts f
or r
egio
nal
PP
Os
coul
d sa
ve M
edic
are
$12.
7 bi
llio
n ov
er f
ive
year
s.
The
tot
al s
avin
gs o
f$29
.5 b
illi
on f
rom
MA
pla
n ex
tra
paym
ents
cou
ld a
mou
nt to
mor
e th
an t
he t
otal
of M
edic
are
2007
-11
sav
ings
pr
opos
ed b
y th
e B
ush
budg
et.
r:
33
BAC
KG
RO
UN
D
AN
NU
AL
IN
CR
EA
SE
IN M
ED
ICA
RE
A+
B C
OS
TS
PE
R C
AP
ITA
2005
20
06
2007
20
08
2009
20
10
2011
To
tal A
+B
co
sts
$328
b
$356
.9
$381
.7
$401
.2
$425
$4
50. 1
$4
69.5
b
Incr
ease
in A
+B
co
sts
8.8%
6.
9o/o
5.
1 O/
o 5.
9o/o
5.
9°/o
4.
1 O/
o
Incr
ease
in
ben
efic
iari
es
1.4°
/o
1. ?o
/o
1.8°
/o
1.8%
1.
9%
2.2o
/o
Incr
ease
in P
er
cap
ita
A+
B c
ost
s 7.
3o/o
5.
1 o/o
3.
2°/o
4.
1%
3.9o
/o
1.9o
/o
Sou
rce:
Fa
ct S
he
et f
or
CB
O's
Mar
ch 2
006
Bas
elin
e: M
ED
ICA
RE
, C
ongr
essi
onal
Bud
get
Offi
ce,
Mar
ch 2
006
AN
NU
AL
IN
CR
EA
SE
IN M
ED
ICA
RE
PA
YM
EN
TS
TO
MA
PL
AN
S
2006
20
07
2008
20
09
2010
20
11
Incr
ease
in p
er c
apit
a A
+B
co
sts
7.3o
/o
5.1
o/o
3.2°
/o
4.1%
3.
9°/o
1.
9o/o
Incr
ease
in
MA
pla
n e
nro
llm
en
t 6.
0o/o
10
.9%
10
.2%
5.
8o/o
4.
0°/o
4.
1°/o
Incr
ea
se in
to
tal
pa
yme
nts
to
MA
pla
ns
13.7
%
16.6
%
13.8
%
10.1
%
8.1
o/o
6.1°
/o
Sou
rce:
Fa
ct S
he
et f
or
CB
O's
Mar
ch 2
00
6 B
asel
ine:
ME
DIC
AR
E,
Con
gres
sion
al B
udge
t Offi
ce,
Mar
ch 2
006
Not
es
1 C
BO
Tes
tim
ony
July
25,
200
6 S
ubco
mm
itte
e on
Hea
lth,
Com
mit
tee
on E
nerg
y an
d C
omm
erce
2 H
.R.5
866:
Med
icar
e P
hysi
cian
Pay
men
t Ref
orm
and
Qua
lity
Im
prov
emen
t A
ct o
f200
6. I
ntro
duce
d 7/
24/2
006.
Spo
nsor
: R
ep. M
icha
el B
urge
ss [
TX
-26]
. A
vail
able
at:
http
://t
hom
as.lo
c.go
v/
·
3 M
. Moo
n, B
. G
age,
and
A.
Eva
ns, A
n E
xam
inat
ion
of K
ey M
edic
are
Pro
visi
ons
in t
he B
alan
ced
Bud
get A
ct o
f 19
97 (
New
Yor
k: T
he C
omm
onw
ealt
h F
und,
S
ept.
1997
).
34
4 P
resi
dent
Bus
h's
FY
07
budg
et p
ropo
sed
new
Med
icar
e sp
endi
ng r
educ
tion
s in
Med
icar
e to
tali
ng $
36 b
illi
on f
or t
he y
ears
200
7 -2
01
1.
The
maj
or c
ost
savi
ng
Med
icar
e pr
opos
als
wou
ld r
educ
e th
e an
nual
inf
latio
n in
crea
se i
n pa
ymen
ts t
o ho
spita
ls, n
ursi
ng h
omes
and
hom
e he
alth
age
ncie
s.
5 S.
193
2: D
efic
it R
educ
tion
Act
of 2
005
Con
fere
nce
Agr
eem
ent a
s pa
ssed
by
the
Sen
ate,
Cos
t Est
imat
e. C
ongr
essi
onal
Bud
get O
ffic
e, W
ashi
ngto
n, D
C,
Janu
ary
27, 2
006.
Not
e th
at w
e ha
ve r
educ
ed C
BO
's 2
011
figu
re o
f $2.
9 bi
llio
n by
25%
to a
ccou
nt f
or th
e re
duct
ion
for
the
bids
.
6 C
ongr
essi
onal
Bud
get O
ffic
e. F
act S
heet
for
CB
O's
Mar
ch 2
005
Bas
elin
e: M
edic
are.
Ava
ilab
le a
t htt
p://
ww
w.c
bo.g
ov/f
acts
heet
s/20
05/M
edic
are.
Acc
esse
d Ju
ly 2
5, 2
005.
7 T
he e
xtra
rat
es i
n th
ese
tabl
es i
nclu
de th
e be
nchm
ark,
BN
RA
pay
men
ts, t
he f
ee-f
or-s
ervi
ce n
orm
aliz
atio
n ad
just
1nen
t and
a 4
% r
educ
tion
to a
ccou
nt f
or th
e bi
ddin
g sy
stem
.
8 M
A p
lans
tha
t off
er p
resc
ript
ion
drug
cov
erag
e (M
A-P
D p
lans
) al
so f
ile a
bid
to p
rovi
de P
art D
cov
erag
e.
Sin
ce P
art D
pay
men
ts a
re n
ot r
elat
ed to
cos
ts i
n FF
S M
edic
are,
the
se p
aym
ents
are
not
incl
uded
in t
his
anal
ysis
.
9 C
ente
rs f
or M
edic
are
and
Med
icai
d S
ervi
ces
(CM
S).
Rat
e C
alcu
lati
on D
ata
(Bal
tim
ore,
M.D
.: C
MS
, Dec
embe
r 20
05).
Ava
ilab
le a
t: ht
tp:/
/ww
w.c
ms.
hhs.
gov/
Med
icar
eAdv
tgS
pecR
ateS
tats
/
10 T
hese
rat
es r
epre
sent
ben
chm
ark
paym
ent
rate
s w
ith
FP
S n
orm
aliz
atio
n an
d B
NR
A o
f 3. 9
per
cent
.
11 C
ente
rs f
or M
edic
are
and
Med
icai
d S
ervi
ces
(CM
S).
Rat
e C
alcu
lati
on D
ata
(Bal
tim
ore,
M.D
.: C
MS
, Dec
embe
r 20
05).
Ava
ilab
le a
t: ht
tp:/
/ww
w.c
ms.
hhs.
gov/
Med
icar
eAdv
tgS
pecR
ateS
tats
/
12 F
or 2
007,
the
ben
chm
arks
are
, ex
cept
for
the
177
100
perc
ent o
fFF
S c
ount
ies
that
wer
e re
base
d fo
r 20
07, t
he a
mou
nt o
f the
200
6 be
nchm
ark
incr
ease
d by
4.8
pe
rcen
t. (S
ee:
Cen
ters
for
Med
icar
e an
d M
edic
aid
Serv
ices
, "A
nnou
ncem
ent
of C
alen
dar
Yea
r (C
Y)
2007
Med
icar
e A
dvan
tage
Cap
itatio
n R
ates
and
Med
icar
e A
dvan
tage
and
Par
t D P
aym
ent P
olic
ies
Fac
t She
et"
(Was
hing
ton,
D.C
.: C
MS
, 200
6). A
vail
able
at:
http
://w
ww
.cm
s.hh
s.go
v/M
edic
areA
dvtg
Spe
cRat
eSta
ts/)
I'
Cou
nty
rate
s tr
ende
d fo
rwar
d fr
om 2
003
wer
e in
crea
sed
by 6
.3 p
erce
nt i
n 20
04, 6
.6 p
erce
nt in
200
5, 5
.5 p
erce
nt in
200
6 an
d 4.
8 pe
rcen
t in
200
7 fo
r a
tota
l co
mpo
unde
d in
crea
se f
rom
to
2003
to
2007
of2
5.3
perc
ent.
35
13 T
o ca
lcul
ate
the
effe
ct o
f the
se d
oubl
e pa
ymen
ts o
n th
e le
vel
of p
aym
ents
to M
A p
lans
, Med
P A
C a
nd o
ther
ana
lyst
s re
duce
the
per
capi
ta F
FS
cos
ts i
n a
coun
ty
by t
he p
er c
apit
a !M
E c
osts
in
the
coun
ty.
Thi
s an
alys
is f
ollo
ws
a m
etho
dolo
gica
l co
nven
tion
dev
elop
ed b
y M
ED
PA
C in
add
ress
ing
the
Med
icar
e po
licy
of
mak
ing
dire
ct p
aym
ents
to
teac
hing
hos
pita
ls f
or th
e co
sts
of i
ndir
ect
med
ical
edu
cati
on (
!ME
) fo
r M
edic
are
Adv
anta
ge e
nrol
lees
. It
adju
sts
fee-
for-
serv
ice
cost
s at
the
coun
ty l
evel
by
rem
ovin
g th
e av
erag
e !M
E e
xpen
se. T
his
is d
one
by d
efla
ting
the
coun
ty f
ee-f
or-s
ervi
ce a
vera
ge b
y a
fact
or o
f I
-(0
.65
* GM
E),
whe
re
GM
E is
the
cou
nty
grad
uate
med
ical
edu
catio
n ca
rve-
out.
A n
atio
nal a
vera
ge o
f 65
perc
ent o
f gra
duat
e m
edic
al e
duca
tion
paym
ents
goe
s to
ind
irec
t m
edic
al
educ
atio
n; c
ount
y-sp
ecif
ic d
ata
are
unav
aila
ble.
Bec
ause
Med
icar
e m
akes
ind
irec
t m
edic
al e
duca
tion
paym
ents
dir
ectly
to
teac
hing
hos
pita
ls f
or p
atie
nts
who
are
en
roll
ed in
Med
icar
e A
dvan
tage
, Med
icar
e A
dvan
tage
pla
n -p
aym
ent r
ates
are
mos
t app
ropr
iate
ly c
ompa
red
wit
h fe
e-fo
r-se
rvic
e co
sts
adju
sted
in
this
man
ner.
M
edic
are
Pay
men
t Adv
isor
y C
omm
issi
on. R
epor
t to
the
Con
gres
s: M
edic
are
Pay
men
t Pol
icy
(Was
hing
ton,
D.C
.: M
edP
AC
, Mar
. 20
02).
14 T
he p
roje
cted
cos
ts o
f MA
pla
n ex
tra
paym
ents
for
!M
E c
osts
are
cal
cula
ted
as p
art
of t
he c
ount
y be
nchm
ark
rate
s an
d th
is p
roje
ctio
n as
sum
es th
at th
e !M
E
cost
s in
clud
ed in
the
cou
nty
benc
hmar
k ra
tes
are
then
red
uced
by
25 p
erce
nt to
acc
ount
for
pla
n bi
ds a
s de
scri
bed
abov
e.
15 R
isk
adju
stm
ent
of M
edic
are
priv
ate
plan
pay
men
ts i
s im
port
ant
beQ
ause
the
cos
t o
f car
e fo
r M
edic
are
bene
fici
arie
s va
ries
gre
atly
. T
he m
ost
expe
nsiv
e 5
perc
ent o
f Med
icar
e be
nefi
ciar
ies
acco
unte
d fo
r 43
per
cent
of t
otal
spe
ndin
g at
an
aver
age
cost
of$
63,0
00 in
200
1 w
hile
the
lea
st e
xpen
sive
50
perc
ent o
f be
nefi
ciar
ies
acco
unte
d fo
r on
ly 4
per
cent
of t
otal
spe
ndin
g at
an
aver
age
cost
of $
550.
In
the
abs
ence
of e
ffec
tive
ris
k ad
just
men
t o
f pay
men
ts, p
lans
tha
t en
roll
heal
thie
r be
nefi
ciar
ies
can
gain
sub
stan
tial s
urpl
uses
. Con
gres
sion
al B
udge
t Off
ice,
Hig
h C
ost
Med
icar
e B
enef
icia
ries
, (W
ashi
ngto
n, D
.C.:C
BO
, May
200
5).
Whi
le t
he d
evel
opm
ent
and
impl
emen
tatio
n o
f an
impr
oved
sys
tem
to a
djus
t pa
ymen
ts t
o in
divi
dual
Med
icar
e pl
ans
was
man
date
d by
the
Bal
ance
d B
udge
t A
ct
of
1997
and
sub
sequ
ent
legi
slat
ion,
the
dec
isio
n to
mak
e ex
tra
paym
ents
to M
A p
lans
ass
ocia
ted
wit
h th
e ne
w r
isk
adju
stm
ent
syst
em w
as m
ade
by C
MS
offi
cial
s fo
llow
ing
lang
uage
in t
he c
onfe
renc
e re
port
for
the
Bal
ance
d B
udge
t Ref
inem
ent A
ct o
f 19
99 th
at u
rged
HH
S to
im
plem
ent t
he r
isk
adju
stm
ent "
wit
hout
re
duci
ng o
vera
ll M
edic
are+
Cho
ice
paym
ents
".
16 R
ober
t A.
Ber
enso
n. "
Med
icar
e D
isad
vant
aged
and
the
Sea
rch
For
the
Elu
sive
'Lev
el P
layi
ng F
ield
': W
hat t
he c
hang
es t
o M
edic
are
real
ly m
ean
for
com
peti
tion
and
the
futu
re o
f the
pro
gram
." H
ealt
h A
ffai
rs,
Web
Exc
/usi
ve (
Dec
. 15
, 200
5):
W4-
572.
17 T
he r
isk
adju
ster
fir
st a
ppli
es t
o 10
0 pe
rcen
t of t
he M
A r
ates
in
2007
18 C
ente
rs f
or M
edic
are
and
Med
icai
d Se
rvic
es, "
Not
e to
Med
icar
e A
dvan
tage
Org
aniz
atio
ns, P
resc
ript
ion
Dru
g Pl
an S
pons
ors
and
Oth
er I
nter
este
d P
artie
s. Su
bjec
t: A
dvan
ce N
otic
e o
f Met
hodo
logi
cal
Cha
nges
for
Cal
enda
r Y
ear
(CY
) 20
06 M
edic
are
Adv
anta
ge (
MA
) P
aym
ent R
ates
" (W
ashi
ngto
n, D
.C.:
CM
S, 2
005)
. A
vail
able
at h
ttp:
//w
ww
.cm
s.hh
s.go
v/he
alth
plan
s/ra
tes/
2006
/45-
day.
pdf.
Cen
ters
for
Med
icar
e an
d M
edic
aid
Ser
vice
s, "
Not
e to
Med
icar
e A
dvan
tage
O
rgan
izat
ions
and
Oth
er I
nter
este
d P
arti
es.
Subj
ect:
Ann
ounc
emen
t of C
alen
dar Y
ear
(CY
) 20
06 M
edic
are
Adv
anta
ge P
aym
ent R
ates
" (W
ashi
ngto
n, D
.C.:
CM
S,
2005
). A
vail
able
at h
ttp:
//w
ww
.cm
s.hh
s.go
v/he
alth
plan
s/ra
tes/
2006
/cov
er.a
sp
19
Sid
e-by
-Sid
e C
ompa
riso
n o
f Med
icar
e, M
edic
aid
and
SC
f/IP
Pro
visi
ons
in t
he D
efic
it R
educ
tion
Act
of 2
005,
Dom
esti
c So
cial
Pol
icy
Div
isio
n, C
ongr
essi
onal
R
esea
rch
Ser
vice
, Lib
rary
of C
ongr
ess,
Was
hing
ton,
DC
Jan
uary
27,
200
6.
20 S.
193
2: D
efic
it R
educ
tion
Act
of 2
005
Con
fere
nce
Agr
eem
ent
as p
asse
d by
the
Sen
ate,
Cos
t Est
imat
e. C
ongr
essi
onal
Bud
get O
ffic
e, W
ashi
ngto
n, D
C,
Janu
ary
27, 2
006.
N
ote
that
we
have
red
uced
CB
O's
201
1 fi
gure
of $
2.9
bill
ion
by 2
5% to
acc
ount
for
the
redu
ctio
n fo
r th
e bi
ds.
36
21 T
he 3
per
cent
and
$1.
7 bi
llio
n fi
gure
s pr
esen
ted
here
rep
rese
nt th
e es
tim
ated
am
ount
ofB
NR
A e
xtra
pay
men
ts a
fter
MA
pla
n bi
ds.
Acc
ordi
ng t
o C
MS
, in
20
07, B
NR
A a
dds
3.9
perc
ent t
o th
e be
nchm
ark
rate
bef
ore
the
bid.
See
: C
ente
rs f
or M
edic
are
and
Med
icai
d Se
rvic
es, "
Ann
ounc
emen
t of C
alen
dar
Yea
r (C
Y)
2007
Med
icar
e A
dvan
tage
Cap
itat
ion
Rat
es a
nd M
edic
are
Adv
anta
ge a
nd P
art D
Pay
men
t Pol
icie
s F
act
She
et"
(Was
hing
ton,
D.C
.: C
MS
, 200
6).
Ava
ilab
le a
t: ht
tp:/
/ww
w.c
ms.
hhs.
gov/
Med
icar
eAdv
tgS
pecR
ateS
tats
/
22
Med
icar
e P
aym
ent
Adv
isor
y C
om1n
issi
on, R
epor
t to
Con
gres
s: I
ssue
s in
a M
oder
niz
ed M
edic
are
Pro
gram
. (W
ashi
ngto
n, D
C.:
Med
.PA
C, J
une
2005
).
23 M
edic
are
Pay
men
t A
dvis
ory
Com
mis
sion
, "M
edic
are
Adv
anta
ge B
ench
mar
ks a
nd P
aym
ents
Com
pare
d w
ith A
vera
ge F
ee-F
or-S
ervi
ce S
pend
ing"
(W
ashi
ngto
n, D
.C.:
Med
PA
C, J
une
2006
).
24 M
edic
are
Pay
men
t Adv
isor
y C
omm
issi
on, R
epor
t to
the
Con
gres
s: I
ssue
s in
a M
oder
nize
d M
edic
are
Pro
gram
. (W
ashi
ngto
n, D
.C.:
Med
PA
C, J
une
2005
).
25 "M
A E
nrol
lmen
t C
lim
bs 1
2% S
ince
Dec
embe
r, w
ith
PF
FS
Acc
ount
ing
for
52%
of G
ain.
" M
edic
are
Adv
anta
ge N
ews
Vol
ume
12, N
umbe
r 10
. (M
ay 2
5, 2
006)
: 7.
26 H
.R.5
866:
Med
icar
e P
hysi
cian
Pay
men
t Ref
orm
and
Qua
lity
Im
prov
emen
t Act
of2
006.
Int
rodu
ced
7/24
/200
6. S
pons
or:
Rep
. M
icha
el B
urge
ss [
TX
-26]
. A
vail
able
at:
http
://t
hom
as.lo
c.go
v/
27 S
enat
or C
huck
Gra
ssle
y. "
Pre
ss R
elea
se:
Pre
side
nt's
Bud
get P
ropo
sal"
Feb
ruar
y 6,
200
6. A
vail
able
at:
http
://g
rass
ley.
sena
te.g
ov/in
dex.
cfm
?Fus
eAct
ion=
Pre
ssR
elea
ses.
Vie
w&
Pre
ssR
elea
se i
d=50
01.
28 E
. M. K
enne
dy a
nd B
. Tho
mas
. "D
ram
atic
Im
prov
emen
t or
Dea
th S
pir
al-T
wo
Me1
nber
s o
f Con
gres
s A
sses
s th
e M
edic
are
Bill
." N
ew E
ngla
nd J
ourn
al o
f M
edic
ine
350
(Feb
. 19
, 200
4):
747-
51.
29 D
epar
tmen
t of H
ealt
h, E
duca
tion
and
Wel
fare
, T
owar
ds a
Com
preh
ensi
ve H
ealt
h P
olic
y fo
r th
e 19
70s:
A W
hite
Pap
er.
(Was
hing
ton,
D.C
.: H
HS
, May
197
1).