HEALTH MAINTENANCE ORGANIZATIONS Staff Questions With Responses of the COMMITTEE ON FINANCE UNITED STATES SENATE RUSSELL B. LONG, Chairman SEPTEMBER 27, 1971 Printed for the use of the Committee on Finance U.S. GOVERNMENT PRINTING OFFICE WASHINGTON: 1971 (99) COMMITTEE ON FINANCE RUSSELL B. LONG, Louisiana, Chairman CLINTON P. ANDERSON, New Mexico WALLACE F. BENNETT, Utah PAUL J. FANNIN, Arizona CLIFFORD P. HANSEN, Wyoming ROBERT P. GRIFFIN, Michigan TOM VAIL, Chief Counsel COMMITTEE ON FINANCE, Letter of Transmittal DEAR MR. CHAIRMAN: On July 20, 1971, during the course of the Committee's Executive Session, the staff indicated the desirability of securing from the Department of Health, Education, and Welfare additional information with respect to the Health Maintenance Organization provisions in H.R. 1. The HMO approach is a major and significant part of the Department of Health, Education, and Welfare's efforts to develop possible solutions to health care problems. In view of the broad implications and potential impact of the HMO alternative, it appeared valuable to develop as much substantive background information as possible for the Committee's use in evaluating the Department's views concerning specific aspects of HMO organization and operation, as well as their proposed policies with respect to quality of care and cost considerations. The Department's responses to these staff questions, which appear on the following pages will, hopefully, assist the Committee in its evaluation of the HMO concept and its proposed implementation. As Under Secretary John G. Veneman notes in his covering letter, the preparation of answers to the staff questions also provided the Department with an opportunity to review their policies with respect to the HMO proposals. Sincerely, TOM VAIL, Hon. JOHN G. VENEMAN, COMMITTEE ON FINANCE, U.S. SENATE, Washington, D.C., July 20, 1971. Under Secretary, Department of Health, Education, and Welfare, Washington, D.C. DEAR MR. VENEMAN: The staff of the Finance Committee is developing information for the Committee's consideration of H.R. 1. In that regard, we certainly appreciate and acknowledge your assistance to date. The Health Maintenance Organization provision in H.R. 1 is a key element in the bill and in your overall approach to health care and its financing. In view of the importance and significance of the HMO provision, it would be appreciated if you could provide us, as soon as possible, with substantive responses to the enclosed series of questions relating to HMO's. These questions should enable you to better prepare your presentation to the Committee. At the same time, your answers will undoubtedly provide valuable background for the Committee's consideration. Thank you again for your cooperation. Sincerely, TOM VAIL, THE UNDER SECRETARY OF HEALTH, EDUCATION, AND WELFARE, Washington, D.C., September 13, 1971. Mr. TOM VAIL, Chief Counsel, Senate Committee on Finance, U.S. Senate, Washington, D.C. DEAR TOM: Enclosed are the responses to the questions on Health Maintenance Organizations requested in your letter to me dated July 20. I regret the delay, but in view of the importance of the Health Maintenance Organizations to the Administration's health strategy, we used the opportunity to review our policies in relation to H.R. 1, S. 1623, and S. 1182 with all the concerned agencies. Sincerely, JOHN G. VENEMAN, Preface of Department of Health, Education, and Welfare to Submission of Finance Committee Questions-Answers Since its initial legislative introduction as an option for Medicare beneficiaries, the health maintenance organization (HMO) approach has been further developed until it now represents a major element in this Administration's programs to improve the Nation's health care system. In this larger context, HMO is a generic term, encompassing a variety of organizational structures and approaches which have in common, the combination of financing and delivery mechanisms so that both consumers and providers have a stake in maintaining health and, when services are required, in assuring the most efficient and effective. use of available facilities and services. Legislation and administrative rules for each Federal program involving HMO's will of necessity include measures taking into account that particular program's beneficiaries, service benefit package, actuarial calculations, and other limitations. However, we intend that there be a consistent and compatible approach to HMO's from all the Federal programs, since regardless of the beneficiary population servedwhether Medicare, Medicaid, Family Health Insurance, or the population covered by private health insurance-there must be safeguards or patient rights, assurance that services are in fact available, and that they meet appropriate quality standards. Thus, administrative rules under S. 1182 will be compatible with rules under H.R. 1 and S. 1623 to the end that HMO's given support through grants or loan guarantees will have the potential for qualifying as HMO's under Medicare, and the other program such as FHIP which may be adopted. It is desired that HMO's will serve a mix of the population, and thus be eligible under all the Federal as well as private programs. Hopefully, we can achieve a consistent means for evaluating the potential of HMO's to contract with the Federal Government for coverage of beneficiaries, so that an HMO would not have to meet unnecessarily different standards or contract requirements. At the same time, it must be recognized that some organizations meeting the basic definitions of HMO may not wish to contract with any or all Federal programs through the capitation arrangement. Some HMO's may not be able to provide or arrange for all Medicare services, for example, it should be noted that the Medicare program currently provides an optional reimbursement approach for group practice prepayment plans and other entities whose patterns of operation and organization represent or approximate those we would expect of HMO's under Medicare. Although this reimbursement mechanism is related to specific services provided to beneficiaries, it does allow for determination and collection of deductibles and coinsurance on an actuarial equivalence basis. This optional payment approach would be retained and we expect that some HMO-type organizations, due to limitations on services or for other reasons, may wish to continue this |