TESTIMONY HUMAN RESOURCES AND INTERGOVERNMENTAL RELATIONS SUBCOMMITTEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS Mr. Chairman and Members of the Committee, my name is Jeffrey Prussin. I am President of Health Systems Development Corporation (HSDC), a health care consulting and management company based in south Florida. Prior to establishing HSDC in 1986, I was a Senior Vice President at International Medical Centers (IMC) for slightly over one year. Altogether, I have been active in the HMO field for twenty years. There is no question that properly structured and managed health maintenance organizations can provide high quality, comprehensive health care services on a cost-effective basis. That is, HMOS can, in fact, achieve the dual goals of: Lowering health care costs. Maintaining and improving the quality of care. HMOS achieve these goals through the exercise of sound management practices, through the practice of preventive medicine, and through early detection, diagnosis, and treatment of illness. The bottom line is HMOs allow many of our citizens to obtain quality health care services that they could not otherwise afford. It is imperative that we not lose sight of the importance of HMOS to the public while analyzing and responding to the IMC debacle. The IMC experience holds many lessons from which we must learn; and, we must respond by ensuring that aberrations such as IMC are For prevented in the future. At the same time, we must not overreact or blindly create a regulatory environment that will foredoom HMOS to failure and thereby deprive the public of their benefits. example, in reaction to IMC, the State of Florida has recently proposed new regulations for HMOS. These regulations start from the premise that IMC was the HMO industry rule, rather than an If these regulations become effective without aberration. significant change, I can assure you, based upon many years of experience in the HMO field, that they will destroy the HMO industry in Florida, much to the detriment of the citizens of that State. In analyzing the IMC experience, we must responsibly address and realize the complexity of issues such as: controls? What was wrong with IMC's internal system structure and How can we create appropriate incentives within HMOs to ensure that needed health care services are provided while unnecessary health care services are not provided? How can we effectively regulate HMOs while not hindering their development and operation? One answer might be development of the freedom-of-choice HMO at risk concept which was described in the May 13, 1985, Congressional 87-094 0 - 88-6 Record. I have appended a copy of this description to my statement. In closing, I wish to thank the Committee for inviting to me testify at this important hearing and for allowing me to make this brief statement. I am prepared to answer your questions at this time. TIONS AT RISK-ALTERNATIVE The SPEAKER pro tempore. Under a previous order of the House, the gentleman from Florida [Mr. PEPPER) is recognized for 5 minutes. Mr. PEPPER. Mr. Speaker, I am pleased to submit, for the attention of my colleagues, the following concept paper prepared by Mr. Jeffrey A. Prus. sin, senior vice president of Government programs and plan development of the International Medical Centers, Inc.. in Miami, FL regarding H.R. 2285, legislation I introduced several days ago providing for "freedom-ofchoice health maintenance organiza tion demonstrations." Mr. Prussin's paper provides a clear explanation of H.R. 2285 which I hope will be useful to my colleagues as they give consideration to this most innovative and necessary legislation, I in. clude Mr. Prussin's paper entitled "Freedom-of-Choice HMO's at Risk: A New Alternative for Medicare" in its entirety at this point in the RECORD: FREEDOM OF CHOICE HMO'S AT RISE A NEW ALTERNATIVE FOR MEDICARE INTRODUCTION Prepaid Medicare demonstrations The Health Care Financing Administration (HCFA) conducted a series of prepaid Medicare demonstration programs throughout the country under which health mainte nance organizations (HMO) and similar or ganizations were paid by HCFA at the rate of 95 percent of the adjusted average per capita cost (AAPCC), or less, for providing Medicare services to enrolled Medicare beneficiaries. This was a prospective payment system that was not adjusted retrosotively, all profits or surpluses were retained by the HMO, and all losses were the responalbility of the HMO. In order to induce Medicare beneficiaries to enroll in their demonstration programs, some of the participating HMOs developed extremely comprehensive benefits packages for Medicare enrollees. In many cases. Medicare enrollees paid nothing to join the HMO and received extra benefits such as elimination of the Medicare deductibles and copayments, free prescription drugs, free eyeglasses and hearing aids, unlimited acute care hospitalization, routine eye and hearing examinations, routine foot care, routine physical examinations, and a broad range of dental services. Tax Equity and Fiscal Responsibility Act HCPA now has implemented the provisions of the Tax Equity and Fiscal Responsibility Act of 1982 [TEFRA) which estab lished as a regular part of the Medicare program a risk-based contracting mechanism H 3131 PROCEEDINGS AND DEBATES OF THE 99th CONGRESS, FIRST SESSION |