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Statement of Need: The Balanced Budget Act of 1997, (Pub. L. 105-33) significantly expanded the types of organizations that may be eligible for contracts with us to provide all Medicare part A and Medicare part B items and services directly to beneficiaries on a prospective reimbursement basis. In addition, the current Medicare requirements for managed care organizations, with respect to reimbursement, beneficiary participation, beneficiary and program protections, organizational requirements, marketing activities, and provider participation, have been significantly revised by the Congress. The Act requires that the Secretary promulgate implementing regulations through an interim final rule by June 1, 1998.

Summary of the Legal Basis: Section 1876 of the Social Security Act (42 U.S.C. 1935mm) established the authority for Medicare reimbursement of managed care organizations that meet specific requirements. Regulations implementing the statutory requirements are found at 42 CFR 417.400 et. seq. The Balanced Budget Act (BBA) establishes a new part C statutory authority under title XVIII of the Social Security Act. Provisions in the new part C establish the conditions under which entities may qualify to contract directly with HCFA as "Medicare + Choice" plans to provide all Medicare part A and part B services to beneficiaries. Part C also establishes significant new program requirements in the following areas: contractor reimbursement, beneficiary eligibility and enrollment, information dissemination, solvency standards, marketing, quality of care, data reporting, access and coverage.

Alternatives: The Balanced Budget Act of 1997 requires that the provisions in part C be implemented through regulations.

Anticipated Costs and Benefits: These rules will accomplish the objectives of increasing availability of services and access for beneficiaries that reside in rural and underserved urban areas of the country. The implementation of statutory provisions at part C will also result in significant Medicare program cost savings, by expanding the types of entities that can elect to receive payment on a capitated basis, and by revising the reimbursement methodology for such payments. ^PWe do not anticipate any impact on Medicare program costs since the payment provisions were designed to be budget neutral.

Risks: Regulated industries and providers have a significant stake in the provisions of the final rules and we anticipate significant volume and complexity of comments once the rules are published. Publication will demonstrate the Administration's position on various sensitive and political issues related to the legislative provisions. ^POne possible risk is that beneficiaries will be confused by the wide array of choices and make selections that are not in their best interest. The comparative information provided by HCFA will facilitate plan selection.