58 MCOs to Pull Out of Medicare+Choice Program, Cut Services in 2002

Medicare+Choice plans will drop about 536,000 seniors next year, HHS announced last Friday, the Washington Post reports (Okie, Washington Post, 9/22). Fifty-eight health plans said that they will withdraw or cut back services (AP/Omaha World-Herald, 9/23). Most of the seniors who will lose their current HMO coverage will be able to find another Medicare+Choice plan in their area, but about 38,000 seniors who live in areas with no other HMO plan will have to return to traditional fee-for-service Medicare. While there is no "national breakdown" showing which areas the pullouts will impact, most of those affected live in urban and suburban areas, American Association of Health Plans president Karen Ignagni said (Washington Post, 9/22). Last year, health plans covering about one million seniors ended their participation in Medicare+Choice (AP/Omaha World Herald, 9/23). Centers for Medicare and Medicaid Services administrator Tom Scully said, "Though we are disappointed with the further program contraction, the number of beneficiaries who are affected by the decisions is smaller than many had predicted and lower than [the number] affected last year" (Rundle, Wall Street Journal, 9/24).

Many plans cited increasing health costs as the reason for withdrawing from the program. Howard Phanstiel, PacifiCare's president and CEO, said, "The disparity between what Medicare really costs and what it is willing to pay is widening to unsustainable levels. As a result, we have few alternatives left other than to leave long-standing members, raise prices and in many cases significantly reduce member benefits" (Scripps Howard News Service/Nando Times, 9/21). Ignagni said, "We have a program where costs are outstripping reimbursement by six to one." But she added that if not for Medicare "givebacks" increasing payments to hospitals and insurers over the last two years, regulatory changes implemented by the Bush administration and "promises of further relief," more plans would have dropped out of Medicare+Choice (CongressDaily, 9/21). The pullouts "raise questions about the future" of a plan by President Bush to "revamp" Medicare by "giving private health plans a much larger role," the New York Times reports. That plan proposes doubling the number of Medicare beneficiaries in Medicare+Choice plans by 2005 (New York Times, 9/22). CMS "is still committed to Medicare reform before Congress adjourns," Scully said (Wall Street Journal, 9/24). In a release, House Ways and Means Committee Chair Bill Thomas (R-Calif.) called for increased payments to Medicare MCOs, saying, "The current reimbursement formula fails to pay the true cost of health care. We are drafting legislation that would entice these plans back into the program so seniors have additional choices" (Washington Post, 9/22).