Health Plan of the Redwoods Moves to Eliminate Medicare+Choice Plan

Health Plan of the Redwoods may need to drop its "money-losing" Medicare managed care program in order to survive, according to the insurer's bankruptcy filings, the Santa Rosa Press-Democrat reports (Fricker, Santa Rosa Press-Democrat, 6/5). Faced with an $8 million budget deficit since Jan. 1, HPR filed for federal Chapter 11 bankruptcy protection last Friday. The managed care company, which has 78,000 members in Sonoma, Mendocino, Lake and Marin counties, said it will continue providing coverage for all its subscribers as it reorganizes its finances (California Healthline, 6/3). As part of its reorganization, HPR is asking the bankruptcy court to release it from its contractual obligations with Medicare if the government does not increase reimbursements. John Baxter, the CEO of the health plan, said that the insurer's Medicare+Choice plan accounts for 60% of the $8 million in losses. Medicare officials have 20 days to respond to HPR's request. After that time, the judge in the bankruptcy proceedings can release the managed care organization from the contract. Until then, officials with HPR said they would work with Medicare in the hopes of negotiating a "more favorable contract."

HPR's Medicare+Choice program, known as MediPrime, is the largest plan the insurer offers, covering more than 11,000 members (Santa Rosa Press Democrat, 6/5). If HPR exits Medicare+Choice, beneficiaries could switch to fee-for-service Medicare, enroll in Kaiser Permanente's Medicare+Choice plan or purchase supplemental Medicare coverage, which costs from $80 to $500 per month (Rose, Santa Rosa Press Democrat, 6/5). Managed care officials in the Sonoma area say that HPR's situation illustrates the need for higher reimbursement rates from Medicare. But Rep. Mike Thompson (D-Calif.) said that simply increasing reimbursements would not "solve the larger problem of a broken health care system." He added, "If [health plans are] waiting for a readjustment in health care reimbursements, they're waiting for the wrong thing" (Soper, Santa Rosa Press Democrat, 6/5). Meanwhile, doctors are "divided" over the bankruptcy filing, with some unhappy over the health plan's payment problems and others saying that they "intend to stick by HPR during the bankruptcy recovery, if only for the sake of their patients" (Allday, Santa Rosa Press Democrat, 6/4).

In response to HPR's bankruptcy filing, the Press Democrat has run editorials on the situation over the past two days. Yesterday, the Press Democrat addressed the cause of HPR's financial problems, noting that a "spike in demand" for services and a switch to a fee-for-service system factored into the bankruptcy filing. The editorial concludes that HPR's situation illustrates "how quickly the [health care] system is fraying" (Santa Rosa Press Democrat, 6/4). Today's editorial states that if HPR is bought by a larger insurer, doctors may benefit in the short term if payments are made quickly. However, the new owner would probably be located outside of the area, leaving doctors to struggle over reimbursements with "an impersonal bureaucracy" (Santa Rosa Press Democrat, 6/5).