Medicare HMO Enrollment Increased 5.1% from 1996 to 1999

The number of Medicare beneficiaries enrolled in MediGap policies decreased from 9.9 million in 1996 to 8.4 million in 1999, while enrollment in Medicare+Choice increased from 4.1 million in 1996 to six million in 1999, which contributed to an overall increase in the number of beneficiaries with prescription drug coverage, a new study published yesterday in a Health Affairs Web exclusive found. In the study, which used data from the Medicare Current Beneficiary Survey Access to Care files from 1996 to 1999, researchers from the Health Practice of Barents Group of KPMG Consulting Inc. and the Kaiser Family Foundation examined trends in supplemental insurance and prescription drug coverage among Medicare beneficiaries. According to the study, nearly 90% of Medicare beneficiaries had supplemental insurance coverage between 1996 and 1999. One-third of beneficiaries had supplemental coverage through an employer in 1999, one-fourth had a Medigap policy and one-sixth had coverage through Medicare+Choice. An additional 11% had coverage through Medicaid in 1999, and 2% had coverage through other public programs, the study found. The study found that of the 12.5% of Medicare beneficiaries, about 4.3 million people, who lacked supplemental insurance coverage in 1999, a "disproportionately large share" were African-American beneficiaries and beneficiaries younger than age 65. Over the four-year period, Medicare HMO enrollment increased by 5.1%, while the number of beneficiaries enrolled in a MediGap policy dropped by 5.1%. The number of beneficiaries who received supplemental insurance coverage from other sources or had no supplemental insurance coverage "remained generally constant" over the four-year period. According to the study, beneficiaries in the highest income group -- those with annual incomes more than $30,000 -- and rural beneficiaries "experienced modest net declines" in supplemental insurance coverage, while beneficiaries in the lower income groups "made gains."

The study also found that the percentage of Medicare beneficiaries who had prescription drug coverage increased by 5.5 percentage points over the four-year period, up from 56.8% in 1996 to 62.3% in 1999. The study attributed the increase in drug coverage to increased enrollment in Medicare HMOs, which offer prescription drug coverage more often than MediGap policies. However, beneficiaries in higher income groups had "virtually no net increase" in prescription drug coverage, and beneficiaries who reported no chronic conditions and rural beneficiaries had "more moderate net gains" than other groups, the study found. According to the study, employer-sponsored health plans and Medicare HMOs served as the "primary sources" of prescription drug coverage for Medicare beneficiaries. Only 7% of beneficiaries received prescription drug coverage through MediGap policies. The study also found that 37.7% of Medicare beneficiaries lacked prescription drug coverage in 1999. In addition, the study found that several groups of "traditionally vulnerable" beneficiaries -- including rural beneficiaries, those ages 85 and older and low-income beneficiaries -- as well as beneficiaries who reported no chronic health conditions, "were more likely" to lack prescription drug coverage.

Although the percentage of Medicare beneficiaries with prescription drug coverage increased from 1996 to 1999 as a result of increased enrollment in Medicare HMOs, the study warns that many HMOs have withdrawn from the program in the past three years. In addition, premiums for MediGap policies that offer prescription drug coverage increased an average of 37% per year from 1998 to 2000. The study concluded, "The uncertain future of supplemental insurance for Medicare beneficiaries threatens to increase the number of seniors and disabled adults without drug coverage, perhaps reversing the gains for many traditionally vulnerable beneficiary groups seen during 1996-1999. This uncertainty places even greater pressure on policy makers to add a prescription drug benefit to Medicare" (Laschober et al., Health Affairs, 2/27). The report, titled, "Trends in Medicare Supplemental Insurance and Prescription Drug Coverage, 1996-1999," is available online.