MEDICARE HMOS: CUTTING BENEFITS AS COSTS RISE
Ever increasing "drug costs" and a congressional "cap" onThis is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
reimbursements are driving Medicare HMOs across the country to
"rewrit[e] the rules" for their elderly subscribers, the New York
Times reports. "[F]or the first time," Medicare HMOs "are
charging monthly premiums ... or are sharply raising fees," while
others "are eliminating some of the most popular features: free
drugs, eye-glasses and dental care." Touted by the federal
government as a cost-saving measure, Medicare HMOs "have become
popular" because they pay for many services that would otherwise
have to be covered by Medigap policies or be paid out-of-pocket.
But while "Medicare HMOs have tinkered with benefits in the
past," the Times reports the changes taking effect on January 1
"amount to the first widespread cutbacks."
TIMES ARE CHANGING
Neptune, NJ-based First Option Health Plan's Senior Option
division sent out a letter this month saying it was ending
prescription drug, eye examination and dental care coverage.
Spokesperson Dennis Wilson said his company had to cut benefits
because Medicare revenues "were not covering our medical ... and
drug expenses." One of the nation's largest managed care firms,
Humana Inc., informed Wall Street earlier this month that it
would have to triple fees it charges customers for brand-name
drugs. Health care analyst Mimi Willard of Donaldson, Lufkin &
Jenrette said these types of announcements are "going to be
widespread" among other HMOs. California-based Aetna Inc. is
raising premiums in San Mateo County, CA, because Medicare
reimbursements have not "fully covered expenses" there.
Connecticut-based Oxford Health Plans this month said Medicare
payments did not cover costs in counties in downstate New York.
Wellpoint Health, the parent company of California Blue Cross,
said "Medicare HMOs are not good for business" and according to
spokesperson Cynthia Coulter, has "shied away" from developing
that area of business. One Pennsylvania HMO, Keystone Health
Plan Central, informed retirees "it would no longer provide
unlimited drug coverage" and then increased monthly premiums 133%
and doubled prescription payments.
BIGGER PROBLEM
The new Medicare HMO policies "have important national
policy implications, too," the Times notes. The White House and
Congress "are counting on managed care to help slow federal
spending on Medicare, reduce budget deficits and stave off
perceived threats of bankruptcy in the program." But if more
Medicare HMOs cut benefits, it "could put a damper on the rapid
growth in ... enrollment." Under this year's federal budget act,
Medicare HMO reimbursements will go up only 2%-3% over last
year's level, compared to "a 5.9% increase in 1997 and a 10.1%
rise in 1996." According to the Times, the impact "of the
changes will not be felt equally across the country." In
Minnesota, "where health costs are relatively low," Medicare HMOs
do not make up a large percentage of plans, so the changes will
not have much effect. However, states like California, Florida
and New York, which have some of the highest health care costs,
will feel the changes the most because Medicare HMO payments
previously tied reimbursements to those high costs.
'BETWEEN A ROCK AND A HARD PLACE'
Federal Center for Health Plans and Providers Director Bruce
Fried, noting the new payment policies enacted by Congress this
year, said Medicare HMOs "are finding themselves between a rock
and a hard place." Congress' decision to place a cap on Medicare
HMO reimbursements "was a necessary thing to do, but a real
hardship for some people who made a decision to go into these
plans," said Urban Institute analyst Marilyn Moon. Donaldson,
Lufkin & Jenrette analyst Mimi Willard said "the government's
austerity move 'will boomerang onto the elderly, who will be left
with less complete coverage and higher medical bills.'" American
Association of Retired Persons Legislative Director John Rother
noted Medicare HMO members who want to switch back to fee-for-
service "may be turned down for Medigap coverage if they have
health problems," leaving them "with little recourse" but to stay
with their HMO. According to Mark Schafer, health insurance
administrator for the Pennsylvania School Employees Retirement
System, "If an HMO could get away with offering little or limited
prescription drugs, it could encourage people whose health has
deteriorated to leave the HMO. It would be too easy for the HMOs
to make themselves unattractive to a group of people who are
heavy utilizers of health care" (Freudenheim, 12/22).
IMAGE PROBLEM
"Managed care has a huge image problem, especially among
Medicare beneficiaries," said Stanford University professor of
health research and policy Laurence Baker. The Sacramento Bee
reports that managed care companies "are finding it more
expensive than they expected to care for the elderly," and the
"elderly themselves are not finding managed care to be to their
liking." AARP health lobbyist Tricia Smith said, "Managed care
may be fine for younger, healthier people. But it has become
clear over time that managed care in Medicare produces different
results. By pushing people on Medicare into managed care, we
could end up with what looks like less expensive care, but is
really lower-quality care." The Bee notes that "rising public
hostility to managed care could force the Republican-controlled
Congress to allow more government regulation of the U.S. health
industry," while Democrats are "preparing to make health care a
big issue in the 1998 congressional campaign" (O'Rourke, 12/21).