MEDICARE HMOS: Insurance Ratings Co. Predicts Bumpy Road
Managed care companies with Medicare programs will continue to see profits shrink as they struggle with low reimbursement rates and plans may be forced to scale-back the rich benefit packages that fueled their initial growth, according to a report released today by A.M. Best Co. Even as enrollment climbed 20% in 1998 --6 million seniors are now enrolled in Medicare HMOs -- the insurance rating company predicts that smaller plans will be squeezed as once-generous reimbursement rates are cut. The 1997 Balanced Budget Act limited reimbursement rate increases to 2% in 1998 and 1999 and set the minimum monthly payment at $367, which "appears to be inadequate to encourage enough plans to offer Medicare-risk programs in ... rural markets." Further, the risk- adjustment process scheduled to be introduced in 2000 will exert additional pressure on already shrinking Medicare-risk profit margins. A.M. Best Co. predicts that while the large established Medicare-risk players will be able to maintain their market positions by changing their benefit structures, smaller plans may have difficulty competing. The report is available online at http://www.best week.com/reorts/index.html (A.M. Best release, 3/2).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.