MEDICARE HMOS: N.Y. Times Looks At Big Picture
Today's New York Times takes a look at the causes and effects of the numerous HMO pullouts from the once-promising Medicare HMO market. Experts lay the blame for the spate of failures and withdrawals -- Aetna, United Healthcare and Oxford are among the most prominent -- on federal reimbursements that were sharply limited by the Balanced Budget Act of 1997, which "will reduce the government's Medicare spending by $115 billion over the next five years." Under the measure, annual reimbursment increases have been lowered far below the rate of medical inflation, shattering thin profit margins. The brunt of the impact has been felt in rural areas, where small populations fail to provide the necessary economies of scale -- and companies have left those areas in droves. However, even in urban centers, competition has forced companies to offer costly premium services such as prescription drug plans that eat up profit margins. The likely solution for HMOs who choose to stay in the Medicare market is to cap payments to physicians on a per patient basis, "push[ing] the financial risk onto the doctor to keep costs down." Humana Inc. and Pacificare, the two companies that have strongly embraced capitation, "are making money on their plans, at least for now." As for the members that belong to plans that discontinue the Medicare HMO product, they are left with fewer benefits in the traditional, and more expensive, fee-for-service Medicare plan (Morrow, 9/9).
Don't Be Scared
As "a relentless, confusing marketing barrage" gears up for the federal government's introduction of Medicare+Choice, a Health Care Financing Administration beneficiary services specialist met with Chicago seniors yesterday to assuage any possible fears about the new program. "I want to make one thing very, very clear," said the HCFA's Janice Cekan. "You don't have to change anything if you are happy with your current health plan." The Chicago Tribune reports that analysts predict that companies currently offering Medicare HMO products will be the most likely to take advantage of the 1997 Balanced Budget Act clause intended to broaden the options available to the public. The HCFA plans a mass mailing in October outlining the changes, and offers additional information at www.medicare.gov (Japsen, 9/9).
MSAs An Orphan?
Medical Savings Accounts, one of the most contentious options made available through Medicare+Choice, have not drawn any takers thus far among health plans, with a November deadline approaching. MSAs would provide tax-free savings to pay for medical bills. The AP/Los Angeles Times reports that insurers are "holding back because of concerns about the expense of carrying that catastrophic coverage for an illness-prone elderly population," or "think retirees may be scared away from MSAs" by bracing out-of-pocket costs that could total up to $6,000. Dr. Robert Berenson, director of the HCFA's Center for Health Plans and Providers, said, "About a dozen insurers have shown interest in offering MSAs ... [b]ut as yet, none have filed formal applications to do so" (9/9). NPR's Joanne Silberner reported last week on how the government is making slow progress in its efforts to implement Medicare+Choice and other program changes mandated under last year's Balanced Budget Act. Click here to listen to the report (Note: You'll need to download special software at www.real.com to hear the report).