MEDICARE HMOs: Seniors ‘In For A Bumpy Ride’
"Americans over 65 who belong to Medicare HMOs had better buckle up, because many are in for a bumpy ride," reports today's Wall Street Journal. After several years spent pursuing "a potentially lucrative growth market," Medicare HMOs appear to be headed for a slump following rising drug prices, mismanagement and last year's Balanced Budget Act, which tightened the Medicare budget. The Journal reports that several recent events are indicative of the approaching troubles, despite the government's plans to boost Medicare HMO participation from current levels of 15% to 30% by 2002. On Monday, United HealthCare announced that it would take a $900 million restructuring charge, "torpedoing" merger plans with Humana; the company will cut back Medicare plans and trim drug benefits for 35 of its U.S. plans. Similarly, the Pennsylvania HMO Keystone Health Plan Central "in January began taking away prescription drug benefits from seniors residing in some counties, while others suddenly had to fork over a 50% co-payment for medications." The Journal reports that PacifiCare Health Systems Inc. has halted its Medicare programs in southern Oregon and will soon follow suit with those in Utah and part of Washington, and Oxford Health Plans Inc. will renegotiate pay arrangements with doctors, to create a system where doctors are provided a set fee per month per patient, "thus transfer[ing] some of the risks for treating those patients to the physicians." Meanwhile, Anthem Blue Cross & Blue Shield has backed out of Medicare HMOs in Ohio, while Aetna Inc. has already reduced benefits for 1998. In spite of the recent market squeeze, Robert Berenson, director of the Center for Health Plans and Providers at the Health Care Financing Administration, said that while they are "obviously concerned" about the recent developments, "there is no sign overall of reduced interest in Medicare managed care on the part of either the health plans or senior citizens themselves." Berenson notes that the number of participating plans has increased over recent years from 218 two years ago to 346 in June, and they're not "systematically seeing" a reduction in Medicare HMO services.
Who's To Blame?
Under the government's old system, HMOs received only slightly less for each patient than the amount paid for traditional Medicare services. The HMOs targeted healthy elderly individuals, and thus "stood to do well." After last year's Balanced Budget Act, Medicare HMOs received a 2% annual increase on reimbursements that had become "unrealistically low for some locations." However, the Journal reports that some analysts and government officials say that "managed care companies themselves bear a good chunk of the blame, because some insisted on expanding too fast" (Burton/Lagnado/McGinley, 8/11).