MEDICARE HMOs: Withdrawing from Medicare at Lightning Pace, Thousands of Californians Lose Coverage

     
      More than 711,000 seniors covered by Medicare HMO plans stand to lose their coverage in 2001, the American Association of Health Plans (AAHP) reported yesterday as several major Medicare+Choice providers announced market pullbacks. The most significant move came from Aetna U.S. Healthcare, which will cut its Medicare HMO business by more than 50% as it withdraws from 11 states and 23 counties, dropping coverage for 355,000 enrollees. Aetna will still cover about 304,000 seniors in five states (AHA News Now, 6/29). Aetna officials recited a commonly heard refrain to explain their decision: Inadequate government reimbursements have made Medicare+Choice participation "no longer viable." Other major insurers dropping Medicare+Choice plans include Foundation Health Systems, Oxford Health Plans and Sierra Health Services; Cigna announced earlier this month that it will eliminate plans for 104,000 recipients. Several insurers added that in remaining markets they will likely have to reduce benefits such as prescription drug coverage or raise out-of-pocket expenses to keep the plans operating (McGinley/Winslow, Wall Street Journal, 6/30). In California:

• Aetna announced it will drop Medicare HMO coverage in Northern California, leaving some 15,280 seniors to find an alternative health plan or return to traditional Medicare. Aetna spokesperson Jill Griffiths said, "Medical costs are consuming nearly all of the revenues we get, and in some cases, the money from supplemental premiums as well. The dollars left aren't enough to even cover the administrative costs of running the program." The health insurer said it will continue to offer coverage in Southern California, where nearly 50,000 Medicare recipients are enrolled (Fisher, Sacramento Bee, 6/30).
• Health Net, one of the state's largest HMOs, said it will pull out of Fresno and Sonoma counties, where 3,200 Californians are covered by the insurer's Seniority Plus Medicare HMO plan. David Friedman, senior vice president and general manager for Health Net's government program, said, "The decision to leave these counties was extremely difficult. However, we had no choice because the rate of increase in Medicare HMO reimbursements from the federal government is far below the rate of increase in health care costs for seniors in these two counties."
• Kaiser Permanente said its 18,000 HMO members in Fresno, Madera, Kings and Tulare counties will not encounter any changes in their coverage this year, and PacifiCare Secure Horizons said it also will continue providing Medicare HMO coverage in Fresno County (Correa, Fresno Bee, 6/30). According to one company source, last-minute talks with the federal government persuaded PacifiCare officials not to withdraw from the state, where the HMO covers 1.1. million Medicare recipients (Rosenblatt/Bernstein, Los Angeles Times, 6/30). But a spokesperson for Senior Secure, a Blue Cross of California plan, would not reveal that HMO's intentions, calling it "premature to say at this point." Managed care companies must file their coverage plans with HCFA by July 3 and withdrawals from the Medicare+Choice program take effect Jan. 1 (Fresno Bee, 6/30).

  St. Joseph's Closes Doors to New HMO Patients
        In related news, St. Joseph Health System of Orange County, the county's largest medical group, announced yesterday it will no longer accept new patients from managed care companies. St. Joseph officials say the system, which currently serves 422,000 patients in Orange County, cannot afford to take on new HMO patients covered by strict capitation rates, under which managed care plans pay a set amount for each person. System officials have notified 17 HMOs of their decision. Noting that St. Joseph's, which owns 38 large doctors' groups and three hospitals, loses $45 million a year on HMO contracts, CFO Joe Randolph said, "The health plans need to take back a lot of the risk they've put off on the providers and let the physicians manage the care, not the dollars. We're not an insurance company." The decision means that should the financially troubled KPC Medical Management fail, its 100,000 Orange County patients will not be able to rely on St. Joseph's for care (Wolfson, Orange County Register, 6/30).