Nearly 80% of California’s Rural Areas Lack an HMO Plan
At least 16 rural California counties have lost all or some of their HMOs, "forcing thousands of residents to pay more for health care," the San Francisco Chronicle reports. About 80% of the state's rural areas lack an HMO, and Medicare managed care plans are "virtually nonexistent" in rural parts of California, according to the California State Rural Health Association. The California Public Employees Retirement System is the "biggest hit" in the "crisis" because it has failed to reach a contract agreement with several HMOs in rural counties for next year. As of Dec. 31, about 40,000 CalPERS members will have to look for other health coverage. Without HMO coverage, rural county residents have to switch insurers, which often means paying higher premiums and out-of-pocket costs, as well as traveling farther for care, the Chronicle reports.
HMOs have pulled out of several counties because "doctors and hospitals are demanding more money than" the companies want to pay. Most HMOs pay doctors and hospitals a set amount per patient per month regardless of whether that patient receives treatment. The idea is that if HMOs have a large enough pool of patients, patients who are healthy and rarely go to the doctor will "subsidize" bills for sicker patients. But there are too few people in rural areas to "make it possible to negotiate discounted prices," Roger Greaves, chair of Health Net, said, adding, "It's a shame it's not possible to provide those kinds of services throughout the rural areas ... but it's not financially viable for health plans to go into rural areas." The state Legislature has sent Gov. Gray Davis (D) a bill (AB 532) that would authorize a study to determine why health plans have pulled out of rural areas.
For their part, doctors and hospitals say HMO reimbursement rates are "too low for the challenges of providing care in rural areas." Rural residents are "often older, sometimes poorer and tend to be more independent and seek help after rather than before a health problem becomes serious," the Chronicle reports. The Chronicle adds that because there are fewer care providers in rural areas, there is "less competition" for reimbursement rates, meaning providers can refuse to accept payer contract offers. Dr. Steve McDermott, CEO of Hill Physicians Medical Group Inc., said he believes an HMO model can work in rural areas, but added, "If you're living in a rural area, you're making a conscious decision about lifestyle and access to certain services. You're going to have limited access to certain kinds of services" (Colliver, San Francisco Chronicle, 8/23).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.