The great Medicare+Choice exodus

Business & Health, Nov, 1998

In the wake of a massive HMO pullout from HCFA's new and improved Medicare Choice program, President Clinton announced in October that the feds would take steps to "protect Americans who have been dropped by their HMOs." HCFA will expedite approval, Clinton promised, for HMO applicants in areas that have been hit hard by withdrawals, and will launch an information campaign to help seniors find another HMO or enroll in a traditional Medicare program. Plans had until Nov. 2 to inform enrollees whose coverage will be dropped at year's end.

Even with the government's promised assistance, Diane Archer, executive director of the Medicare Rights Center, told Business & Health that the pullout will cause seniors and disabled beneficiaries a great deal of anxiety and serious disruptions in care. "Even if they are able to get supplemental insurance to fill gaps in Medicare," she said, many beneficiaries will experience "serious financial difficulty" and an inability to get their need for prescription drugs satisfied. Medicare enrollees also fear that "if they switch to another HMO, that HMO could just as easily dump them next year and put them back into the same situation they are in now."

At least one state isn't sitting on its hands over the withdrawals. Florida officials have mounted an investigation to see whether the seven Medicare HMOs exiting the state - and leaving 50,000 Floridians in the lurch - conspired to dump beneficiaries in violation of the state's anti-trust laws and fair trade practices.

At presstime, 43 of the current 347 Medicare-risk HMOs had announced that they are not renewing their contracts with HCFA and another 52 are reducing their service areas, leaving some 414,000 beneficiaries having to change plans and nearly 50,000 with no managed care options at all. Six million enrollees, or 17 percent of Medicare beneficiaries, are now in HMOs.

More withdrawals are expected following the Clinton administration's refusal to let Medicare-risk HMOs revise rate proposals for 1999. In a letter to the Health Care Financing Administration, the American Association of Health Plans requested a midterm correction because medical inflation is running higher than previously estimated. In denying the request, HCFA Administrator Nancy-Ann Min DeParle said last month that "it would be neither in the best interest of beneficiaries nor administratively feasible for us to reopen the premium and benefit calculations for virtually the entire Medicare Choice program." Testifying before a Senate hearing on Medicare Choice, HCFA Deputy Administrator Michael Hash cited numerous studies indicating plans are actually overpaid by Medicare.

In October, Oxford Health Plans announced it would terminate Medicare HMO coverage in selected counties in New York, New Jersey, Connecticut and Pennsylvania that serve 26,600, or 17 percent of its Medicare members. The pullouts are in areas in which Oxford has not been able to work out risk-sharing arrangements with local providers. Other plans that blame insufficient reimbursement rates for leaving the Medicare market include Colorado's QualMed Health Plans and Blue Cross Blue Shield of Colorado, among a long list of HMOs.

One provider-sponsored organization - Florida Hospital Premier Care. which serves 14,000 beneficiaries - is withdrawing for the same reason. One of just eight Medicare PSOs in the country, Premier Care announced in October that it would shut its doors on Dec. 31 after two years of operation.

But the biggest retreat thus far comes from United HealthCare. Also in October, the giant managed care organization announced the closing of HMOs in 86 counties that cover 59,000 lives - 13 percent of its 440,000 Medicare beneficiaries. Like other HMOs that are pulling out of the massive federal program, United cited inadequacies in the Medicare reimbursement system and higher-than-expected medical costs.

Nationally, HCFA rates for Medicare HMOs range from $367 per enrollee per month in many rural counties to more than $700 per month in metropolitan areas like New York and Miami. The Balanced Budget Act of 1997 limited rate increases, which have run as high as 10 percent in past years, to 2 percent a year.

In contrast, United's Medigap program, an indemnity product marketed by the American Association of Retired Persons, recently applied for a 1999 rate hike averaging 9 percent. The hefty increase, which would affect some 2.5 million seniors, has already been granted in some locales. With the supplemental coverage not limited to a 2 percent premium hike, AARP and United cited rising medical costs and higher claims arising from an older and sicker population. The requested increase follows several years of double digit premium hikes for seniors with AARP/United coverage.