Bracing for the year 2000 Medicare+Choice bug - FYI - Medicare+Choice health maintenance organization increases - Column

Healthcare Financial Management, Nov, 1999 by Jeanne Schulte Scott

"It is just getting worse and worse and worse. These increases are shockers."

- Kate Stahl of the Minnesota Senior Federation, protesting the increases in Medicare Choice HMO premiums.

It takes a lot of chutzpah for the president and the vice president to criticize private Medicare HMOs for having to pass along cost increases...[when] the administration has not proposed changing the revenue cap that restricts government funding to most Medicare HMOs to an average annual increase of around 2 percent." - Chip Kahn, president of the Health Insurance Association of America, commenting on the White House's criticism of the HMO industry.

When Congress first established the outlines for a new Medicare Choice program as part of the Balanced Budget Act of 1997, many advocates of the program envisioned a future where Medicare beneficiaries would be able to choose from a smorgasbord of options offered by health plans competing for their business. It was hoped that out of this competition, beneficiaries would gain access to better coverage and the nation would pay less for the coverage.

Well, you know what they say about the best-laid plans of mice and men. In the program's second full year of operation, both Medicare Choice options and benefits are being reduced. Beginning in 2000, every Medicare HMO that provides prescription drug coverage will be charging a copayment for this benefit. On average, copayments will rise 21 percent for brand-name drugs and 8 percent for generics. Up to 1.2 million senior citizens who previously had access to free prescription drugs now will have to cough up some cash for them.

Other changes for the year ahead include:

* More prescription drug coverage caps. In 1999, 21 percent of the plans limited drug coverage to $500 or less; in 2000, that number will rise to 32 percent.

* Access to only the most expensive HMOs. The number of senior citizens with access to only the most expensive HMOs (those with annual premiums of $960 or more) will quadruple from 50,000 this year to 207,000 next year.

* Premium increases. Average monthly premiums for Medicare HMO members will triple next year, from $5.35 to $15.84.

PacifiCare Health Systems' Secure Horizons, the nation's largest Medicare HMO, offers a specific example of what is ahead for beneficiaries. The plan will raise $10 prescription copayments to $15, require a $5 copayment for office visits that are now free, and restrict the currently unlimited prescription drug coverage to $2,000 per year.

At the state level, drastic cuts are in the offing. Minnesota's three Medicare HMOs, which cover roughly 50,000 senior citizens, have proposed monthly premium increases for couples ranging from $270 to $299, a 12 to 50 percent increase over this year's rates.

More than 100,000 covered senior citizens in Connecticut will see premium increases of $500 to $1,000 per year and, for many plans, lower pay-outs for prescription drugs. For example, Aetna U.S. Healthcare's Medicare 10 plan, which operates in Connecticut, is increasing its monthly premium from $19 to $81 and decreasing its brand-name prescription benefit from $750 to $500 a year.

Four of five plans in South Florida will increase rates and cut benefits to the 40 percent of senior citizens across the region who are enrolled in Medicare managed care plans. For example, members of the ArMed Health Plan in Broward County will have to pay for their medications for the first time ever, with charges ranging from $10 for generics to $40 for nonformulary drugs, while Foundation Health's Palm Beach County HMO will no longer cover medications at all.

What to Do, What to Do?

The rate hikes themselves were not surprises, but their size and scope were. Most Medicare beneficiaries are just now starting to realize what is about to hit them. As we move into the new year, we can expect news coverage of horror story after horror story of financially beleaguered senior citizens facing crushing new healthcare costs.

To address the year 2000 Medicare Choice "crisis," HCFA has already begun a massive consumer education effort. This fall, the agency mailed new handbooks to America's 39 million Medicare enrollees to help guide them through the new Medicare options available in 26 specific regions, as well as health plan quality data. The handbook, Medicare & You 2000, was created after months of market research found that Medicare beneficiaries and their families have only the sketchiest understanding of the traditional Medicare program and almost no understanding of the Medigap and Medicare Choice insurance options. HCFA expects to repeat this exercise every fall to give Medicare beneficiaries notice of their options in time to change their Medicare plan enrollment.

According to HCFA, despite the bad news for Medicare beneficiaries and the recent withdrawal of several Medicare HMOs from various markets, the number of plans serving Medicare beneficiaries and enrollment in these plans continues to grow. The number of HMOs with Medicare risk contracts increased from 383 to 402 in 1999, and the number of enrollees grew from 6.553 million in January 1999 to 6.863 million in June 1999.