HMOs find a goldmine in old folks Medicare: Medicare recipients have become a lucrative market for HMOs, especially in Maryland, where the number of enrollees increased 323% in the past year.

September 08, 1996|By M. William Salganik | M. William Salganik,SUN STAFF

The setting does not exactly scream "health care."

The easel with flip charts is set up in front of a bar. Dotting the dark paneling are advertising signs, including one depicting St. Bernard dogs seated at a table hefting beer steins.

But in this downstairs room at a Parkville restaurant, 18 seniors were gathered to sip coffee, munch Danishes and listen to an NYLCare official pitch the benefits of joining a Medicare health maintenance organization.

Medicare HMOs are a fast-growing product. Nationally, the number of enrollees has jumped from 2.1 million two years ago to 2.9 million a year ago to 3.9 million as of Sept. 1 -- an increase of 33 percent in the last year and 83 percent in two years.

And in Maryland, the numbers are even more dramatic -- from a tiny 978 enrollees two years ago to 8,075 last year to 34,179 on Sept. 1 -- 323 percent in the past year. There's still plenty of room for more growth, however, as that represents only about 5 percent of the eligible Medicare recipients in the state.

HMO companies are learning that signing up seniors requires a different kind of marketing.

Rather than making presentations to corporate executives and benefits managers, then signing up hundreds or even thousands of employees in one enrollment period, HMOs generally reach Medicare recipients in small groups or one at a time.

The pitches come in homes, on the phone, at senior centers, at health fairs. And they come in HMO-sponsored information sessions like this one in Parkville.

Because older citizens may not be familiar with managed care insurance, "This is not your typical sales call," said Kevin C. O'Neill, senior vice president of sales and marketing for Chesapeake Health Plan, whose Medicare HMO plan is called Advantage 65. "You're actually providing an education when you go in."

"We really, really, really focus on heavy-duty education," echoed Sandy Beard, director of marketing for Blue Cross and Blue Shield of Maryland, whose product is called Medi-CareFirst.

The HMOs offer a relatively simple trade-off for those over 65: a narrower choice of doctors in exchange for more benefits and lower out-of-pocket costs.

"We've always had choice, but we pay $1,400 [a year] for supplemental insurance, and it doesn't pay for prescriptions. It doesn't pay for eyes. I hate to pay $1,400 if I can get away for nothing," said Helen Shealey of Hamilton, one of those at the Parkville seminar.

Some seniors, particularly those getting retiree benefits, are members of HMOs but retain traditional Medicare coverage as well; one plan will cover what the other does not. But what is being offered now is a different twist: HMO membership instead of traditional Medicare.

Should Shealey choose to enroll in the NYLCare plan, called NYLCare 65, she would have to use doctors and other providers (such as medical labs) who have contracts with NYLCare. And her primary care physician would decide when she needed to see a specialist or get lab tests. If she chose to go outside the system, neither NYLCare nor Medicare would pay the bill.

In return, however, NYLCare and other HMOs offer her the chance to:

Stop paying the monthly premiums, typically in the $100 range, that pay for the so-called "Medigap" policies that supplement Medicare benefits.

Avoid most of the deductibles and co-payments that come with normal Medicare coverage.

Get additional coverage, such as prescription drug benefits, not included in regular Medicare or in most Medigap policies.

At the Parkville session, Kenneth McGaffin, a NYLCare sales representative, going through his flip charts, explained, "There's no free lunch."

While the member pays no premium (beyond the Medicare Part B premium, $42.50 a month), the federal Health Care Financing Administration (HCFA) pays the HMO 95 percent of the average amount Medicare spends for enrollees in that county. In the Baltimore area, that's about $400 per month per person.

The government, at least in theory, saves money because it's paying only 95 percent of what it would pay if patients continued to choose doctors and Medicare paid on a fee-for-service basis.

The HMO hopes to make money, even though it is offering extra benefits, by contracting at favorable rates with doctors and labs -- in effect, getting a volume discount -- and managing care through "gatekeeper" physicians.

And while seniors need much more care than younger members, the federal reimbursement for Medicare HMOs is about four times the premium for a younger enrollee.

The costs and benefits vary by market, depending on the federal reimbursement rate and the level of competition.

In the Baltimore-Washington areas, the zero-premium Medicare HMOs offer, with small co-payments, annual physicals, eye exams, dental care and hearing checkups.

The prescription coverage (up to $1,000 a year in Medi-CareFirst and Advantage 65, up to $375 a quarter in NYLCare 65) is particularly attractive to potential members, according to the marketers.

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