Managed-care companies nationwide are starting to cut some of the generous benefits that millions of elderly Americans on Medicare counted on when they signed up with health maintenance organizations.
The health plans have become popular because they fill many of the biggest gaps in Medicare, notably costs for prescription drugs, which otherwise have to be covered by expensive supplemental policies known as Medigap insurance or out-of-pocket cash. Best of all, there is often no charge, or only a modest one, to belong to one of these Medicare HMOs. The cost is largely paid by the government, which has tried to save money by applying managed-care methods to soaring Medicare expenses.
But because of rising drug costs and a cap set by Congress on next year's payments to Medicare HMOs, many of the plans are rewriting the rules. Some are charging monthly premiums for the first time or are sharply raising fees. And a few are eliminating some of the most popular features: free drugs, eyeglasses and dental care.
Many Medicare HMOs are still deciding how to react to the new payment level, but premium increases or benefit cutbacks have already been announced by HMOs in California, Maryland, New Jersey and other states.
While Medicare HMOs have tinkered with benefits in the past, the changes that are being announced amount to the first widespread cutbacks.
"If plans are making major reductions in benefits," or charging more for the same benefits, "that would be a reversal of the trends we have seen in the '90s," said Patricia Newman, director of the Medicare Policy Project at the Kaiser Family Foundation.
One of the biggest national managed-care companies, Humana Inc., told Wall Street analysts earlier this month that it planned to triple the fees that members pay for some brand-name drugs.
"Other HMOs will be making similar announcements," said Mimi Willard, a health-care analyst with Donaldson, Lufkin & Jenrette.
Many health care experts think the government's payments to Medicare HMOs have been unjustifiably high in certain parts of the country, including New York, Miami and southern California, and in effect have rewarded inefficiency, said Marilyn Moon, a Medicare expert with the Urban Institute in Washington. Congress' decision to curb the payments "was a necessary thing to do," Ms. Moon said, "but a real hardship for some people who made a decision to go into these plans."
In the end, added Ms. Willard of Donaldson, Lufkin, the government's austerity move "will boomerang onto the elderly, who will be left with less complete coverage and higher medical bills."
And many may find themselves with little recourse, experts say. HMO members who want to switch back to a traditional fee-for-service Medicare approach may be turned down for Medigap coverage if they have health problems, said John Rother, legislative director of the American Association of Retired Persons. Others may wind up paying a lot more for a new Medigap policy than if they had kept their old policies. That is because most insurers tie their Medigap rates to an applicant's age on the theory that an older policyholder is more likely to have higher health costs.
Pub Date: 12/22/97