Pullout by HMOs stirs fears Retreat from Medicare leaves seniors angry, scurrying for coverage

"Too good to be true"

Some say insurers saw "easy money" first, then red ink in books

October 11, 1998|By M. William Salganik | M. William Salganik,SUN STAFF

Only recently, HMOs were courting people like John Price. Now they're running from them.

Having just turned 65, Price, a Fallston retiree, joined Prudential HealthCare's Medicare HMO on June 1. As recently as Sept. 19, he spotted a Prudential recruiter at a senior fair at a mall and told the recruiter how happy he was with the HMO. He even picked up brochures to give to his friends.

A few days later, Price got a jolt. Prudential sent him a letter saying it was dropping its Medicare HMO business.

Price is one of more than 35,000 Maryland seniors notified over the past few weeks that they would be bumped from their HMOs, as four companies left the Maryland Medicare market and a fifth cut back its service areas.

Nationally, more than 300,000 seniors are being dropped by HMOs, according to the American Association of Health Plans, an HMO trade group.

The sudden retreat of the HMOs raised questions about why managed care companies were leaving a business that only recently was seen as highly profitable.

It left lots of confused and angry seniors, scrambling to find other coverage and raising enough noise that politicians, from Gov. Parris N. Glendening to President Clinton, began calling for a solution.

Clinton said Thursday that the Medicare HMO pullouts "have brought uncertainty, fear and disruption into the lives of tens of thousands of older Americans across the country."

Price poured his feelings into a three-page letter to Prudential -- letter he said he might or might not mail. Price said he was "incensed" that HMOs would market plans to seniors, then withdraw coverage. The health plans, he complained, "seem concerned not about health care but about high profitability."

Others joined the chorus of complaints.

"I've been a volunteer for eight years, and this is the busiest I've seen it," said Bob Breiner, a retiree himself who is an insurance counselor for the Baltimore County Department of Aging. "Seniors don't like change. It took them a while to make the decision to get into a Medicare HMO, and now they'll have to switch around."

While there are HMOs remaining in the market, some seniors will have to switch doctors if they pick another plan. They may also have to pay a premium or have different benefit levels.

Price has been calling HMOs to find one that will work for him. Often, he said, the line has been busy, or he's had to settle for leaving his name and address in a voice-mail system.

Mary Anne Heckwolf, vice president for government programs at Blue Cross and Blue Shield of Maryland (which offers a Medicare HMO called MediCareFirst), said her customer service center, which usually gets 2,500 calls a week, fielded an extra 1,000 calls one recent week.

Seniors abandoned by their HMO may also choose to return to traditional fee-for-service Medicare, which would allow free choice of doctors and hospitals but provides fewer benefits and requires deductibles and co-payments.

But many of those seniors took the plunge into an HMO after enticements of extra benefits and lower out-of-pocket costs.

"The concept of the plans was too good to be true -- generous benefits and no premium," said Tricia Neuman, director of the Medicare Policy Project of the Kaiser Family Foundation (which has no connection with the Kaiser Permanente health plan).

Cheaper than Medigap

HMOs were not really offering something for nothing. The federal Medicare program was willing to pay them a monthly premium for each enrollee. But to enrollees who paid no additional premium, it offered a savings from so-called Medigap policies that cost $100 a month or more.

Medicare hoped to save money by paying the HMOs a little less than it would cost to treat people on a fee-for-service basis. And the HMOs thought they could make money by negotiating lower rates with doctors and other providers (such as labs) and controlling care through "gatekeeper" physicians.

In fact several early studies suggested that the HMOs were being overpaid, since they were attracting younger, healthier seniors who required less care.

Seeing solid profits, more HMOs sent recruiters to senior centers and homes. Nationally, Medicare HMOs went from 2 million members four years ago, to 3.9 million two years ago, to 6.5 million now. In Maryland, the curve was even steeper -- from about 1,000 four years ago to 34,000 two years ago to about 90,000 now.

As the HMOs marketed aggressively, however, they may have been signing up members who required more care.

"They might have come in thinking this was easy money," said Neuman, "and offered benefits that attracted a sicker population." In particular, she said, the HMOs offered some coverage for prescription drugs, not covered by regular Medicare or by all but the most costly Medigap policies.

Joe Baker, associate director of the Medicare Rights Center, a New York-based advocacy group, said, "as they got more

penetration, sicker individuals were signing up."

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