Projecting a loss of $5 million this year in its Medicare HMO, CareFirst BlueCross BlueShield announced yesterday that it will no longer offer Medicare HMO coverage in 17 rural Maryland counties and will start charging a premium in the metropolitan region.
The cut in coverage will force about 14,000 members back to traditional Medicare coverage, while 31,000 others will have to pay premiums or switch to a different health maintenance organization.
"It's unfair to our other subscribers to subsidize the federal government's failure to provide adequate reimbursement" in rural areas, Jeffery W. Valentine, director of corporate communications for CareFirst, said.
Across the nation, a number of large national companies also announced cuts in Medicare HMO participation, generally in rural counties where federal premium payments are lower.
As a result, millions of Medicare HMO subscribers will face higher premiums or benefit cuts, according to estimates by the American Association of Health Plans, a trade group.
The decisions seem to undercut a key part of President Clinton's latest Medicare proposal, which depends on competition among HMOs to make the program more efficient.
About 250,000 seniors will have to find new coverage effective Jan. 1, according to AAHP.
There are 39 million people covered nationally by Medicare, which insures people over 65. Of those, about 6.2 million are in Medicare HMO plans.
In a national survey by AAHP, HMOs reported that they were increasing premiums for 1.5 million Medicare beneficiaries next year.
Richard I. Smith, vice president of the association, said that premiums would increase by more than $20 a month for 930,000 beneficiaries, including 400,000 people who will see increases of $40 or more.
Wednesday was the deadline for HMOs to notify the federal Health Care Financing Administration about their plans for Medicare for next year.
"It seems virtually every Medicare [HMO] beneficiary will be affected by some type of cutback," said Karen Ignagni, president of AAHP.
Medicare HMO members will receive notices in the next several days if their plan is withdrawing from Medicare, and they will either have to choose another health plan -- if one is available -- or choose traditional Medicare.
Members will be notified of precise benefit changes and premium increases in the fall.
Medicare HMOs have been popular because they offer coverage beyond traditional Medicare, such as checkups and prescriptions.
In return for the extra benefits, seniors must get their care from doctors who participate in the HMO and are subject to HMO reviews for the care they receive.
While the industry complained about the rates the government pays, Nancy Ann DeParle, HCFA administrator, said yesterday, "Studies continue to show that Medicare managed care plans are still being overpaid."
Rep. Benjamin L. Cardin, a Democrat from Maryland's Third District, said the cuts were "a serious blow to beneficiaries who joined HMOs because of their comprehensive benefits package."
Democratic Sen. Barbara A. Mikulski of Maryland wrote to President Clinton, asking him to develop a remedial plan in time for congressional action in the fall, with the hopes of reversing the Jan. 1 pullouts. She said federal action should be "swift, timely and bipartisan."
A premium of $50 per month
CareFirst's Medicare HMO, called MediCareFirst, will operate next year only in Baltimore and Anne Arundel, Baltimore, Harford, Howard, Montgomery and Prince George's counties. It is seeking HCFA permission to charge a $50-a-month premium there.
It has been offering MediCareFirst without a premium for members in those counties, operating off the premium paid by HCFA.
The premiums paid by HCFA are based on average costs for traditional Medicare fee-for-service patients. The insurance industry has been complaining about the level of payments, particularly in rural areas.
Valentine said HCFA has been paying an average of $523 per member per month in the metropolitan counties in Maryland, $410 per month in Western Maryland and $375 on the Eastern Shore.
The payment dispute led United HealthCare to pull out of rural Maryland counties last year and Mid Atlantic Medical Services Inc. to make a similar move the year before. Also last year, MAMSI pulled out of the Medicare market in Maryland entirely, as did Aetna U.S. Healthcare, NYLCare and Prudential HealthCare.
The shuffle left about 35,000 of Maryland's 100,000 Medicare HMO members looking for new coverage. Some switched to other HMOs, while others returned to fee-for-service Medicare.
Sicker seniors costly
In addition to low reimbursements, Valentine said, the HMOs have had trouble finding doctors willing to accept the Medicare fee schedule.
Also, health economists say the Medicare HMOs, with their added benefits, have attracted sicker seniors, so the cost of taking care of them has been more than health plans expected.
Other HMOs with Maryland operations are largely standing pat for next year.
* United HealthCare, which withdrew from 49 counties nationally, is leaving Cecil County, where it has 666 subscribers. That will leave it with Medicare HMO members in Baltimore and Anne Arundel, Baltimore, Carroll, Charles, Harford, Howard, Montgomery and Prince George's counties.
* CIGNA HealthCare is making no change in its Maryland service area, although the Connecticut-based insurer announced that it was pulling back in 16 markets. CIGNA has 4,800 Medicare HMO members in Baltimore and Anne Arundel, Baltimore, Carroll, Charles, Frederick, Harford, Howard, Montgomery and Prince George's counties.
* Kaiser Permanente also said it plans no changes in its service area. It has 11,864 Medicare HMO members in Baltimore City and County, Howard, Montgomery and Prince George's counties and parts of Anne Arundel and Charles counties.
Wire services contributed to this article.