HMO cutbacks create Medicare crisis for thousands of seniors

Many elderly cast adrift as insurers quit unprofitable areas

Health care

July 03, 1999|By M. William Salganik | M. William Salganik,SUN STAFF

About two years ago, Bea Myers of Hagerstown joined United HealthCare's Medicare HMO.

Then United pulled its Medicare HMO out of Washington County. After looking at various options, she switched to an HMO called MediCareFirst, offered by CareFirst BlueCross BlueShield.

This week, CareFirst announced it, too, is leaving Washington County at the end of the year -- and 16 other Maryland counties, where, it says, federal payments are too low.

She isn't sure where she'll turn next for coverage. "I haven't decided," she said yesterday. "It all just hit me."

Bea Myers isn't the only one who's uncertain. Several national HMOs announced plans to cut back on Medicare services this week, leaving an estimated 250,000 seniors nationally to find new coverage and perhaps 1 million facing additional premiums or lesser benefits.

The actions by the HMOs -- after cutting service to 400,000 seniors last year -- also create uncertainty over the role of managed care in the Medicare program.

Bea Myers is one of about 100,000 Marylanders -- and more than 6 million seniors nationally -- who were attracted to HMOs because, despite their tighter controls over care, they offered prescription drug coverage, no out-of-pocket costs for hospitalization and other benefits not provided by traditional Medicare.

Medicare changes in recent years were designed to increase the number of options for seniors, particularly through HMOs -- which, the government hoped, would control costs.

"Just the opposite is happening -- the choices are being narrowed," complained Susan Pisano, a spokeswoman for the American Association of Health Plans, the HMO trade group.

The government, she said, "isn't keeping the bargain"; it pays much less to HMOs than it pays to care for beneficiaries in traditional, fee-for-service Medicare.

"The way I look at it," countered Joe Baker, associate director of the Medicare Rights Center, an advocacy group in New York, "it's the HMOs who have reneged on their promise to provide savings."

In seeking congressional action, Baker said, "The HMOs are positioning themselves for a piece of the surplus. But to pay them more money, willy-nilly, is not the solution."

The federal government once paid HMOs 95 percent of the cost of caring for an average fee-for-service patient in each county. That's why rural rates are lower than urban or suburban ones, and why the rural counties have been dropped by CareFirst and other Maryland HMOs.

The 95 percent rate proved profitable for HMOs, which began recruiting seniors aggressively in the mid-1990s. The recruitment drew some sicker seniors, making the plans less profitable.

And the federal government, concerned that HMOs had been making excess profits, began holding down rate increases. Rapidly rising prescription costs compounded the pressure on the HMOs' bottom lines.

"The health plans are being forced out" by the lower rates, Pisano said yesterday. If Congress doesn't act this year to fix the rates, she said, "There will be a debacle next year."

Others, however, view the exits of HMOs as part of natural evolution of the market.

Some plans had too few members in a given market to work efficiently, so they left the market, said Marilyn Moon, a senior fellow at the Urban Institute in Washington. "When you're relying on the market for competition, that's exactly what you'd expect."

In addition, Moon said, HMOs shy away from rural areas because there are relatively few doctors and hospitals, so the health plans cannot rely on competition among providers to negotiate discounts on rates.

All this, she said, may result in a more efficient system but means "a lot of disruption" for seniors, "having to change doctors and learn new rules" as plans come and go.

Rep. Benjamin L. Cardin said the Medicare system cannot rely on HMOs for cost savings. "Private insurance is an important part of our system, but understand that the insurers are in it for a profit, and caring for seniors is expensive," said the Maryland Democrat.

He believes -- as President Clinton recommended this week -- that fee-for-service Medicare needs to include some prescription drug coverage. He thinks there is a chance of congressional action on that this fall.

"It's important for seniors to have access to prescription drugs," he said. "Because of HMOs pulling out, that's going to be denied to many seniors."

Pub Date: 7/03/99

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