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GOVERNMENT & MEDICINE

More HMOs pull out of Medicare; who's at fault?

Health plans cite budget act's payment cuts, risk adjustment plan. But federal officials and others blame plans' focus on profits.

By Geri Aston, AMNews staff. July 19, 1999. - Additional information.


Washington -- The second wave of HMO withdrawalsfrom Medicare in eight months has left a blame game in its wake.

Plans are wagging their fingers at the government. But federal officials, and physician and consumer groups, are throwing the fault back at HMOs.

At least 250,000 beneficiaries will be dropped by their health plans in January, and virtually all of Medicare's 6.8 million HMO enrollees will see either an increase in their premiums or a decrease in extra benefits, according to an American Assn. of Health Plans survey of 23 plans enrolling about 4 million seniors.

Health plans had until July 1 to notify the government of any terminations of Medicare services for next year. At AMNews deadline, the government hadn't released the official numbers on the latest exodus.

In the first round of plan defections, 99 HMOs dropped out of Medicare or cut back their service areas in a move that impacted more than 440,000 beneficiaries this year.

Budget law faulted by plans

Plans blame government payment changes, passed as part of the Balanced Budget Act of 1997, for both spates of exits.

"The biggest reason is inadequate reimbursement," said Mary Sellers, spokeswoman for Humana Inc. "Companies can't sell a product for less than what it costs to provide it."

Plans also point to the growing disparity between Medicare HMO and fee-for-service payments that puts them at a competitive disadvantage with the traditional program. AAHP estimates that by 2004, the budget law's "fairness gap" will be at least $1,000 for two-thirds of beneficiaries living in the 100 counties with the highest Medicare HMO enrollment.

The payment crunch is causing a backlash among some physicians and other providers, and that has played a role in plans' decisions to exit Medicare in some areas, AAHP said.

Faced with the prospect of lower payments from plans and increased administrative hassles brought on by the budget law, "providers are simply saying it's too much," said AAHP President and CEO Karen Ignagni.

Some doctors and providers are deciding that it's more cost effective to work in Medicare fee for service than to participate in a Medicare HMO, health plan officials said.

"You've got to roll into the entire mix that along with lower reimbursement rates are higher administrative costs," said Phil Soucheray, spokesman for UnitedHealthcare. "It becomes more difficult to set up and sustain a network when they can see the value of not getting involved in a Medicare plan."

Fully aware of widespread criticism that they've been overpaid for years, HMOs counter that the data are outdated and that the large volume of Medicare withdrawals undercuts their opponents' argument.

"Overpaid plans don't leave programs," Ignagni said. "Overpaid plans do not cut benefits."

The Health Care Financing Administration and some lawmakers "are in denial about what's happening to this program," she added.

HMOs might have a point, said Gail R. Wilensky, PhD, Medicare Payment Advisory Commission chair.

"When you have lots of exits and few entrants, that's not a classic sign of being overpaid," she said.

Another major factor contributing to plan withdrawals is the government's plan to begin paying HMOs more for sick beneficiaries and less for healthy ones, HMO officials said.

When Congress mandated this risk-adjustment program in the budget law, it intended the changes to be budget neutral, meaning funding would shift among plans without the overall pool of money being cut, Ignagni said. Instead, HCFA's proposal would cut $11 billion from Medicare managed care over five years on top of the $22 billion in savings already called for in the budget act, she said.

Congress must act this year to narrow the payment "fairness gap" and to fix the risk-adjustment proposal, she said.

HMOs have garnered some support on Capitol Hill. Florida Reps. Michael Bilirakis, a Republican, and Peter Deutsch, a Democrat, introduced a bill to make the risk-adjustment program budget neutral.

But the managed care community's complaints are generating little sympathy in other circles.

Rep. Pete Stark (D, Calif.) has said that "to pour more money into HMOs is unfair to the 82% of seniors in traditional Medicare and will speed Medicare's financial crisis."

HCFA Administrator Nancy-Ann DeParle criticized the latest round of plan withdrawals.

"We're disappointed that HMOs are making decisions that will force some Medicare beneficiaries to change their health coverage and at the same time scaring them about their Medicare benefits," she said.

The government will pay all Medicare HMOs more in 2000 than it did this year, DeParle noted. The average increase will be about 5%.

Unreliability charged

Doctors and consumer groups view the latest actions as more evidence of managed care's unreliability.

"This is an example of the HMO industry putting dollars first and patients second," said AMA Board of Trustees Chair D. Ted Lewers, MD.

In Dallas County, where thousands of seniors will be bounced from their HMOs, the plan exits "show an attitude that if a company can't make a lot of money, it just dumps the consumer," said Robert Gunby, MD, chair of the Dallas County Medical Society's managed care committee.

The plan withdrawals prove the danger of relying on the private market, said Judy Waxman, government affairs director for Families USA.

"The market system is very volatile, and consumers can't count on plans being there next year," she said.

A General Accounting Office report released earlier this year found the first round of plan exits were driven not only by payment rates but also by competition and low enrollment.

"I think that's the case again this year," said Joe Baker, associate director of the Medicare Rights Center. "They're leaving for a slew of other business reasons but blaming it on payment."

Congress must have substantiation that plans' complaints of financial trouble are true before changing the law to increase their reimbursement, Dr. Lewers said.

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Medicare HMO exodus: round two

At least 250,000 Medicare beneficiaries will be dropped from their health plans as a second wave of HMO departures in eight months hits the program. Below is a snapshot of withdrawals at four major plans.

Humana Inc.

  • Exiting from: 31 counties in Arizona, Nevada, Texas, Kansas, Illinois, Wisconsin and Florida.
  • Beneficiaries impacted: 46,188.
  • Medicare enrollment: 480,000.

United Healthcare

  • Exiting from: 49 counties in Arizona, California, Louisiana, Missouri, New Jersey, Texas, Tennessee, Arkansas, Georgia, Maryland, Rhode Island, Massachusetts, New York and Wisconsin.
  • Beneficiaries impacted: Approximately 40,000.
  • Medicare enrollment: 445,000.

PacifiCare Health Systems Inc.

  • Exiting from: 12 counties in Ohio, Washington, Oregon and California.
  • Beneficiaries impacted: 16,400.
  • Medicare enrollment: 991,000.

Foundation Health Systems Inc.

  • Exiting from: 32 counties in California, Colorado, New Jersey, Connecticut and New York.
  • Beneficiaries impacted: 15,900.
  • Medicare enrollment: 283,000.

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