LEXIS-NEXIS® Academic Universe-Document

LEXIS-NEXIS® Academic

January 2, 2000, Sunday, Home Edition

SECTION: Business; Pg. 1F

LENGTH: 1910 words

HEADLINE: HMOs lose steam in enrolling Medicare recipients

BYLINE: Andy Miller, Staff

SOURCE: AJC

BODY:
Darwin Johnson of Fairburn figures he's saving $ 4,000 a year by being different.

Johnson, 78 , is one of only 16 percent of metro Atlanta seniors --- and 6 percent statewide --- in Medicare managed care plans. Although many of his friends refuse to switch from traditional Medicare, wanting to keep their own doctors, Johnson chose his HMO-like plan for the benefits bargain it provides.

After enrolling in Medicare Secure Choice, a managed-care plan run by Georgia Baptist Health Care System, Johnson has cut the costs of his blood- pressure and cholesterol medications from up to $ 140 a month to about $ 60. Secure Choice, Johnson adds, "seems to be interested in keeping me healthy, not just fixing it after it's broken.'' But Georgia Baptist is now seeking a buyer for Secure Choice, which covers about 7,000 Atlanta seniors. In two years, the health plan has piled up losses of more than $ 12 million. Despite the red ink, though, its chief executive officer, Doug Cueny, says three insurers have expressed serious interest in taking over Secure Choice.

Meanwhile, a similar HMO-like plan run by St. Joseph's Health System in Atlanta is closing its doors to Medicare beneficiaries this month, citing, in part, low payments from the federal government.

Three years ago, the 900,000 Georgia seniors in Medicare --- about a third of them in metro Atlanta --- looked like a golden market for local HMOs hunting for new members. By the close of 1999, though, HMOs have found the financial prospects tarnished at best.

Most are losing money or barely breaking even, or have cut back on their service area for Medicare, the federal program that covers 34 million Americans 65 and older, and 5 million disabled.

In Medicaid, the federal-state program for the poor, Georgia will have no HMOs left enrolling members in 2000. The last one, Grady Health System, with more than 20,000 Medicaid enrollees, recently had its contract terminated by the state. Since opening in July 1997, Grady's HMO had lost $ 6 million.

Conversely, the privately insured in metro Atlanta have steadily moved into HMOs through their job-based insurance. In metro Atlanta, an estimated 59 percent of those with employer coverage are members of HMOs or similar, point- of-service plans, according to Nashville-based Harkey & Associates.

Why the enrollment gap between employer and government plans?

One reason centers on seniors not wanting to give up some freedoms of traditional Medicare --- notably, choice of doctor and hospital. "My friends say that they want to choose their own doctor,'' Johnson says. "Well, I did, too. No one likes to change doctors.''

Price is right

But for Johnson, who chairs Secure Choice's member advisory committee, the price advantage of managed care is too good to pass up.

Besides drug discounts, Johnson likes the $ 10 co-pays for office visits and the lack of paperwork in managed care. Also, he no longer needs to pay for a Medicare supplement insurance policy, which fills in coverage gaps left by the traditional program.

Johnson says he would be willing to pay ''a little more'' in co-pays or other costs to bail out Secure Choice. "I'd still be saving money.''

Because of the lure of lower out-of-pocket costs, many experts believe that Medicare HMO enrollment will surge in Georgia and nationally, after the current lull.

Medicaid may be a different story. The status quo --- of zero Medicaid HMOs --- appears fine with officials at the state Department of Community Health, which runs the program for more than 1 million Georgians.

Nationally, about 50 percent of Medicaid recipients who aren't in nursing homes or disabled are HMO members, estimates John Holahan of the Urban Institute, a Washington-based research organization.

While many states, including Tennessee, have embraced HMOs as an answer to accelerating costs, Holahan notes that there may be a slowing of this enrollment.

Other states, including Georgia, run a ''Managed Care Lite'' system, in which a primary care doctor guides Medicaid recipients' care. The program has saved taxpayers $ 60 million to $ 70 million annually, says the Department of Community Health.

Three years ago, Georgia's Medicaid HMOs had a foothold here, with a high of about 52,000 members. But HMOs never got the proper support from the state, or adequate payments, insists Brent Layton of Atlanta consulting firm Layton & Associates. One by one, they collapsed after major financial losses.

Medicare has also been a money drain for HMOs in Georgia, Layton adds. Low reimbursements and high medical costs have caused a financial squeeze. "The people who enrolled in Medicare managed care (in Atlanta) were often the sickest, had high prescription bills, and visited doctors often,'' Layton says. "It cost HMOs dramatically.''

The enrollment lag in Medicare HMOs here parallels a similar national trend. About one of every six U.S. seniors has joined ''Medicare Plus Choice'' plans, the label for the federal managed care program. After a spurt in the mid-1990s, enrollment has leveled off considerably.

To counter the freedom to choose one's doctor in traditional Medicare, HMOs generally offer better coverage of such items as eyeglasses, physical exams, wheelchairs, prosthetic devices and foot care. Deductibles aren't charged, and HMOs can allow seniors to drop expensive supplemental insurance policies.

But the biggest break involves prescription drugs. Traditional Medicare does not cover them, and seniors have to pick up the entire cost of pharmaceuticals. That often-overwhelming price has spawned stories of seniors having to make an agonizing choice between buying groceries and pharmaceuticals.

Medicare HMOs offer drugs at low prices --- often it's $ 10 or $ 15 for generic drugs and some brand-name drugs, higher prices for others --- with coverage capped at an annual amount.

"Generally, a Medicare HMO is most attractive to people with moderate incomes, who don't have subsidized employer coverage,'' adds Marsha Gold of Mathematica, a policy research organization.

Still, other factors besides doctor choice may dampen Medicare HMO enrollment. Some reluctance may stem from seniors' fear of the unknown, says Marilyn Moon, a Medicare expert at the Urban Institute. Then there's widespread confusion about the Medicare choices, she adds.

"There's a sense that if you don't understand what's going on, you stay pat, '' Moon says. For many beneficiaries with a chronic health condition, ''you don't want to take a risk with insurance.''

The current backlash against HMOs may frighten some Medicare recipients.

Also rattling the seniors market has been a recent shakeout among HMOs. Citing high medical costs and low federal payments, dozens of HMOs either dumped their Medicare offerings or have pulled back on their service areas in the past two years. The withdrawals affected 400,000 U.S. Medicare beneficiaries by the end of 1998 and another 327,000 a year later.

This exodus has eroded beneficiaries' trust in managed care, says an official with the federal Health Care Financing Administration, which runs the Medicare program.

Terminated services

For two consecutive years, about 100 health plans either terminated the business or reduced their service areas, says Dr. Robert Berenson of HCFA.

UnitedHealthcare of Georgia, for example, cut back from serving 13 local counties to five in 1999. United now has 4,800 members, down from 16,000 in October 1998. Chris Wilson, a United vice president, links the pullback to HCFA payment increases falling from about 8 percent annually to about 2 percent in 1999, while the HMO's costs stayed at 8 percent.

St. Joseph's health plan allowed more flexibility for enrollees on their choice of doctor. Yet in its second year, and an enrollment surpassing 3,000, the plan notified members in July that it was closing in January. St. Joseph's pins most of the blame on payment cuts from the Balanced Budget Act of 1997 coming right after its start-up.

Sonya Smith, a local consumer health advocate for AARP, the advocacy group for seniors, says that when local beneficiaries got notice of the St. Joseph's closing, "they were extremely upset. They felt they were stabbed in the back.''

A recent study found that two of three people affected by HMO withdrawals subsequently joined another HMO. The study, released by the Kaiser Family Foundation, also found 40 percent of the disenrolled incurred higher premiums, and more than 20 percent had to choose a new doctor.

Many HMOs that are sticking with Medicare are raising costs to beneficiaries. Aetna U.S. Healthcare, though it's profitable with its local Medicare product, has increased monthly premiums and co-pays for drugs for many Atlanta area seniors.

Blue Cross and Blue Shield of Georgia has the largest enrollment in the state but lost $ 128,000 on its Medicare business in 1998.

"We expect to do better than that this year,'' says Charlie Harman, a Blue Cross vice president. He adds: "We are concerned about the direction that the federal government is going on reimbursements. We are committed as long as the fees make sense.''

But Berenson of HCFA counters that the Medicare agency ''believes, in the aggregate, that payments are adequate.''

HMOs have also run into financial problems with their commercial business, Berenson notes. While they've raised their rates to private employers by 8 percent to 10 percent for 2000 because of increased medical costs, HMOs don't have that option with Medicare.

It's not clear in what direction Medicare managed care will go, Berenson says. The HCFA's vision is to have HMOs and traditional plans compete for seniors' enrollment, including competition on quality-of-care issues. "We're working very hard to ensure a level playing field'' between HMOs and traditional Medicare, Berenson adds.

A managed care trade group, the American Association of Health Plans, says financial losses have forced HMOs to raise premiums and pare benefits for Medicare recipients. That has made HMO benefits less attractive, though they're clearly better than those in traditional Medicare, says Don White, an AAHP spokesman.

Still, recent revisions to the Balanced Budget Act have lifted future Medicare HMO payments. Both policy researcher Gold and the Urban Institute's Moon expect enrollment to increase in Medicare HMOs. Moon suggests that supplement policies may get too expensive for many Medicare beneficiaries.

Gold says many workers in job-based HMOs, satisfied with the care, will join Medicare HMOs when they retire at 65.

In Atlanta, Medicare Secure Choice is planning to run operations as usual until a buyer is found.

Cueny, the CEO, believes the managed-care plan simply ran out of time, a victim of other financial cuts experienced by the Georgia Baptist system. "A health plan, as a start-up operation, is a drain,'' says Cueny. "You need 10, 000 to 12,000 members for break-even.''

The Medicare HMO business "is a tough business,'' Cueny adds. "But all of health care is a tough business.''

Darwin Johnson also believes that given more time, Secure Choice would have turned the corner.

Will a new owner change his mind about managed care?

Johnson doesn't believe so. "I don't think a change of ownership would matter, as long as they show a continuing interest in me as a patient and member, rather than just a dollar sign."

GRAPHIC: Graphic
SLOW GROWTH
....The number of Georgia Medicare beneficiaries in managed care plans:
December 1997.... 24,252
December 1998.... 46,108
November 1999.... 55,123
Graphic
WHERE MEDICARE MEETS MANAGED CARE IN U.S.
Year........................Percent of......Increase
........................ Medicare from..........past
........................ beneficiaries.......... year
..............................enrolled
1990........................... . 3.37%
1991............................ 3.70%........ 9.96%
1992.......... .................. 4.18%........12.69%
1993............................ 4.83% ........15.70%
1994............................ 6.08%........25.22%
1995.... ........................ 8.25%........36.19%
1996............................ 11.0%........33.21%
1997............................ 14.0%........26.63%
1998............................16.14%........16.20%
1999.................... ........ 16.7%..........4.8%
Source: Health Care Financing
Administration and American Association of Health Plans

LOAD-DATE: January 2, 2000