Seniors in Chicago are getting a better value through local Medicare HMOs than by relying on basic Medicare benefits, according to a new report, but financial turmoil in the managed-care industry is likely to end that scenario soon.
Consumer Reports, a monthly magazine produced by the not-for-profit Consumers Union, examined more than 200 Medicare HMOs and more than 1,200 Medicare supplemental insurance policies in 19 cities across the country. Chicago, where Medicare HMOs are just beginning to appear, is among the cities studied. The results will be published in the September issue.
The consumer group didn’t examine the financial health of the HMOs or other health plans, but said its studies, which ended this spring, comprise a warning based on the industry’s volatility.
“Things are changing, and these plans don’t have a lot of stability,” said Trudy Lieberman, Consumer Reports health policy editor. People already are finding benefits offered when they signed up with a Medicare HMO now are being phased out, she said.
Medicare, the national health-care program that covers people ages 65 and over and disabled people, offers basic benefits through a fee-for-service plan. Medicare patients pay a preset premium of about $50 a month–usually deducted from their Social Security checks– and their doctors bill Medicare directly for services.
Medicare HMOs charge the same premium as Medicare, but they contract directly with the government program. In return, they receive a set monthly amount to provide their members with medical care.
To entice people to sign up with them rather than use basic Medicare, the HMOs typically offer certain extras at no additional cost–more dental care or prescription drug benefits than Medicare covers, for example.
Lieberman said seniors should be leery of the allure of extra benefits and watch closely if there are any changes in premium rates. The economic fundamentals of the managed-care industry are poor: “How long are these HMOs going to continue to offer these premiums at no cost to seniors?” she asks.
Though Chicago’s Medicare HMO plans fared well in the Consumer Report study, the information is already outdated, thanks to mergers and growing financial troubles in the industry. Local analysts say they don’t expect Medicare HMOs here–or anywhere–to continue to offer seniors as many extras in the future without raising premiums. It’s already happened in many markets across the country.
“The good times are behind us in terms of what Medicare HMOs will pay for,” said Todd Swim, a benefits consultant with William M. Mercer and Associates in Chicago. “They have offered prescription drugs, dental coverage, hearing coverage, but those days are somewhat behind us. They may have offered too much, and now it’s costing them.”
Analysts said Medicare HMOs in Chicago haven’t felt the financial strain yet because fewer than 10 percent of the area’s seniors belong to them. In markets where Medicare HMOs have had problems, up to 50 percent of seniors in certain counties are customers.
Humana Inc. of Louisville and Minneapolis-based United HealthCare Corp. terminated their merger earlier this week after United reported a $900 million charge, largely related to its decision to cease operations of Medicare HMOs in certain markets.
United is also planning to cut back its efforts to enroll customers in many of its newly launched Medicare HMOs, but the company said Chicago is a well-established market and won’t be affected.
United’s Medicare HMO plans have nearly 60,000 customers in the Chicago area, making it the area’s largest Medicare HMO. In Illinois, there are more than 104,000 people enrolled in Medicare HMOs, with the majority coming from the Chicago area, Mercer statistics indicate.
But analysts estimate Medicare HMOs will grow as the federal government attempts to control Medicare spending. The Health Care Financing Administration expects the share of seniors enrolled in Medicare HMOs to double to 30 percent of the senior population by 2005 from 15 percent currently.
“A lot of the bleeding in HMOs has been on the Medicare risk side,” said Dave Fortosis, a consultant with Hewitt Associates in Chicago.
“To make up for those losses, prices are either going to ratchet up or the design of the plan is going to become less attractive, which means the price of the co-payment for the prescription drugs will rise.”
