Summertime can be an interesting time for retired seniors. It’s the season to venture out without fear of falling on the ice, to take the grandkids to the zoo, and lately, to find out if they’re being dropped by their HMO.
It’s becoming a dreaded Fourth of July ritual for millions of older Americans. By July 1 all managed care plans must notify the government whether they will, or will not, be participating in the Medicare+Choice program the following year.
Last July some 330,000 U.S. seniors, including tens of thousands from Illinois, learned their HMOs were either quitting entirely or limiting membership to counties where Medicare pays the best premiums. One HMO quit the collar counties to concentrate its efforts in Cook, where “capitation rates” are 20 percent higher.
Turns out the Health Care Financing Administration (HCFA), being a rule-loving bureaucracy, has divided the nation into hundreds of payment zones. The general rule is that HCFA pays HMOs 95 percent of its average cost to service non-HMO enrollees in that zone. The thinking is that well-run managed care should be able to save at least 5 percent versus traditional, open-ended, fee-for-service coverage.
So far so good. But inflexible government formulas tend to produce strange results.
For one, they reward counties and regions that, for one reason or another, have fostered high costs. In Miami, for instance, where doctors and hospitals are both powerful and plentiful, Medicare HMOs collect about $800 per month per enrollee. HMOs there compete for seniors with full drug benefits, health club privileges and limousine pick-up services. In Minneapolis, where large corporate insurance plans ride herd on medical costs, HMOs are paid about $300 a month. That’s barely enough for a partial drug benefit–and drug benefits are a big reason some 6.2 million seniors (16 percent of Medicare enrollees) have opted for managed care (this sentence as published has been corrected in this text).
Within metropolitan areas, HCFA reimbursement levels are more uniform but no less perverse. Why should a senior from east Du Page County who uses the same doctors and hospitals as one from west Cook County be “capitated” at $100 less per month?
Then there’s an overarching question as to whether HCFA pays HMOs enough, period. The HMO industry argues that steady cutbacks in Medicare’s fee-for-service payments (dictated by Congress’s 1997 balanced budget agreement) are now squeezing HMO reimbursements under the 95 percent formula. There’s also the rising cost of coverage mandates and appeals regulations being imposed on HMOs by state legislatures, the courts and, probably soon, Congress.
Still some experts, including those at HCFA, claim Medicare HMOs are being overpaid.
But markets don’t lie. Why would HMOs quit the program, or jump from county to county, if they were being overpaid?
Well-run managed care holds great promise for seniors, beginning with its proven ability to deliver a cost-effective pharmacy benefit. Too bad the government, with its bizarre payment system, is strangling Medicare’s best hope for continued solvency and higher levels of service.
