Even a huge increase in federal money may not be enough to lure HMOs providing Medicare coverage back to the Chicago area, where an exodus of plans left thousands of seniors without drug coverage and other benefits.
As part of the Medicare reform package signed into law Monday by President Bush, HMOs operating in the Medicare business next year will begin receiving a new influx of funding–$1.6 billion in payment increases to be distributed during the course of three years.
The higher payments are designed to satisfy the health insurance industry’s complaints that Medicare didn’t pay health plans enough to provide adequate benefits to seniors.
Medicare HMOs became popular as part of the Balanced Budget Act of 1997 that allowed health plans to pool Medicare money and leverage it to provide basic Medicare benefits, plus extras such as drug coverage. But in recent years, scores of health plans left the business, citing low returns, and left hundreds of thousands of seniors without coverage.
In some parts of the country, health plans are expected to return to the Medicare market, although plans aren’t saying where, according to the industry’s trade group. Where they exist, insurers say HMO plans will be able to serve as a bridge of sorts for seniors until 2006 when a broader Medicare drug benefit begins.
“What we are anticipating is that health plans will re-evaluate their participation in the program as well as benefit structures in light of the stabilization fund that will go into effect in 2004,” said Mohit Ghose, director of public affairs for AAHP-HIAA, the trade group representing the health plan industry. But health plans operating in Chicago say they are deferring decisions until they can see exactly what the payment increases are from Medicare. Such specifics are expected to become available in the next two months.
“At this point, it’s just too early for us to tell how the bill will change things going forward,” said Valerie Kennedy, spokeswoman for Humana, the only Medicare HMO still operating in Medicare’s managed-care program in the Chicago area.
Giants Aetna Inc. and United Healthcare parent UnitedHealth Group left the market complaining of unsatisfactory reimbursement.
Seniors and some industry analysts say that lack of trust by health plans underscores a potential flaw in the Medicare reform package.
Seniors worry additional money would not be used to restore benefits, and health plans admit regulations allow them to use the money to pay doctors and hospitals in order to keep them from leaving their networks. Therefore, benefits could stay the same and not expand at all.
Some seniors also are skeptical about HMO plans and say they could leave again or cut back benefits in the future if Congress doesn’t maintain adequate funding levels.
Herb Branson, 69, watched his drug benefit dwindle from $1,000 a year in 1999 to nothing by 2001 when he was enrolled in United Healthcare of Illinois Inc.’s Medicare HMO. He eventually switched to Humana because it was the only Medicare HMO left in the Chicago area that provided drug coverage.
Branson has since opted to take prescription coverage through a state-sponsored plan for low-income seniors because it is cheaper and more adequate for his needs than the drug benefit offered through Humana’s Medicare HMO, he said.
Branson isn’t optimistic Humana or other HMOs will restore benefits they have cut, given their history of altering coverage depending on federal reimbursement formulas.
“I doubt they will do much on the prescriptions,” said Branson. “It is just beyond me that they would suddenly offer prescriptions. I don’t think they can profit from it.”
Neither Aetna, which left three years ago, nor UnitedHealth, which left the Chicago Medicare market two years ago, will commit to returning here, although both plans have business elsewhere. The two plans say they are weighing their options across the country and the specific rate increases the government will outline in the coming weeks.
“I am not at liberty to discuss markets that United would or would not enter,” said UnitedHealth spokeswoman Joyce Larkin.
Aetna said the company is in the process of assessing whether to expand in Chicago or elsewhere.
“Aetna views this legislation as significant strengthening of the Medicare program,” said spokeswoman Wendy Morphew. “We view it as benefiting senior citizens, particularly in terms of greater consumer choice and prescription drug coverage.”
Largely because of the drug benefit, as many as 17 percent of Medicare beneficiaries, or more than 6 million of the 40 million Americans covered by Medicare, were enrolled in HMOs during the so-called Medicare+Choice plan’s peak enrollment. Now, only about 11 percent of Medicare beneficiaries, or about 4 million people, are enrolled in Medicare HMOs.
There are 42,000 Medicare recipients left in Humana’s Medicare HMO that operates in parts of Cook, Kane and Kendall counties. Five years ago, there were about 150,000 seniors, or one in 10 local Medicare beneficiaries, enrolled in one of several Medicare HMOs.
Analysts say health plans that also want to be in the business of providing a drug benefit through Medicare in 2006 may want to get back in the Medicare HMO business as a way to begin marketing to seniors early.
Health plans and pharmacy benefit management companies are expected to have a key role in the Bush administration’s effort to have the private sector involved in providing drug coverage.
“Somebody like an Aetna and United may very seriously consider coming back into this market for Medicare,” said Todd Swim, a health benefits analyst with Mercer Human Resource Consulting. “In the marketplace today, there is a tremendous need for that kind of type of coverage.”
