HMO WOES

November 1998
		On January 1, almost half a million elderly and disabled Americans will lose their health coverage when several managed care plans no longer cover Medicare patients. What is the fate of Medicare? What options do people have? Experts answer your questions.

How do I know if I will lose medical coverage? Is the pullout legal? Why is healthcare so expensive? Can people just go back to Medicare? Why don't we raise rates? Does the medical industry charge too much? How can HMO's work with the government?

Jim Golden of Hauppauge, NY, asks: Important issues are raised by the loss of Medicare HMO coverage. Why should we care, the Medicare HMO option is relatively new, doesn't the loss just return patients to the pre-HMO status quo? Karen Ignagni responds: There are important reasons that we shouldn't be content with returning patients to the "pre-HMO status quo." HMOs participating in Medicare have made care much more affordable for millions of seniors, provided expanded benefits (such as coverage for outpatient prescription drugs) and are improving the quality of health care. At the same time, they have produced savings to the federal government through what analysts call "spillover effects" that help to stabilize the Medicare trust fund. It is important to maintain an effective health plan option so that seniors and disabled persons today benefit from the affordability, broader benefits and quality of care offered, and so that we can tackle the very substantial financial challenges that Medicare faces in the not too distant future. Diane Archer responds: The reason to care is that traditional Medicare has become unaffordable for many people on Medicare. (The average income of someone on Medicare is about $15,000.) Medicare supplemental insurance is very expensive and prescription drugs are not covered. The challenge is to design a health care delivery system that is not so volatile and that offers comprehensive affordable health care. Tricia Neuman responds: The issue of Medicare HMOs dropping their coverage points to a broader issue that affects all Medicare beneficiaries. But the concern for those who are losing their Medicare HMO coverage, and returning to traditional Medicare, is that they may also be losing access to affordable, supplemental benefits, such as prescription drugs, and may face higher out-of-pocket expenses for their health care. Medicare program covers basic medical care, such as hospital, physician and home health care. It does not cover outpatient prescription drugs and has high cost-sharing requirements. That's why about a third of all Medicare beneficiaries purchase supplemental insurance, known as Medigap, to fill in the gaps in Medicare's benefit package (paying premiums that range from about $80 to $300 per month) and another third have retiree health benefits to supplement Medicare. A growing number of beneficiaries have been enrolling in Medicare HMOs because HMOs have been able to offer their members relatively generous benefits, such as prescription drugs, for relatively low or no premiums. Most beneficiaries in Medicare HMOs do not pay an additional premium for these extra benefits, and those who do pay on average $36 per month. Medicare HMOs are able to offer these attractive benefits because the law requires them to provide additional benefits to enrollees or return excess payments to Medicare, if the plan's costs are less than the Medicare payment amount. These benefits - especially prescription drug coverage -- are extremely valuable to elderly and disabled people on Medicare, because they are more likely than younger people have health problems and use medications on a regular basis. The health insurance environment for Medicare beneficiaries is changing rapidly - not only because HMOs are pulling out, but also because Medigap premiums are rising rapidly and retiree health benefits are eroding. If Medicare HMOs are unable to provide these highly desired benefits and make a profit, and if options for affordable supplemental coverage diminish, policymakers may want to consider strategies for improving benefits under traditional Medicare as they grapple with fiscal challenges facing the program.   Click to continue...