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?

Al Benson of Tucson, AZ, asks: My mother is about to be 97, and has Cigna Medicare plus. The comments on allowing the HMO's to raise rates to cover increased costs made perfect sense. Why didn't PBS challenge more strongly the contrary view regarding "letting everyone raise rates?" Tricia Neuman responds: Medicare HMOs are permitted to raise rates and change their benefits every year when they submit applications to the Health Care Financing Administration for Medicare contracts. After they submit their applications, however, they are not permitted to make revisions in their applications that affect benefits or premiums. Earlier this year, many Medicare HMOs asked to revise their applications, perhaps because they under-estimated the impact of HMO payment reforms enacted in the Balanced Budget Act of 1997, the cost of complying with new Medicare regulations issued that were issued after they filed, and the cost of caring for elderly and disabled Medicare beneficiaries. Because there is a lot of concern about beneficiaries who are affected by plans pulling out of selected markets or reducing their service areas, there is likely to be Congressional oversight on this issue early in the new year. Some members of Congress have already called for additional measure that would encourage plans to remain in the market, and the Administration is considering a variety of strategies to halt the departure of plans from Medicare. While it would appear that plans will be unable to raise rates or cut benefits further than the levels specified in their applications and Medicare contracts for the next year, many expect benefit reductions and premium hikes in the future. Karen Ignagni responds: AAHP believes that modest flexibility on rates this year would have produced important benefits for seniors. In all likelihood, many of the plans forced to withdraw would have been able to remain in the program. Seniors would have paid a bit more in premiums and copays, but they would have been able to keep the plan of their choice and still would have received far broader and more affordable coverage than is available in the traditional Medicare program. Diane Archer responds: HMOs will always need to raise rates to cover increased costs unless the government pays them more money. But, in fact, the government intends to reduce HMO payments, not increase them. When the HMOs can raise rates as much as they need in order to cover costs, it makes it difficult for people who join HMOs to budget for their health care. In fact, it can force them out of the HMOs if they cannot afford the costs. Unfortunately, the increase can be significant from one year to the next and people don't know in advance what the increase will be. Medicare was designed initially to cover people's reasonable and necessary services no matter what the cost. Now, with HMOs, the government pays a fixed fee per person to the HMO, allowing the government to contain its costs. However, if the government payment is not high enough to cover the HMO's expenses, this payment system only shifts costs and increases health care expenses for people on Medicare.   Click to continue...