LTC Bullet: HMOs Struggle with Medicare
Wednesday September 9, 1998
The New York Times reported today (9/9/98) that HMOs squeezed
by falling government
payments and expensive benefit packages are either ending or scaling
back their Medicare
Aetna, Pacificare Health Systems, Oxford Health Plans, Foundation
Health Systems, Kaiser Permanente, and Blue Cross and Blue Shield
associations have all cancelled Medicare plans in parts of 13
states over the last year, according to the Times.
HMOs are otherwise modifying their Medicare plans to protect
already thin operating margins.
HMOs are cutting expensive perks including prescription drug programs
Medicare enrollees in the first place. Capping payments to doctors
is another cost control
measure now being employed.
HMO Medicare plans face an uncertain future. The Balanced Budget
Act of 1997 (BBA) re-
duced the annual increase in Medicare payments to HMOs. In some
counties, the annual
increase has been cut to 2%, less than half the national medical
cost inflation rate. The BBA
also created Medicare managed care alternatives to HMOs which
will soon compete for the
same Medicare clientele.
No doubt HMO executives are experiencing deja vu. HMOs face
the same dilemma with
Medicare plans as they have already experienced with their Medicaid
programs: How to
provide quality care with inadequate resources. (See LTC Bullet:
"HMOs Get Dose of
Medicaid Reality" 7/6/98 at www.centerltc.com).
The government for its part continues to encourage HMOs to
enroll Medicare patients
on the theory that better cost control is the secret to success
in the Medicare market.
Without adequate resources to provide quality care, however, Medicare
HMOs can survive
only for so long.
Readers should consider these developments in the context of
government plans to extend
managed care and capitation to the provision and financing of
long-term care. What did the
sage say? ... Those who do not learn from history are doomed to
Source: David J. Morrow, "After Recruiting Elderly, Many
HMO's Now Retreat," New York
Times, September 9, 1998. http://www.nytimes.com/yr/mo/day/news/financial/hmos-elderly-care.html