Only recently, HMOs were courting people like John Price. Now they're running from them.
Having just turned 65, Price, a Fallston retiree, joined Prudential HealthCare's Medicare HMO on June 1. As recently as Sept. 19, he spotted a Prudential recruiter at a senior fair at a mall and told the recruiter how happy he was with the HMO. He even picked up brochures to give to his friends.
A few days later, Price got a jolt. Prudential sent him a letter saying it was dropping its Medicare HMO business.
Price is one of more than 35,000 Maryland seniors notified over the past few weeks that they would be bumped from their HMOs, as four companies left the Maryland Medicare market and a fifth cut back its service areas.
Nationally, more than 300,000 seniors are being dropped by HMOs, according to the American Association of Health Plans, an HMO trade group.
The sudden retreat of the HMOs raised questions about why managed care companies were leaving a business that only recently was seen as highly profitable.
It left lots of confused and angry seniors, scrambling to find other coverage and raising enough noise that politicians, from Gov. Parris N. Glendening to President Clinton, began calling for a solution.
Clinton said Thursday that the Medicare HMO pullouts "have brought uncertainty, fear and disruption into the lives of tens of thousands of older Americans across the country."
Price poured his feelings into a three-page letter to Prudential -- letter he said he might or might not mail. Price said he was "incensed" that HMOs would market plans to seniors, then withdraw coverage. The health plans, he complained, "seem concerned not about health care but about high profitability."
Others joined the chorus of complaints.
"I've been a volunteer for eight years, and this is the busiest I've seen it," said Bob Breiner, a retiree himself who is an insurance counselor for the Baltimore County Department of Aging. "Seniors don't like change. It took them a while to make the decision to get into a Medicare HMO, and now they'll have to switch around."
While there are HMOs remaining in the market, some seniors will have to switch doctors if they pick another plan. They may also have to pay a premium or have different benefit levels.
Price has been calling HMOs to find one that will work for him. Often, he said, the line has been busy, or he's had to settle for leaving his name and address in a voice-mail system.
Mary Anne Heckwolf, vice president for government programs at Blue Cross and Blue Shield of Maryland (which offers a Medicare HMO called MediCareFirst), said her customer service center, which usually gets 2,500 calls a week, fielded an extra 1,000 calls one recent week.
Seniors abandoned by their HMO may also choose to return to traditional fee-for-service Medicare, which would allow free choice of doctors and hospitals but provides fewer benefits and requires deductibles and co-payments.
But many of those seniors took the plunge into an HMO after enticements of extra benefits and lower out-of-pocket costs.
"The concept of the plans was too good to be true -- generous benefits and no premium," said Tricia Neuman, director of the Medicare Policy Project of the Kaiser Family Foundation (which has no connection with the Kaiser Permanente health plan).
Cheaper than Medigap
HMOs were not really offering something for nothing. The federal Medicare program was willing to pay them a monthly premium for each enrollee. But to enrollees who paid no additional premium, it offered a savings from so-called Medigap policies that cost $100 a month or more.
Medicare hoped to save money by paying the HMOs a little less than it would cost to treat people on a fee-for-service basis. And the HMOs thought they could make money by negotiating lower rates with doctors and other providers (such as labs) and controlling care through "gatekeeper" physicians.
In fact several early studies suggested that the HMOs were being overpaid, since they were attracting younger, healthier seniors who required less care.
Seeing solid profits, more HMOs sent recruiters to senior centers and homes. Nationally, Medicare HMOs went from 2 million members four years ago, to 3.9 million two years ago, to 6.5 million now. In Maryland, the curve was even steeper -- from about 1,000 four years ago to 34,000 two years ago to about 90,000 now.
As the HMOs marketed aggressively, however, they may have been signing up members who required more care.
"They might have come in thinking this was easy money," said Neuman, "and offered benefits that attracted a sicker population." In particular, she said, the HMOs offered some coverage for prescription drugs, not covered by regular Medicare or by all but the most costly Medigap policies.
Joe Baker, associate director of the Medicare Rights Center, a New York-based advocacy group, said, "as they got more
penetration, sicker individuals were signing up."
Karen Ignagni, president of the national HMO trade group, said, "The fastest growth in Medicare [HMOs] is people over 85 and the disabled. The additional benefits bring these people in, and provide incentive for people who are ill" to join HMOs rather than staying in traditional Medicare.
With medical costs rising, HMOs, in Maryland and nationally, began seeing red ink in their Medicare books.
MediCareFirst, the Maryland Blue Cross Medicare HMO, lost about $4 million last year, and began charging a $75-a-month premium in 16 rural counties where the federal reimbursement rate is lower. It expects to break even this year, according to Heckwolf, largely on the strength of the premium revenue.
Influx feared
Optimum Choice, a Rockville-based HMO, cut service to some counties where reimbursement was low. Last year, however, it paid out $1.23 in claims for each dollar of Medicare premium revenue. This year, that was down to $1.05 -- but, afraid of an influx of new patients from the other plans, it decided to pull out.
United HealthCare of the Mid-Atlantic, after taking a $120 million charge in its most recent quarter related to Medicare losses -- touching off a plummet in stock prices and killing a deal United had to acquire Humana Inc. -- decided this month to pull out of 86 counties, including 14 in Maryland.
'Low-margin' business
That decision was helped by new federal rules. "They were limiting our revenue increases to 2 percent, but medical care costs are rising 4 to 6 percent," said Richard Zoretic, CEO of United. "Despite what the public thinks, and some members of Congress think, ours is a low-margin business."
While some are pulling out, some are staying. Darlene Frank, a spokeswoman for the regional operation of Kaiser Permanente, said her plan is not losing money on Medicare.
She said Kaiser was able to manage medical costs through "care management practices" it had developed with Medicare patients other markets and by relying on a group of physicians that contract exclusively with Kaiser.
Others in the industry suggest to be profitable, a plan needs a large enough group of patients. "You need at least 10,000 to make a go," said Jeannine Rivet, chief executive of the health services segment for Minneapolis-based United HealthCare. She participated in the market-by-market review in which United decided where to pull out.
A 10,000 benchmark leaves MediCareFirst and United comfortably above that level -- and they're still in the market. Those that are leaving had enrollments in Maryland between 6,000 and 11,000.
With some plans remaining, every Maryland senior has an HMO available, although MediCareFirst is the only remaining choice in rural counties, and charges a premium in those counties.
Nationally, about 50,000 who have been in HMOs will be left without a managed-care option, according to the federal government.
But that doesn't ease the minds of people like John Price, whose doctor is not currently in any other plan. He may have to choose between changing doctors or returning to fee-for-service Medicare, with its higher out-of-pocket costs.
Anxiety about next year
And people are uneasy about the future. "There's anxiety about what will happen next year," said Michelle Holzer, coordinator of the state senior Health Insurance Counseling and Advocacy Program. "Will they raise their rates? Will they drop prescription coverage? Will they be here at all?"
Clinton said Thursday that he was asking his administration and Congress to study "all possible legislative options that can be included in the next budget I send to Congress."
Ignagni, the trade association president, said of this year's pullouts, "This is the tip of the iceberg. Unless this is fixed, you could see more and more plans exiting next year." She said, however, she is detecting a willingness to reconsider program rules, even from members of Congress normally hostile to managed care.
But any solution could bump against budget-balancing goals. In fact, said Neuman, in trying to encourage more managed-care options at the same time it was trying to control Medicare costs, the government "set up goals that could be mutually exclusive."
Medicare HMOs in Maryland
Who's out
The following companies have pulled out of the Medicare HMO market in Maryland, effective Jan. 1. Subscribers to these Medicare HMOs have until Dec. 1 to select new HMOs or return to traditional fee-for-service Medicare.
Aetna U.S. Healthcare. Announced Sept. 1 it would pull out of Maryland and five other states. About 11,000 subscribers in Maryland, with largest enrollment in Baltimore.
NYLCare. Acquired by Aetna U.S. Healthcare; out of Maryland as part of Aetna's move. About 7,000 Maryland subscribers, with the largest numbers in Montgomery and Prince George's counties.
Prudential HealthCare. Announced Sept. 22 it would pull out of Maryland, District of Columbia and all or part of four other states. About 8,000 Maryland subscribers, most in Baltimore city and county.
Optimum Choice. Announced Oct. 1 that its parent company, Mid Atlantic Medical Services, Inc., would stop Medicare HMO operations altogether. About 6,400 Maryland members, with the largest enrollment in Montgomery County.
Who's partly out
United HealthCare announced Oct. 1 it was dropping its Medicare HMO in 14 Maryland counties, covering the Eastern Shore, Western Maryland and Southern Maryland and leaving about 3,000 members to find new coverage. United will continue to operate its no-premium Medicare HMO in Anne Arundel, Baltimore city and county, Carroll, Cecil, Charles, Harford, Howard, Montgomery and Prince George's; it has about 18,000 members in those counties.
Who's in
The following companies are remaining in the Medicare HMO market in Maryland, with no change in service area:
MediCareFirst, the Medicare HMO of FreeState Health Plan. Offered with no premiums in the following: Baltimore; Anne Arundel, Baltimore, Carroll, Harford, Howard, Montgomery and Prince George's counties. Offered in all other Maryland counties with $75-a-month premium.
Kaiser Permanente. No premium; available only in Baltimore, Baltimore County, Howard, Montgomery, Prince George's and limited sections of Anne Arundel and Charles.
Who's coming
CIGNA. Details not yet announced.
Where can I get information?
From the HMOs. From county aging departments. And from the state's toll-free senior information lines, 1-800-AGE-DIAL (1-800-243-3425) and 1-888-307-2532.
Pub Date: 10/11/98