CareFirst BlueCross BlueShield said yesterday that it will shut the state's largest Medicare HMO, with 32,000 members, at the end of the year, saying low federal payments were causing the program to lose money. With two other Medicare HMOs, UnitedHealthcare and CIGNA, having announced last month that they were pulling out of the Maryland market, more than 55,000 seniors in the state will have to find new health coverage by the end of the year.
The only other Medicare HMO operating in Maryland, Kaiser Permanente, with about 14,000 members in the state, said yesterday that it will remain if federal regulators approve its plans for next year. The cutbacks in Maryland are part of a broad national trend. The American Association of Health Plans, a trade group, estimated last week that more than 700,000 of the 6.2 million Medicare HMO members nationally would be dropped by their plans.
The HMOs began their exits a few years ago, when the federal government changed its method for calculating how to pay them. They had become popular with seniors because, while the HMOs limited the choice of doctors, they covered preventive care and other costs that traditional Medicare doesn't cover.
"Prescriptions were the best thing," Ruby L. Shipley, 71, of Marriottsville, said yesterday. She said she takes four different medications regularly, the most expensive one costing $100 for a three-month supply. She joined one Medicare HMO a few years ago. It left the market, and she switched to CareFirst, which left Carroll County at the beginning of this year.
Now, she said, she pays $1,480 a year - much more than the premium for a Medicare HMO - for a Medigap supplemental insurance policy that pays for some of her prescriptions.
CareFirst says it costs $608 per month to provide care for the average senior in the program, but it is receiving only $585 per member per month - a $50 premium and the rest a reimbursement from the federal government. CareFirst lost $12 million on its Medicare HMO last year and, despite dropping coverage in 17 rural counties where reimbursement was lowest, was projecting a loss of $7.5 million this year.
"We want to be sure everybody understands what a very difficult decision this was for CareFirst," said Mary Anne Heckwolf, the insurer's vice president for government programs. Continuing losses - $27 million since 1996 - meant "subscribers in our commercial business are paying for what the federal government should be paying for."
She said CareFirst had considered premium increases, benefit changes and an enrollment cap, but concluded that it could not put the program together in a way that would offer desired benefits at an affordable price.
CareFirst has more than 20,000 enrollees - about two-thirds of its Medicare HMO membership - in Baltimore and Baltimore County.
Kaiser Permanente has about 4,000 members in the Baltimore area, with the rest of its Maryland members in the Washington suburbs. Susan Whyte Simon, director of media relations, said financially "we are keeping our head above water in the Baltimore area - barely."
For the Baltimore-Washington area as a whole, she said, "It's a continual struggle, and we've had to look at a variety of potential changes."
Kaiser has been charging a $19-a-month premium in Maryland, compared with the $50 charged by CareFirst.
Susan Pisano, vice president of the HMO trade group, said she hopes Congress and the Clinton administration can agree on improved reimbursements in time for HMOs to reapply for next year, even if they have announced pull-outs based on current payment levels.
"We have seen an escalating recognition that this is a program in crisis and that brings value to beneficiaries," she said.
Nancy-Ann DeParle, administrator of the Health Care Financing Administration, the agency that runs Medicare, said last month, "While private-sector Medicare HMOs are paid enough to provide the basic Medicare benefits, the payment formula set by law doesn't always pay enough for the extra benefits - such as prescription drugs - that they use to entice beneficiaries and make enough profit."
Tricia Neuman, director of the Medicare Policy Project of the Kaiser Family Foundation (which has no connection with the Kaiser Permanente health plan), said Medicare historically overpaid HMOs, but has found it difficult to control costs while still offering high enough payments to keep health plans participating.
"The problem is that you've got two stakeholders with competing goals," she said. "The plans are accountable to Wall Street, and Medicare is accountable to Congress."
Also, Neuman continued, while the federal budget surplus has given momentum to the idea of increasing Medicare payments, other health providers, such as hospitals, nursing homes and home health agencies, also are seeking more reimbursement.
"There will be, I don't want to say a feeding frenzy, but a lot of providers circling around the surplus," she said.