Keeping elderly care out of the E.R.


IT WASN'T supposed to be this way.

When the federal government first began promoting Medicare HMO programs in earnest in 1996, the goal was admirable: Apply the tenets of managed care to provide comprehensive health coverage for seniors at less cost than traditional Medicare. Now, just four years later, the program is in tatters.

Sustaining huge losses, health plans have been forced to withdraw from the so-called Medicare+Choice programs in 400 counties in 33 states, stranding more than 700,000 seniors. Hundreds of thousands more seniors face the loss of their Medicare HMO as remaining insurers exit.

Maryland has not been immune from this phenomenon. In 1996, seven insurers offered Medicare HMO products. By next year, one will remain. First, national insurers withdrew from rural markets. CareFirst BlueCross BlueShield was the last to offer a Medicare HMO product statewide before mounting financial losses finally forced an exit from 17 rural counties earlier this year.

Now, the same difficult choices are being made in metropolitan areas.

UnitedHealthcare and Cigna both announced their withdrawals to take place in 2001. CareFirst projects losses this year of $7.5 million on Medi-CareFirst, our Medicare HMO product. That's on top of nearly $25 million lost in the previous four years. CareFirst sought emergency federal injunctive relief to increase reimbursement to a level that would permit CareFirst to remain in 2001. When that request was denied, CareFirst was forced to exit as well.

To remain in business, health plans cannot run deficits year after year. Even a not-for-profit like CareFirst requires reserves to invest in technology to improve service to customers and to meet tough new federal and state mandates. Premiums are raised on other products to offset losses on Medi-CareFirst .

What happened? How has such a well-intentioned program fallen apart?

In its zeal to reduce the federal deficit, Congress in 1997 dramatically reduced reimbursements paid health plans offering Medicare managed care products. Research conducted for CareFirst demonstrates the ever-widening gap between federal reimbursements and medical costs.

Since 1997, Medicare HMO reimbursements have increased only 2 percent annually. Meanwhile, medical care costs have risen 7 percent or more annually, resulting in a cumulative 23-percent gap between reimbursement and medical costs.

Thus far this year, CareFirst has spent an average of $607 a month to provide care to each Medi-CareFirst member. The Health Care Financing Administration pays CareFirst only $535 a month, and the $50 premium paid by members doesn't nearly make up the difference. That gap is expected to widen, and no relief is in sight.

Increasingly, providers -- both physicians and hospitals -- refuse to participate in Medicare HMOs because of the low reimbursement rates. Without an adequate network of physicians and hospitals, insurers cannot make managed care work. Adding to the problem are spiraling prescription drug costs. Under such distressing trends, is it any wonder that more and more health plans simply are abandoning the Medicare HMO market?

As insurers withdraw, many seniors are left without affordable prescription drug coverage. Now, both federal and state legislators are scrambling for ways to extend drug benefits to seniors. Certainly, something must be done, but the lack of pharmacy coverage is only symptomatic of Medicare's more fundamental weaknesses.

Medicare's problems must be addressed in a thoughtful, comprehensive manner. The unquestioned benefits of providing comprehensive health care to seniors through Medicare+Choice cannot be achieved without providing health plans with the financial incentives to remain in the program.

In recent years, CareFirst searched diligently for ways to continue to offer its Medicare HMO product. We refrained as long as possible from imposing premiums on our subscribers and set those premiums low, even though those decisions were sure to result in additional financial losses.

CareFirst and other health plans cannot serve the Medicare HMO market until the federal government increases reimbursement rates to reflect the actual costs of providing care. Medicare reform efforts must focus on ways private insurers and government can work together to meet the health care needs of seniors.

A steep challenge faces all of us involved in delivering health care services and shaping health care policy. The choices we make today will affect Maryland seniors for decades to come.

William L. Jews is president and chief executive officer of CareFirst BlueCross BlueShield.

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