Medicare HMOs Continue To Cut Programs Across Country


Three short years ago Congress was pushing for increased use of “managed care” plans as one way to stave off a looming financial crisis for the federal Medicare program. Today the promise of managed care continues to be unmet—largely because of Congress’ own actions.

The federal government picks up almost 40% of all health care costs in this country, with almost half of that amount (just under 19%) paid by the Medicare program. Medicare covers over 13% of all American citizens. The program offers hospitalization, out-patient care, hospice and home health care, together with a limited nursing home benefit, to most citizens over age 65, the totally disabled and a handful of other beneficiaries.

Medicare HMOs (Health Maintenance Organizations) first began to sign up significant numbers of participants in 1995, and by 1996 Tucson had more of its Medicare recipients enrolled in HMOs than nearly any other community in the country. The New York Times, in an article published in March, 1996, predicted that the Tucson experience would soon sweep the nation, and that Medicare HMOs would continue to grow as seniors learned they could save money and still get good care.

Then Congress derailed its own HMO plans. In passing the Balanced Budget Act of 1997, Congress made it much more difficult to operate a profitable Medicare HMO. The result: in the next year (1998), over 400,000 HMO members were dropped when their health plans curtailed coverage in particular areas, especially in rural communities.

HMOs did not end their flight away from Medicare programs in that year, either. In 1999 another 327,000 enrollees were dropped by their HMOs, and almost a million more will lose coverage in the year 2000.

None of those HMO participants will actually lose Medicare coverage, of course. As HMOs pull out of the Medicare market, individual plan members are free to switch to another HMO (assuming another HMO offers coverage in their area) or return to “traditional” Medicare. They may find the choice of doctors or the extent of coverage sharply curtailed, however.

The 1996 New York Times article cited strong HMO competition in Tucson, with four companies offering different programs. That competition has now shrunk to just two HMOs in the Tucson area: Intergroup of Arizona, Inc., and PacifiCare of Arizona, Inc. (PacifiCare actually offers three slightly different programs under its Secure Horizons name). One HMO (Intergroup) offers coverage in Nogales, and four are active in parts of Pinal County, but the rest of Southern Arizona has no Medicare HMO coverage available. That experience is mirrored across the country as HMOs pull out of Medicare, particularly in rural areas.

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