Posts Tagged ‘Intergroup’

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.

New York Times: Tucson “A Model For Medicare’s Future?”


Nationwide, fewer than ten percent of Medicare recipients belong to Health Maintenance Organizations. In Pima County, HMOs serve 42% of participants in the federal health care program for the elderly and disabled.

Last Tuesday, a front-page article in the New York Times analyzed the Pima County experience with Medicare HMOs. According to the Times‘ headline, “H.M.O.’s [sic]in Tucson May Offer A Model for Medicare’s Future: Many Retirees Pick Managed Care and Like It.”

Only a handful of other communities (including Riverside and San Diego in California and Portland, Oregon) have HMO participation above 40% among Medicare recipients. Arizona’s HMO penetration into Medicare is generally high, and Pima County has the highest participation in Arizona.

Because Tucson has four vigorous and competitive HMO providers, their programs tend to provide more benefits than in some other communities. Pima County’s elderly residents can choose between Partners Health Plan, Intergroup, FHP and Cigna Health Care of Arizona. The competition has generated some real savings for participants.

Benefits for Members

HMO participants in Pima County have come to expect $5 doctor’s visits, free hospitalization, free X-rays, mammograms and lab tests, $26 eyeglasses, and even free rides to medical appointments. More recently, the competition has resulted in coverage for medications; some participants pay as little as $7 for a three-month supply of most drugs, while “traditional” Medicare provides almost no coverage for prescriptions.

Medicare HMO participants seem generally to be pleased with their plans. Just over 1% of plan participants quit and return to regular Medicare coverage each month. Polls show customer satisfaction with Medicare HMOs is higher than traditional Medicare, employer-sponsored HMOs or even regular indemnity insurance plans.

Future of Medicare?

The Pima County experience with Medicare HMOs may become the national norm in the next few years. An analysis prepared by an HMO industry trade group predicted that national participation at 40% (just below Pima County’s level) would save Medicare 21% of its annual costs. Since this represents almost exactly the $270 billion in savings promised by the Republic Congress, the allure of HMOs is obvious.

The New York Times article also notes that HMOs may save less money than anticipated for one simple reason: they market their alternative services to the relatively younger, healthier population of Medicare recipients who require the least medical care. Since HMOs are paid 95% of the average cost of Medicare for each enrollee, such “skimming” could easily cause the total cost of Medicare to actually rise, as the average cost of providing care to the relatively healthy HMO participants could be less than that 95% figure.

Government studies have attempted to determine whether the payments to HMOs are fair, given the patient population attracted to HMOs. The results have been inconclusive, with some evidence suggesting that the cost of care may be increased. It is clear, however, that the average cost of care in Arizona is lower than the national average for Medicare.

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