Medicare MCOs to Drop Coverage for ‘Several Hundred Thousand’ Beneficiaries; Administration to Ease Rules

The Bush administration announced on Aug. 29 that HMOs participating in Medicare+Choice will drop health coverage for "several hundred thousand" Medicare beneficiaries next year, the Los Angeles Times reports. To help prevent "greater losses," Centers for Medicare and Medicaid Services Administrator Thomas Scully said that the administration plans to ease rules for health plans participating in the program (Rosenblatt, Los Angeles Times, 8/30). The administration will allow HMOs to offer Medicare plans in selected areas of a county, rather than the entire county (Wall Street Journal, 8/30). In addition, CMS will allow HMOs to negotiate contracts with employers to provide benefits for retirees older than 65 similar to the coverage that they received as employees (Appleby, USA Today, 8/30). The agency also will allow HMOs to develop special plans for companies and groups of employers (Los Angeles Times, 8/30). Scully said that the agency would reduce "time-consuming audits" for health plans with "good track record[s]" (McQueen, AP/Detroit Free Press, 8/30). He added that CMS would ease requirements for HMO marketing materials and said that he has urged a number of health plans to participate in Medicare+Choice next year (Goldstein, Washington Post, 8/30). "We're trying to stabilize the program. We're trying to turn this thing around," Scully said. Although Scully said he could not yet specifically state how many beneficiaries would be affected by pullouts, he added, "It could have been a lot worse." In 2001, more than 900,000 Medicare beneficiaries had to enroll in new health plans or return to traditional fee-for-service Medicare after many HMOs withdrew from Medicare+Choice. Scully said that HMOs, which cover 15% of all Medicare beneficiaries, have until Sept. 17 to announce whether they will cover beneficiaries in certain markets next year (Los Angeles Times, 8/30).

Funds Sought for Urban Areas
Scully also "made clear" that he "sympathizes" with HMOs, which have said that Medicare offers them "too little" reimbursement for services (Washington Post, 8/30). He said that HMOs in high-cost urban markets -- where most Medicare+Choice patients reside -- "have been hard pressed financially" since Congress passed the 1997 Balanced Budget Act, which restricted reimbursement rates for HMOs in urban markets and increased rates for those in rural areas (Los Angeles Times, 8/30). Scully urged Congress to boost reimbursement rates for Medicare HMOs in urban areas and plans to ask for "very extensive legislative authority" next year to modify Medicare+Choice rules (Washington Post, 8/30). "Congress needs to come back and tweak the formula and put the money where the program is popular," Scully said, adding, "The money is in the budget for this. It just needs to be allocated in a different way" (Los Angeles Times, 8/30).

Rx Benefit in Doubt?
The Los Angeles Times reports that the further HMO pullouts from Medicare+Choice may "increase pressure" on Congress to reduce Medicare costs even as lawmakers consider adding a prescription drug benefit -- which is estimated to cost at least $300 billion over 10 years -- to the program (Los Angeles Times, 8/30). In addition, the Washington Post reports that the White House has "hinged" plans to "modernize" Medicare on Medicare+Choice, predicting that private health plans will reduce costs and offer "better coverage" (Washington Post, 8/30). Scully said that the administration "remains committed" to Medicare reform, including adding a prescription drug benefit. However, HHS Secretary Tommy Thompson said last week that new budget estimates may "threaten" plans to add a drug benefit to Medicare (USA Today, 8/30).