58 MCOs Reduce Medicare+Choice Participation for 2002, 536,000 Seniors Affected

Medicare+Choice plans will drop about 536,000 seniors next year, HHS announced on Sept. 21, the Washington Post reports (Okie, Washington Post, 9/22). Fifty-eight health plans said that they will reduce participation in the program (AP/Omaha World-Herald, 9/23). Of the plans, 22 are withdrawing entirely and 36 are reducing their service areas (CMS release, 9/21). Most of the seniors who will lose their current HMO coverage will be able to find another Medicare+Choice plan in their area, but about 38,000 seniors live in areas with no other option except to return to traditional fee-for-service Medicare. Another 50,000 will only have access to a Medicare private fee-for-service product, meaning 88,000 will not have access to a managed care organization through Medicare+Choice. While there is no "national breakdown" showing which areas the pullouts will impact, most of those affected live in urban and suburban areas, American Association of Health Plans president Karen Ignagni said (Washington Post, 9/22). Last year, health plans covering almost one million seniors ended their participation in Medicare+Choice (AP/Omaha World Herald, 9/23). Centers for Medicare and Medicaid Services administrator Tom Scully said, "Though we are disappointed with the further program contraction, the number of beneficiaries who are affected by the decisions is smaller than many had predicted and lower than [the number] affected last year" (Rundle, Wall Street Journal, 9/24).

The Plans
The largest Medicare+Choice organization, PacifiCare, will drop 64,200 beneficiaries in California, Texas, Arizona and other states. ConnectiCare will pull out of two counties in Connecticut, affecting 24,700 beneficiaries. Aetna will drop 38% of its 277,000 Medicare beneficiaries, many of whom live in New Jersey and Pennsylvania (Pear, New York Times, 9/22). In addition, Humana will drop about 14,000 seniors in the Louisville, Ky., area, and United Healthcare plans to drop all Medicare+Choice plans in Arkansas, as well as some in Ohio, Florida and Illinois (Bowman, Scripps Howard News Service/Nando Times, 9/21). Health Net of Los Angeles will drop about 14,000 seniors in nine counties in California and New York. Last week, Sierra Health Services Inc. and Oxford also announced pullouts (Wall Street Journal, 9/24). Other HMOs announced that they would cut back benefits or increase premiums. Harvard Pilgrim Health Care, with 37,000 Medicare beneficiaries in Massachusetts, said it will increase its monthly premium from $35 to $60 per month. In addition, Blue Cross and Blue Shield of Massachusetts, with about 40,000 Medicare+Choice beneficiaries, will increase its premiums from $25 to $40 per month (New York Times, 9/22). In the next few weeks, HHS is expected to release official numbers of Medicare+Choice plans that are withdrawing from the program (Rovner, CongressDaily, 9/21).

Increased Costs
Many plans cited increasing health costs as the reason for withdrawing from the program. Howard Phanstiel, PacifiCare's president and CEO, said, "The disparity between what Medicare really costs and what it is willing to pay is widening to unsustainable levels. As a result, we have few alternatives left other than to leave long-standing members, raise prices and in many cases significantly reduce member benefits" (Scripps Howard News Service/Nando Times, 9/21). Ignagni said, "We have a program where the costs are outstripping reimbursement by six to one." But she added that if not for Medicare "givebacks" increasing payments to hospitals and insurers over the last two years, regulatory changes implemented by the Bush administration and "promises of further relief," more plans would have dropped out of Medicare+Choice (CongressDaily, 9/21).

Doubling the Size of the Program?
The pullouts "raise questions about the future" of a plan by President Bush to "revamp" Medicare by "giving private health plans a much larger role," the New York Times reports. That plan proposes doubling the number of Medicare beneficiaries in Medicare+Choice plans by 2005 (New York Times, 9/22). CMS "is still committed to Medicare reform before Congress adjourns," Scully said (Wall Street Journal, 9/24). In a release, House Ways and Means Committee Chair Bill Thomas (R-Calif.) called for increased payments to Medicare MCOs, saying, "The current reimbursement formula fails to pay the true cost of health care. We are drafting legislation that would entice these plans back into the program so seniors have additional choices" (Washington Post, 9/22).