Hartford Courant Outlines Problems in Medicare+Choice Program

The Hartford Courant reports on Medicare+Choice, saying that "a program hailed five years ago as the future of Medicare is spiraling downward." With enrollment in Medicare HMOs dropping and reimbursement so low that many plans have "scale[d] back," analysts are beginning to question "how long" Medicare+Choice "can survive," the Courant reports. Created by Congress in 1997 to offer beneficiaries more options and services while controlling costs, the plans have had the "misfortune" of trying to operate with reimbursements that they say do not cover their medical costs. For example, from 1998 to 2002, reimbursements increased at a rate of 2% to 3% annually, while medical cost inflation rose at a rate of 9% to 10% each year. In response, many Medicare HMO plans have left unprofitable markets, forcing beneficiaries to find different coverage. Plans that have continued to participate in Medicare+Choice have increased out-of-pocket expenses for beneficiaries -- the average Medicare HMO beneficiary in good health will spend $1,195 out-of-pocket annually, and those in poor health will spend three times that amount. The Courant reports that this year, costs are expected to "soar." CMS Administrator Thomas Scully said, "If Congress doesn't act to fix many of the problems in the program, the program will, in fact, blow away in the wind in the next few years."

Administration Response
To address the "significant challenges" facing Medicare+Choice, the Bush administration has proposed "pump[ing]" $3.7 billion into the program over the next three years, which Scully said would "prevent further erosion" and stabilize the plans that are still in the program. Under Bush's proposal, HMOs in urban and suburban areas would receive a 6.5% increase in reimbursements this year and bonuses for providing coverage in unserved areas. However, the Courant reports that some analysts say that "money alone is not the answer," as last year the government spent an extra $1 billion on the program and 536,000 beneficiaries still lost their coverage. Also, "political differences" will make it difficult to reform the program, as some in Congress favor HMOs, while others are "leery" of the restrictions HMOs "impose on patients." Marsha Gold, a Medicare expert at Mathematica Policy Research, said, "Congress is unlikely to address many of the issues plaguing the (Medicare HMO) program until it comes to terms with fundamental differences in ideology, values and the vision for Medicare's future" (MacDonald, Hartford Courant, 3/8).