Managed care courts Medicare

Managed care courts Medicare

Helen Taylor

Business Report Staff Writer
The Medicare ship is going down, and a likely lifeboat for the federal program˜s 38 million beneficiaries is managed care.Over the next five years, the government˜s balanced-budget agreement is expected to save $115 billion in Medicare spending by curbing payments to hospitals, managed-care companies and other providers.
Controlled spending will temporarily keep insolvency at bay for the tax-funded program and buy time to implement more fundamental changes. In the meantime, a hard push to get Medicare patients into cost-conscious managed-care plans is complemented by managed care˜s enthusiastic move to absorb Medicare business.
Nationally, about 100,000 Medicare beneficiaries sign up for health-maintenance organizations each month, and the Congressional Budget Office estimates that more than one-third will be treated through HMOs by the year 2007.
Enrollment in Medicare HMOs in Colorado has tripled since 1992, from about 35,000 to almost 120,000, and seven Colorado HMOs now market Medicare risk plans, up from five last year. In some counties, the penetration rate is as high as 35 percent of eligible seniors, according to the 1997 Colorado Managed Care Review.
Northern Colorado residents should have the option of a Medicare risk plan by eary 1998. Both PacifiCare of Colorado and United HealthCare of Colorado have applied to the Health Care Financing Administration to bring Medicare HMOs to the region.
Approval of the plans means seniors will have a choice between the standard Medicare Part B supplemental plan, which gives them freedom of choice when choosing a doctor but holds them responsible for a larger share of the cost for services and the more restrictive Medicare HMO, which is often premium-free and typically expands benefits.
PacifiCare is eager to introduce its Medicare HMO, Secure Horizons, to Northern Colorado, certain that a generous portion of the region˜s 50,000 potential enrollees, will land in the HMO˜s camp.
"I think the seniors in this area are familiar with HMO products and are anxiously awaiting this," said Elaine Taylor, regional director for the company.
United HealthCare CEO Terry Nimnicht won˜t speculate on when his company˜s Medicare HMO, Physicians Choice, might be available in Northern Colorado, but he believes it also would do well.
United HealthCare˜s entry into the Medicare risk market in Denver and Colorado Springs in April was hailed as the company˜s strongest product introduction yet, he said.
HMOs offering Medicare risk plans must offer the same services available to fee-for-service participants. The federal government pays the HMO roughly 95 percent of the anticipated cost to cover each beneficiary, though that will change in 1998 when federal payment reforms go into effect.
How that will affect HMO revenues has yet to be seen, but right now, Medicare business is good business. Although Medicare beneficiaries account for less than 10 percent of HMO enrollees in Colorado, Medicare plans provide 23.5 percent of total HMO revenues, the 1997 Colorado Managed Care Review reported.
Enrollees pay the normal Part B premium, a premium to the HMO, if required, and small copayments for each doctor˜s visit. Coverage generally includes all the standard Medicare benefits, plus physical exams, limited prescription benefits, and eye and dental care.
"Pharmacy costs in particular are a huge cost to seniors, and without coverage, it˜s unfortunate that some try to make do by splitting dosages or not refilling the prescription," she said. "In the long run it costs more money to put someone in the hospital than to make sure they get the medication they need."
Taylor said that not only are the additional benefits appealing, but seniors also find the HMO˜s simplicity attractive.
"We take care of all the billing that goes along with Medicare — all the paperwork that can be burdensome and confusing to seniors," she said.
Blue Cross Blue Shield of Colorado also would like to bring its Medicare risk plan, Blue Advantage for Seniors, to Northern Colorado, but hasn˜t received support for the plan from local physicians and hospitals.
"We˜d like to expand our senior plan to Larimer and Weld, but we˜ve not yet been able to work out agreements with providers," said Kevin Magee, vice president of customer development for the company. "We raise the suggestion regularly, but there˜s a general resistance from this provider community to managed care. Providers here are very comfortable and familiar in their current operating environment. They have to get their feet wet gradually, and as they do, they˜ be more willing to contract with managed-care companies."
Hospitals in the region have particular cause for concern over managed care˜s meddling in Medicare. Medicare charges represent almost half or more of all patient charges for Poudre Valley Hospital in Fort Collins and North Colorado Medical Center in Greeley, and while traditional Medicare reimbursements may be shrinking, fixed per-person sums doled out by the HMOs will limit hospital revenue in that area.
"If it˜s going to happen, what we need to do is position ourselves in a way to take advantage of contracting opportunities with the HMOs," said NCMC spokesman Gene Haffner. "The upside is that with our philosophy of total care, (Medicare HMOs) will give us more defined channels to serve the senior population."
Whatever resistance providers feel for them, it is widely acknowledged that Medicare HMOs offer seniors beneficial and worthwhile choices.
"Throughout the state, seniors achieved high participation levels in HMOs before employer groups," Magee said. "They˜re shrewd, savvy consumers who˜ve done their homework."
Seniors are switching to HMOs at a rapid pace, but some worry that they˜re not sticking with them. A study conducted in Florida indicated that Medicare beneficiaries might be leaving HMOs for fee-for-service plans when they need acute care they don˜t think they can get from a managed-care plan.
Such a scenario suggests that HMOs are doing little to save the Medicare program money — Medicare is paying HMOs more than they need to care for relatively healthy patients, and patients in need of more serious, more expensive care are obtaining it from a source where costs are more or less uncontrolled.
However, United Health Care˜s Nimnicht, among others, says he is not convinced by the results of the study, and cites a retention rate of 96 percent for his company˜s senior plan. Additionally, if there is unnecessary movement between plans, guidelines for an annual open-enrollment period to be implemented in 1999 should prevent patients from switching plans willy-nilly.
HMOs are part of the solution to the Medicare problem, but the Balanced Budget Act of 1997 includes other provisions for cutting costs associated with senior˜s care.
Provisions for provider-sponsored organizations mean that groups of doctors and hospitals can contract directly with the Health Care Financing Administration to offer Medicare plans on the same full-risk basis as HMOs.
PSOs offer providers the opportunity to develop their own networks and payment structures to circumvent and compete with commercial HMOs that have typically dictated their pay and the way they practice.
Also, payments to Medicare health plans will change to more fairly compensate different geographical areas, Medicare medical savings accounts will be offered on a limited basis, and, in 1999 and again in 2000, the federal Department of Health and Human Services will attempt another competitive pricing demonstration similar to the one shot down in the Denver area last summer.
Medicare has been doing business as usual for more than 30 years, but the demographic composition of the country has shifted from a population of young people to one of middle-aged and older adults.
"Medicare can˜t continue as it has because it was founded on a principle that doesn˜t work today," Taylor said. "When it began, benefits started at age 65 and the average life expectancy was 68 and a half years. Now the average life expectancy is 75 and getting higher, and the number of people in the senior population is growing. We have to adjust for that."

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