establishing physician networks and dealing with state and federal regulations.
PacifiCare anticipates more franchising and acquisitions in order to avoid setting up its own commercial HMOs in other regions, said Craig Schub, president of Secure Horizons.
Whatever the difficulties involved in establishing Medicare risk HMOs, beneficiaries have been voting with their feet. Enrollment in Medicare risk plans has been growing steadily. It increased by 27% in 1994 compared with 14% in 1993, according to figures from the GHAA. More than 44 counties now have Medicare risk enrollment of 20% to 30% of the Medicare population, according to HCFA figures.
Proponents say a Medicare risk HMO is a good deal for senior citizens for a number of reasons. First, an HMO offers more benefits than traditional fee-for-service Medicare, often at no extra cost or for nominal copayments, which makes expensive "Medigap," or supplemental, policies unnecessary.
Also, a Medicare risk HMO involves much less paperwork than fee-for-service Medicare, and a primary-care physician coordinates care and medications, and helps seniors navigate the healthcare system.
During the past year, numerous studies have shown that "the elderly enrolled in HMOs are more satisfied with their coverage than the elderly receiving services under the traditional Medicare fee-for-service program," Ignagni told the House Ways and Means health subcommittee in February.
But a report released last month by HHS' inspector general's office recommends that HCFA monitor risk plans for enrollment and access problems, which are especially felt by the elderly disabled (March 20, p. 6). For example, 50% of the elderly disabled ex-enrollees who responded to a survey reported that they failed to receive necessary specialist care.
More choices."Our projection for growth of Medicare risk plans in 1995 is 20% to 25%," Rodney Armstead, director of HCFA's Office of Managed Care, told MODERN HEALTHCARE. "We've seen a huge growth just in the voluntary marke.......HCFA is trying to actively expand choices that a Medicare beneficiary has, such as a PPO option and a point-of-service option," which also will contribute to more beneficiaries moving toward managed care, he said.
Expanding the 15-state Medicare Select PPO and HMO pilot program permanently to 50 states-as the House Commerce and Ways and Means health subcommittees recently voted to do-eventually would funnel more beneficiaries into risk plans, as the elderly become accustomed to managed care. The Medicare Select program allows beneficiaries to buy discounted Medigap policies to cover copayments and deductibles if they enter a managed-care plan.
Fueling the risk market growth, more employers are encouraging retirees to join Medicare HMOs by paying part or all of the premium. That allows the employer to drop the expensive supplemental coverage while offering enhanced benefits, Towers Perrin's Martingale said.
Last year, the consulting firm worked with eight large employers with retirees in Florida-including the city of New York, Nynex, LTV Corp. and Union Carbide-to evaluate and choose HMOs with risk contracts in that state. Towers Perrin now is planning to evaluate HMOs in different parts of the country for employers who want to offer them to retirees, he said.
After years of concentrating on the commercial marketplace, "the light has gone on," and the country's HMOs see the Medicare market as ripe and lucrative, said an HMO spokesman.
One initiative aimed at gaining market share is the Alliance for Healthy Aging, sponsored by drug manufacturer G.D. Searle & Co. and Age Wave, a California marketing firm. More than 50 HMOs have joined the alliance, which sponsors a biannual conference on innovations in care for the elderly, develops patient education materials and advises HMOs on marketing to Medicare beneficiaries.
Searle said it will spend $30 million to $50 million in the next three to five years on the alliance and to acquire minority interests in companies providing services to HMOs that treat the elderly.
Such activities attest to the value of the eldercare market. "What's so appealing about Medicare risk is that it's winner take all. The government pays you a flat fee, and if you can manage care for less than that, you get to keep the difference," said Brian Glassman, senior consultant in