When Anthem Blue Cross and Blue Shield recently announced its plans to yank its Medicare HMO from much of rural Ohio by year-end, it might have signaled a broader retreat by Medicare risk HMOs to more profitable urban markets.
Regardless, the move also sends yet another warning to hospitals and physicians that want to form Medicare provider-sponsored organizations (See cover story, p. 58).
"This is not just an Ohio-only issue," said Susan Foote, a lawyer and lobbyist for the Fairness Coalition, an ad hoc group of providers and HMOs seeking higher Medicare reimbursement rates for rural areas and other regions that now get lower payments for Medicare risk plans.
"Enrollment growth is extensive in the high-reimbursement areas and insignificant in low-payment areas," Foote said. She argued that many rural counties "are not getting increases sufficient to cover their costs and they have no cushion, because their rates are so low to begin with."
Anthem isn't alone in withdrawing from rural markets.
PacifiCare's Medicare risk plan, the nation's leader with nearly 1 million enrollees, exited several counties in Oregon earlier this year, said spokesman Ben Singer.
And late last year, a 115,000-enrollee subsidiary of Blue Cross and Blue Shield of South Carolina pulled its Medicare risk product out of 10 of the 13 counties where it operated in the state. Companion HealthCare, a wholly owned unit of the Columbia, S.C.-based Blues plan, discontinued its Medicare HMO program as of Dec. 31, 1997, citing reimbursement concerns. Nearly 3,000 enrollees were affected.
And now, sources say, PacifiCare will announce its exit from the Utah risk market in the near future (See story, this page).
Nationally, Medicare capitation rates this year range from a high of more than $780 per enrollee per month in parts of the New York metropolitan area to a floor of $367, giving plans a strong financial incentive to avoid low-paying regions.
Although last year's Balanced Budget Act raised the payment floor for rural counties, it permitted rates to increase just 2% annually over the next five years-not enough for many Medicare risk plans that already had ventured into rural areas.
"That doesn't even keep up with medical inflation," said Lynne Gross, Anthem's vice president of government products.
Cincinnati-based Anthem said late last month that its Medicare HMO, called Anthem Senior Advantage, is pulling out of 19 Ohio counties and parts of three others on Jan. 1, due largely to concerns about Medicare reimbursement. About 20,000 of Anthem's 63,000 Medicare HMO enrollees in the state are affected.
Gross said the plan was unwilling to cut benefits and isn't willing to "continue to suffer financial losses on this product."
In Holmes County, near Canton, Ohio, for example, the capitation rate for Medicare HMOs this year is just $367-or more than 25% below the national average, according to HCFA.
Some counties simply don't support the cost of the Medicare HMO program, said Gross, who said he expects other health plans in Ohio to follow suit with similar "service reductions."
But Kip May, deputy commissioner at the Ohio Department of Insurance, said Anthem is the only player to pull out of rural Ohio so far and that state residents in most of the affected counties will have other Medicare HMOs to choose from.
Anthem will still offer the Medicare risk product in major urban areas of Ohio such as Akron, Cincinnati, Cleveland, Columbus, Dayton, Warren and Youngstown.
Lower reimbursement rates are just part of the rural problem, said Singer, who also blamed the difficulties of creating integrated delivery systems in rural America. "It's a chicken-and-egg situation," he said.
But critics say low Medicare reimbursement rates in much of the U.S. also might keep the newly approved Medicare PSOs from forming in rural markets.