In the latest pullouts from the increasingly shaky Medicare risk market, Aetna U.S. Healthcare last week announced that it plans to exit markets in all or part of nine states and the District of Columbia, and Foundation Health Systems dropped coverage in five rural counties of New Jersey and Connecticut.
Aetna officials blamed low reimbursement rates for the move, the latest in a series of pullbacks in recent months by major managed-care organizations.
The exodus of Blue Bell, Pa.-based Aetna will strand some 58,000 current Aetna Medicare risk enrollees in Delaware, Maryland, Massachusetts, New Hampshire, Rhode Island, Virginia, the District of Columbia, and selected counties in California, Connecticut and Florida.
Affected counties include Marin and Sonoma in California, Tolland and Windham in Connecticut and Polk in Florida.
"We will see continued attrition in terms of markets being served by Medicare HMOs," predicted Robert Hoehn, a healthcare analyst at ING Baring Furman Selz in New York.
Margins in Medicare can do nothing but decline for the foreseeable future, he said, so "if you're marginally profitable in a market, it makes all the sense in the world to exit that market."
Aetna's decision "is just one more piece of evidence that the (current Medicare risk) payment just isn't cutting it," said Mary Hayter, a lobbyist for the Fairness Coalition, a Washington-based group of providers and HMOs that seeks higher Medicare HMO reimbursement rates from the federal government.
However, senior HCFA officials say managed-care companies are simply making "legitimate business decisions" to leave certain markets, and that the overall Medicare HMO program continues to gain as many as 100,000 new beneficiaries per month.
Aetna, for example, is leaving several areas that are very competitive for a variety of reasons, said Robert Berenson, M.D., director of HCFA's center for health plans and providers. "I don't think there's a crisis out there," he added.
Nationally, those rates range from more than $780 per enrollee per month in parts of the New York metropolitan area to a floor of just $367, giving plans a strong financial incentive to avoid high-cost or low-paying regions.
Even after the Medicare risk pullout, Aetna will continue to serve 469,000 Medicare HMO beneficiaries in 16 states through various Aetna plans and a number of Medicare risk plans that were part of NYLCare Health Plans, acquired by Aetna in mid-July (July 20, p. 24).
Enrollees in areas where Aetna is pulling back can return to a traditional Medicare fee-for-service program, purchase Medicare supplemental insurance or-if Medicare+Choice plans get off the ground next year, as planned-enroll in one of the new experimental plans, according to Aetna.
Aetna officials said Medicare rates in the affected areas do not permit the plan to provide additions such as enhanced prescription benefits, coverage for annual Pap smears and well-care visits, and reimbursement for hearing aids and eyeglasses. Those extras differentiate its Medicare HMOs from traditional fee-for-service Medicare programs.
Meanwhile, Woodland Hills, Calif.-based Foundation Health Systems said its decision to drop coverage for five counties from its Northeast division will affect 8,000 enrollees. The company said Medicare reimbursements in the five targeted counties average $417 per enrollee, compared with an average monthly rate of $623 per enrollee in New York City.
"This makes it impossible to offer quality care in these counties," said Jay Gellert, the company's president and chief executive officer.
The companies join a host of health plans that have announced in recent months that they will exit, reduce their exposure in or raise rates and cut benefits in selected Medicare risk markets; they blame low reimbursement rates from HCFA. These include San Francisco's Blue Shield of California, New York-based Empire Blue Cross and Blue Shield, Cypress, Calif.-based PacifiCare, Salt Lake City's Intermountain Health Care and Cincinnati's Anthem Blue Cross and Blue Shield.
Anthem started the recent spate of pullbacks in May when it announced plans to yank its Medicare risk plan from 19 Ohio counties and parts of three others (June 15, p. 26). Now it has reconsidered (See story, this page).
Next on the list of health plan giants to look to trim their Medicare exposure may be United HealthCare Corp. of Minneapolis. United blamed Medicare risk losses for a big chunk of the $900 million second-quarter write-off that scuttled its proposed acquisition of Louisville, Ky.-based Humana. Norwalk, Conn.-based Oxford Health Plans also blamed Medicare-related losses for part of its $508 million second-quarter deficit.