In the latest announced exit from selected Medicare HMO markets, Prudential HealthCare said last week it will not renew Medicare risk contracts in California, the District of Columbia, Maryland, New Jersey, New York and parts of the Jacksonville, Fla., region.
The pullout, effective Jan. 1, will affect about 24,000 enrollees in Prudential's SeniorCare Medicare HMO, officials said.
Over the past few months, at least seven other major managed-care companies have announced plans to drop their Medicare HMO plans in certain areas, blaming inadequate government payment rates. However, so far, those pullouts will affect fewer than 200,000 Medicare beneficiaries, about 4.1% of the enrollees in prepaid Medicare plans nationwide in 1997. In fact, Anthem Blue Cross and Blue Shield said late last week that it may not exit as many Ohio counties as planned in May, reducing the number of affected enrollees to 13,000 from 20,000.
Still, fear that more plans will leave Medicare risk markets has prompted a federal lawmaker to urge HCFA to consider increasing Medicare payments to HMOs (See related story, p. 2).
Prudential will remain in more lucrative Medicare risk markets in Orlando and Tampa, Fla.; South Florida; Houston; San Antonio and Cleveland. Prudential has about 100,000 Medicare HMO enrollees in those areas.
Citing inadequate reimbursement and higher-than-expected costs, Prudential said it cannot offer competitive Medicare HMO products in the regions it is exiting.
In California, where Prudential has just 10,000 Medicare HMO enrollees, the plan is "too small to compete effectively, and I wasn't at all sure I could increase that membership," said Cora Tellez, president of Prudential Health Care Plan of California, a Prudential HealthCare subsidiary.
The company decided to leave markets where it had little hope of gaining significant market share or where creating and maintaining an extensive-enough contracting network would have been difficult, according to spokesman Kevin Heine.
Nationally, the rates HCFA pays to Medicare HMOs range from just $367 per enrollee per month to the New York metropolitan area's more than $780. That range gives plans a strong financial incentive to avoid high-cost or low-paying regions. Under the 1997 Balanced Budget Act, those rates are scheduled to increase at just 2% a year-not enough to entice many plans to stay in less-lucrative regions.
The Prudential pullout will affect about 10,000 enrollees in California, 8,200 in the Maryland-Washington, D.C., area, 4,200 in New York and New Jersey, and 1,500 in Baker County and part of St. Johns County, near Jacksonville, in Florida.
However, Roseland, N.J.-based Prudential will continue to offer Medicare HMO coverage to parts of St. Johns County and three other nearby counties-Clay, Duval and Nassau.
At issue in North Florida "is where are you going to get the best long-term bang for your buck," said Gary Davis, a healthcare attorney with Steel Hector & Davis in Miami.
The "acquisition cost" to gain a new Medicare enrollee in sparsely populated areas like Baker County is far higher than in South Florida's heavily populated Gold Coast, Davis said. In addition, health plans will likely face tougher competition from provider-sponsored organizations in more isolated, rural areas than in urban areas, where the costs to enter the market are far higher, he said.
Overall, Prudential HealthCare, the healthcare unit of Prudential Insurance Company of America, covers 5 million managed-care enrollees in 40 markets nationwide.
Managed-care companies have until Oct. 1 to tell HCFA their plans for renewing their Medicare risk contracts for next year.