Managed-care plans reacted with predictable indignation last week to a General Accounting Office report that suggested they have themselves to blame for problems with Medicare risk contracts.
"Whatever studies you do, you can't escape the fact that costs in Medicare are going up 6% to 7%, and premiums are going up 2 to 3%," said David Olson, senior vice president of investor relations for Foundation Health Systems.
Woodland Hills, Calif.-based Foundation has about 290,000 Medicare-risk enrollees in 10 states. More than half are enrolled in its Health Net Seniority Plus HMO in California.
Last year, Olson said, Foundation responded to those economic facts by exiting 32 counties in six states with a total of 23,000 Medicare managed-care enrollees (Oct. 12, 1998, p. 8).
Foundation was one of nearly 100 Medicare risk plans that exited selected markets last year.
The GAO report attributed the exodus primarily to market considerations such as low enrollment and heavy competition. The exits forced 450,000 Medicare beneficiaries to change health coverage.
The report, presented at a hearing convened by the Senate Special Committee on Aging, called the 1998 Medicare withdrawals a "market correction" and compared them with market exits in the late 1980s linked to HMOs' inability to get enrollees and earn profits.
Sen. Chuck Grassley (R-Iowa) and other members of the Special Committee on Aging had asked the agency to delve into the causes of the exodus.
But the American Association of Health Plans and the Health Insurance Association of America immediately criticized the report's focus.
Chip Kahn, HIAA president, called the study "seriously deficient" because it underestimated the impact of government-imposed rate constraints and red tape on health plans' decisions to abandon some Medicare risk markets last year.
Both trade associations warned that more plans may pull out of Medicare risk. Unless gaps between reimbursement for fee-for-service and capitated risk plans are lowered, "more health plans will be forced out of markets or forced to reduce benefits and increase premiums," said AAHP President and Chief Executive Officer Karen Ignagni.
In markets such as Miami, the annual gap is expected to grow to more than $3,500 per enrollee by 2004, according to the association.
In the latest response to these conditions, Humana told analysts last month that it will stop marketing its Medicare risk plans in 35 counties in an undisclosed number of states where it believes reimbursement rates are inadequate.
Greg Donaldson, a spokesman for the Louisville, Ky.-based managed-care company, would not identify the markets except to say, "a number of them are in Florida."
Humana is also considering adding new premiums or reducing benefits next year for its Medicare risk products, officials said.