Protesting low payment rates, dozens of HMOs have pulled out of the Medicare risk-contracting business during the past nine months affecting thousands of beneficiaries, many of whom are without any Medicare HMO coverage in their markets.
At least superficially, the en masse pullout may resemble an illegal group boycott. But the HMOs and their industry representatives say it's just a financially driven coincidence, with all the plans making their decisions independently.
Group boycotts occur when sellers band together and agree not to deal with a particular buyer unless that buyer pays them the price they demand. A group boycott is automatically presumed illegal under federal antitrust laws when the group of sellers has significant market power or access to a key service or asset that others need to compete with them.
"Of course we didn't recommend to anyone that they pull out," said Susan Pisano, a spokeswoman for the American Association of Health Plans, which represents 550 HMOs, 154 of which cover Medicare beneficiaries. "Competition is fierce out in the marketplace. Everyone wants a leg up on their competitors. Why would they agree to pull out (simultaneously)?"
At a press conference at its Washington headquarters July 1, the AAHP released survey responses from 23 of its 26 members with Medicare HMOs showing that two of every three Medicare enrollees covered by those plans would feel the effects of a pullout or slashed benefits.
The AAHP's announcement came on the day plans were required to notify HCFA of their intention to stay in or get out of the Medicare managed-care business.
Not including the pullouts announced in July, more than 100 plans either withdrew from Medicare managed care or cut benefits to plan members effective Jan. 1.
For its survey, the AAHP hired a third party to collect the information to avoid any appearance of impropriety.
"The only case where we knew when plans were pulling out was when those plans made public announcements beforehand," Pisano said. "Once that was made public, we were free to use that information. We don't know yet if there are markets where there wasn't a single (Medicare) health plan left. We'll only know that when HCFA compiles all the data."
Richard Coorsh, a spokesman for the Health Insurance Association of America, said, "We can't talk to our members about the withdrawals because of the antitrust implications." The association represents 269 insurers, at least seven of which own Medicare HMOs.
Pisano added that if plans appeared to act simultaneously, it was because they wanted to make their final decisions about withdrawing as close to the July 1 deadline as possible.
Last year, the only two Medicare HMOs serving Utah-IHC SeniorCare and PacifiCare of Utah-announced their withdrawals in a joint news release.
Intermountain Health Care, which owned IHC, and Altius Health Plans, which bought PacifiCare of Utah last year, said the plans made their decisions independently. It was HCFA, they said, that suggested they make their announcements together to avoid confusion among beneficiaries.
"The fact is, we understood the reality of the marketplace," said Dee Brewer, a spokesman for Altius. "It wasn't surprising that the other Medicare HMO wasn't viable either, because the rates in Utah were simply too low."
Jeff Miles, an antitrust attorney at Ober Kaler Grimes & Shriver in Washington, said the odds are slim that Medicare HMOs illegally colluded.
"There has to be some understanding or agreement to break out (of the program) or not participate, and I'd be surprised if that were the case," Miles said.
However, federal authorities have pursued numerous cases of group boycotts in the healthcare industry, particularly among physicians, with their alleged victims being managed-care plans.
Last year, the U.S. Justice Department filed an antitrust complaint in U.S. District Court in Wilmington, Del., alleging that a physicians' union illegally coordinated a group boycott of Blue Cross and Blue Shield of Delaware (Aug. 17, 1998, p. 3). The case is pending.
"Group boycotts are a common phenomenon in antitrust law in general and healthcare in particular," Miles said. "I have no doubt that if there were a boycott by the health plans of the Medicare and Medicaid business, the government would pursue it."
Florida has undertaken the only known investigation of Medicare HMO pullouts. The ballyhooed probe by the state attorney general and insurance department ended unceremoniously last month with regulators concluding no laws were violated when Medicare HMOs nearly simultaneously withdrew from several markets (June 14, p. 24).
Some consumer groups, concerned about the pullouts, said antitrust authorities should pay attention.
"It's certainly a worry, and I certainly hope our antitrust enforcers are monitoring the situation if there could be a problem," said Gail Shearer, director of health policy analysis at Consumers Union in Washington.
Federal Trade Commission officials and the U.S. Justice Department declined to say whether their agencies are reviewing the Medicare HMO defections.