The relaxed rules the government announced for Medicare+Choice are likely too little too late for most of the major healthcare plans.
Several health plans--including Cigna and Aetna--have either announced their withdrawal from Medicare managed care or strongly hinted that's the path they will take. Health plans must tell HCFA by July 3 whether they will participate at all in the program or cut back services in 2001.
More withdrawals are expected despite HCFA's recently announced flexibility for plans offering Medicare+Choice, including allowing plans to rejoin the program after two years instead of five and implementing a bonus payment program to encourage plans to serve beneficiaries in underserved areas.
The potential mass exodus has caught the attention of President Clinton, who says something needs to be done with the program that was supposed to be Medicare's salvation. Congress is holding hearings on the matter. But with the deadline fast approaching, few people expect a cure this year. Last year, 41 health plans withdrew from the program, and 58 reduced their service areas.
The problem is reimbursement, specifically the lack of it. HCFA officials say health plans are guaranteed this year a minimum increase of 2%.
The 7% to 8% rise per year of healthcare costs isn't being covered by the 2% a year increase in Medicare payments, says Mark Di Giorgio, a Cigna spokesman.
"When your costs are escalating beyond reimbursement, it's not a good situation," he says. "It's one we didn't want to be in."
So Cigna gave notice that it plans to leave 11 markets effective Jan. 1, affecting about 104,000 of its 160,000 senior enrollees.
Officials at Aetna, the nation's largest insurer, wouldn't say at press time what their plans were. However, during an appearance in Connecticut, CEO William Donaldson said that the company couldn't afford to continue to lose money in the program.
Aetna officials planned to publicly announce their decision in late June or early July.
Cigna officials say the company will exit the majority of its Medicare managed care markets when the contracts expire at the end of the year. The company plans to keep its Medicare managed care programs at its staff models in Phoenix and New Mexico, Di Giorgio says.
The company didn't want to cause any disruption in service, he says. But "we didn't want to go down the road of decreasing benefit levels and increasing prices. That's no way to treat patients."
Most plans can't provide quality service by "getting 70 cents on the dollar," says Mohit Ghose, a spokesperson for the American Association of Health Plans.
The Balanced Budget Act of 1997, which was designed to enroll more people in the Medicare+Choice program, also cut $11 billion from Medicare reimbursements.
While the Balanced Budget Relief Act last year did limit some of those proposed cuts, the proposed reimbursement increases of 2% to 3% don't come close to the 7% increase of the cost of providing healthcare, Ghose says.
The main issue is the way the program is funded. Plans are reimbursed under a risk adjuster program. Under the risk adjuster schedule, plans with more sick people are paid at higher reimbursement rates.
AAHP officials aren't opposed to the concept of risk adjusters. They are opposed to the way risk adjustors are structured, Ghose says. "It penalizes health plans for doing their jobs well."
Ghose says the payments are based on the number of inpatient hospital days. In other words, managed care companies that have successful disease management programs and keep people out of the hospitals don't receive as much reimbursement as those plans whose patients are in the hospital more, he says.
"It goes against everything that managed care is about," Ghose says. "It needs to be a comprehensive risk adjuster."
There have been some changes: Plans that can demonstrate good disease management for congestive heart failure can receive higher reimbursement, he says.
"That's the type of (plan) that makes sense to us," Ghose says.
The nation's second largest insurer, Minneapolis-based UnitedHealthcare, is evaluating its participation in Medicare managed care, which provides coverage for 400,000 enrollees, says spokesperson Roger Cruzan.
"It's kind of the same news as last year," he says. The company must decide whether it can financially afford to provide healthcare at low reimbursement rates, he says.