The nation's largest Medicare HMO and three major Blue Cross and Blue Shield plans were among the latest managed-care companies to flee unprofitable Medicare markets in the face of what they claim is insufficient federal funding.
The moves, announced last week, add another 77,310 seniors to the list of those who must scramble to find new health coverage by the end of the year.
CareFirst Blue Cross and Blue Shield led the pullouts last week, reporting that it will close Maryland's largest Medicare HMO by year-end, displacing 32,000 members in central Maryland and the District of Columbia. The decision by the Owings Mills, Md.-based health insurer follows similar actions in June by United Healthcare Corp. and Cigna Corp., leaving the state with just one Medicare HMO, Kaiser Permanente.
"It wasn't financially feasible," said CareFirst spokeswoman Debbie Rosen McKerrow. "We're projecting a $7.5 million loss on our Medicare HMO business this year, and that's on top of losses totaling more than $25 million since 1996."
CareFirst blames the government's skimpy reimbursement rates, which it says aren't keeping pace with medical cost increases. McKerrow said CareFirst spends $608 monthly to care for the average senior, while the company receives $585 per month in federal reimbursement.
Sharing that sentiment is PacifiCare Health Systems, which announced it will uproot an additional 20,300 of its Medicare beneficiaries next year when it exits 15 markets in Arizona, Colorado, Texas and Washington. The Santa Ana, Calif.-based HMO hinted at the move last month when it announced plans to drop coverage of its 6,300 Medicare members in Kentucky and Ohio.
The pullouts will affect about 3% of the 1.1 million seniors now enrolled in PacifiCare's Secure Horizons plan, the nation's largest Medicare HMO.
The company has been changing its benefit offerings and boosting members' premiums and copayments in an effort to offset reduced government payments. But those adjustments weren't enough to sustain profitability in some markets, said Robert O'Leary, PacifiCare's new president and chief executive officer.
"There's no question that Medicare is one of the largest and most successful parts of our business," O'Leary said. "But for us to remain viable in the long term, congressional action is needed. We've been urging Congress for over two years to increase funding" for the Medicare+Choice program.
Others announcing Medicare pullouts included two Seattle-based health plans, Regence Blue Shield and Premera Blue Cross, along with Brookline, Mass.-based Harvard Pilgrim Health Care.
Last week's announced pullouts follow similar moves in late June by Aetna, Humana, United Healthcare and several other leading HMOs across the country.
The cutbacks are part of an industrywide trend that has accelerated since the passage of the 1997 Balanced Budget Act, which capped Medicare reimbursement hikes at 2%.
HMOs cut 400,000 Medicare members in 1999 and 327,000 this year. Industry officials estimate that next year's withdrawals, effective Jan. 1, 2001, will affect a total of 710,000 seniors, nearly as many as in the previous two years combined.