What's wrong with this picture?
Federal policy makers established Medicare+Choice to create competition and improve less expensive quality care options for seniors. They also authorized PSOs, or provider service organizations, to allow doctors and hospitals to enter into managed care competition. Somewhat different beginnings; similar goals.
Yet today, both plans are going the way of the dinosaur--a signal of the need for reforming the Medicare program.
HMOs are dumping patients from Medicare+Choice plans faster than criminals get rid of incriminating evidence. In recent weeks, at least seven HMOs have announced plans to exit from Medicare+Choice markets, leaving some 700,000 seniors searching for low-cost health benefits. In each of the previous two years, another half-million enrollees faced the same fate.
The provider service organization was an idea whose time never really came. Only four PSOs received a waiver from Medicare to pioneer the concept. One of them, St. Joseph Healthcare of Albuquerque, N.M., recently announced it's pulling the plug. Its $10 million experiment in managed care risk is expected to lose about $1 million on operations this year while servicing 8,000 enrollees.
Can't anyone here play this game? Not when the concepts are flawed, they can't.
HMOs tried to attract seniors to Medicare risk with an attractive benefit package. But even at its peak, only 6 million beneficiaries enrolled, amounting to about 16% of the total Medicare population of 38 million nationwide.
That's largely because the program operated under an ill-conceived payment plan, in which HMO rates were tied to local fee-for-service costs. As a result, some HMOs were overpaid, some were underpaid, and HMOs were reluctant to expand in areas with historically low fee-for-service costs.
To make matters worse, many HMOs decided the best way to attract more enrollees was with generous drug benefit programs, a move that quickly became burdensome as pharmaceutical costs skyrocketed.
That strategy should give pause to those who are urging Congress to add expensive prescription drug coverage to traditional Medicare coverage. An independent think tank last year estimated the annual cost of such an open-ended benefit at about $20 billion, and in reality such estimates typically soar beyond reasonable expectations. The budget surplus notwithstanding, doesn't anyone see a potential problem here?
Real Medicare reform is a topic that gives policy makers the willies, perhaps because of late their track record on Medicare is nothing to be proud of. The tight reimbursement caps established as part of the Balanced Budget Act of 1997 have only made the problems of Medicare risk worse. Now lawmakers see political points to be earned in dishing out generous drug benefits to seniors.
Instead, the answer is in encouraging the growth of Medicare managed care with a formula that recognizes the realities of today's changing marketplace.