The federal Medicare+Choice program is in trouble if you ask the health insurance industry or the Bush administration. But hospitals don't seem to care if the program languishes, since it pays them less than traditional Medicare.
As legislators consider ways to fortify Medicare+Choice, "why aren't they looking at the fact that the Medicare program has been underpaying hospitals since the beginning of DRGs?" said Jeff Brownawell, vice president of managed care and government reporting for nine-hospital Memorial Hermann Healthcare System in Houston.
Health plans had until last week to notify the Centers for Medicare and Medicaid Services of the markets in which they will provide Medicare HMO plans next year. Citing inadequate federal funding, several major insurers said they would leave markets where Medicare+Choice plans are financially draining, according to the American Association of Health Plans' annual tally, released last week.
Some 200,000 beneficiaries nationwide will lose their coverage as a result of planned market withdrawals, the AAHP estimated. That's down 63% from the 536,000 beneficiaries who lost coverage in 2002.
Congressional action is needed to save the program, said CMS Administrator Thomas Scully, speaking at an AAHP conference last week in Washington. Scully said the program is in "bad shape" and has "significant, serious problems."
A Medicare prescription drug plan passed by the House in July included $3 billion in new funding for Medicare HMO plans. A provision in that bill, which has not yet been taken up in the Senate, would increase the minimum annual payment update to 3% from the current 2%.
Some hospitals, such as Memorial Hermann, view the effort to prop up Medicare+Choice as a potential hit to their overall Medicare reimbursement.
"Why is Congress going forward to pump money into Medicare HMOs?" Brownawell said. "Where is that money going to come from? From the pockets of hospitals in traditional Medicare."
The AAHP didn't list all the insurers that left a market or provide a breakdown of markets affected. Some examples include Aetna, Hartford, Conn., which said it is dropping Medicare+Choice coverage in three Pennsylvania counties and two counties in New Jersey. PacifiCare Health Systems, Cypress, Calif., is abandoning Medicare+Choice in the greater Houston area and portions of Northern California because of "chronic underfunding of the program," said Tyler Mason, a PacifiCare spokesman.
Memorial Hermann, a prominent provider in the Houston area, canceled its contract with PacifiCare in May after unsuccessful efforts to negotiate new rates. "We couldn't come to terms on a contract amount because PacifiCare wasn't willing to pay us what Medicare paid us," Brownawell said.
AAHP conference speakers said medical costs are rising at a 10% rate, while Medicare+Choice rates are scheduled to increase only 2% next year.
"The fundamental problem with Medicare is that the payments do not reflect the cost, and you can't force people to lose money," John McManus, staff director of the House Ways and Means Committee's health subcommittee, said at the conference.