The HMOs ditch Medicare

The Clinton administration is finally realizing that the mass exodus of HMOs from the Medicare program is not a minor problem, as they have long maintained. It is a major problem to Medicare beneficiaries, and threatens to become a big problem to the Clintonians themselves.

The recent announcement by the Cigna Corporation that they would end HMO coverage - for over 100,000 Medicare beneficiaries in 11 states - at the end of 2000 finally drove the point home. 

Managed care plans are beginning to realize that they cannot afford to provide coverage for Medicare patients, given the decreasing reimbursements provided by the government. Despite the vaunted “efficiencies” provided by managed care programs (and now, the official license to ration care), and despite frequent assertions by the Clinton administration that Medicare HMOs are still being overpaid (even in the face of continued cuts in reimbursement), HMOs are losing money on their Medicare products.  As Karen Ignagni of the American Association of Health Plans has said, HMOs “would not be leaving Medicare if they were overpaid.”

DrRich comments:

The withdrawal of HMOs from the Medicare program should not be a surprise to anybody.  As we pointed out in our Grand Theory, Medicare HMOs made out well for a few years, while they were few in number and could effectively “cherry pick” the healthier Medicare beneficiaries.  But once the government officially “pushed” Medicare HMOs, increasing their numbers, adding new layers of regulations, and eliminating the opportunity to cherry pick, the HMOs found themselves having to try to make a profit by actually managing the care of the sick elderly.  And this is not possible, given reimbursement levels.  Time to abandon ship.

 The question is: who will take the hit?

 It was largely the Gekkonians who pushed Medicare HMOs in the first place.  It was their way of letting free enterprise health care take control of and “save” an inefficient government-run system.  And for a couple of years, as mentioned, Medicare HMOs  looked pretty good on paper. But now that the for-profits are leaving the playing field in droves (effectively driving hundreds of thousands of patients back into the arms of traditional Medicare coverage), the Gekkonians may wind up with egg on their face just before an important election.

One would think the Clintonians would be licking their chops at the prospective political advantages.  But instead, their reaction so far has been more nearly one of panic.  It won’t do to have a million seniors enraged about their Medicare coverage just before the election.  Fair or not, seniors tend to equate Medicare issues with the Clintonians, and it may be difficult to “sell” the notion that their mass displacement from their Medicare HMOs is actually a Gekkonian issue.  The sell will be all the more difficult since the Gekkonians and the HMOs are loudly placing the blame for the failure of Medicare HMOs on the huge regulatory burden – along with reimbursement cuts – that the Clintonians have imposed.

Medicare HMOs have to announce their intentions for next year by July 3.  The Clinton administration, until recently denying there is any serious problem regarding Medicare HMOs, are now (according to the New York Times) calling HMO executives to try to ferret out their intentions, and to ask what the government can do to keep them in the program.  

And as if to emphasize their new-found panic, on June 12, Medicare administrators announced they would loosen up on several stifling regulations the government has imposed on health plans, in an effort to forestall HMO defections from the Medicare program (a strategy that only lends credence to the Gekkonians' explanation of the problem.) The immediate response of the American Association of Health Plans is, in essence, “Thanks. But too little, too late.”

06/24/2000

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