Medicare HMOs vote with their feet

The July 3 deadline for insurance carriers to notify the feds of their intention to abandon their Medicare HMO products has come and gone. Based on preliminary data, it appears that over 700,000 beneficiaries (about 12% of those enrolled in Medicare HMOs)  will be cut loose to seek other health insurance alternatives on January 1.

This number nearly doubles the total of 732,000 seniors dumped from Medicare HMOs in 1998 and 1999. Karen Ignagni, CEO and President of the American Association of Health Plans (AAHP) expects the number for 2000 to rise even higher, once all the data is tallied. 

Among the largest health plans to pull the plug are Aetna/US Healthcare (355,000 beneficiaries), Cigna HealthCare (104,000 beneficiaries) and Humana (84,000 beneficiaries).  Humana has offered Medicare HMO plans for the past 14 years.

Ignagni blamed the accelerating abandonment of Medicare HMOs on two factors: inadequate reimbursements, and the regulatory burden imposed on Medicare HMOs.

DrRich comments:

We analyzed the likely political fallout from the folding of Medicare HMOs in a previous commentary.  Turning Medicare over to for-profit insurance companies was mainly the idea of the GOP, so one might think that the failure of for-profit Medicare HMOs would reflect poorly on that party.

And no doubt, the wholesale withdrawal of the for-profit world from the Medicare program is, at some deep level, warming the cockles of Democrat hearts.  However, the Clinton administration has been displaying an interesting amount of dismay at the prospect of hundreds of thousands of displaced seniors so close to an important election.  

Consequently, HCFA has quickly made some regulatory changes to ease the burdens faced by health plans participating in Medicare.  And Congress is considering increasing reimbursements to Medicare HMOs.  It seems that neither the administration nor Congress wants to appear placid in the face of the accelerating demise of Medicare HMOs.  

Whether substantial improvements in either reimbursements or regulations will actually happen, one suspects, will depend on the polls.  How angry are seniors becoming over the the growing fiasco, and who do they blame?  If seniors are not particularly exercised over the issue, or if the GOP takes the blame, then the Democrats will have the best of all possible situations - the demise of for-profit participation in Medicare, and no political fallout.  The way the Clintons are behaving, however, it seems they don't think that scenario is particularly likely. 

07/22/2000

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