Senior Savings : HMOs Get Boost From Bush Plan

Barbara Inglis, a 75-year-old living on Social Security, says she might have hesitated to get the medical attention she needed to fight the flu if she had to pay the hefty deductibles and other payments usually required by Medicare.

But like an increasing number of senior citizens, the Santa Ana resident has found a more economical alternative: a health maintenance organization, or HMO, specially designed for Medicare recipients. HMOs typically provide more benefits at less cost by requiring that their member patients use predesignated doctors, hospitals and clinics.

“I think it’s the best deal that ever came along,” Inglis said Monday as she visited a senior health center operated by FHP in Huntington Beach, where she paid just $8 for a checkup and prescription.

Medicare recipients like Inglis soon may have more incentive than ever to join HMOs. As part of the federal budget proposal sent to Congress on Monday, the Bush Administration is proposing to give seniors in managed health care plans a rebate of about $5 from the $28.60 that is deducted monthly from their Social Security checks to qualify them for Medicare.

Also, to encourage more HMOs to set up senior citizen plans, Bush is proposing to increase the reimbursement given to HMOs with Medicare contracts.

Currently, HMOs with Medicare contracts get 95% of the average cost of providing medical care to senior citizens in the regular fee-for-service sector, or about $280 per patient per month in Southern California.

By contrast, Bush is recommending that the federal government finance the senior HMO programs at 100% of cost. That would be done by giving HMOs about $10 more a month per senior member in Southern California and Medicare recipients about a $5 per month rebate.

“In the big picture, $5 is pretty minimal, but it does mean a lot to seniors who are on limited incomes,” said Terry Hartshorn, chief executive officer of Pacificare, a Cypress-based HMO with 105,000 members in its Secure Horizons senior citizens program, which serves Southern California, Oregon, Oklahoma and San Antonio, Tex.

Al Goldberg, 81, who was waiting to have his eyeglasses adjusted at FHP’s Huntington Beach center, said the proposed $5-a-month rebate “would be wonderful.” But he added that the rebate “would be nothing compared to what the HMO programs do for you.” He figures that FHP benefits are saving him up to $2,000 a year that he otherwise would have to spend on insurance to supplement his Medicare benefits.

Leslie Rose, legislative director of the Group Health Assn. of America, the national trade organization for managed health care companies, said the Administration’s plan to encourage expansion of senior HMOs “is significant in a year when they are talking about making substantial cuts in Medicare.”

Federal health officials said Monday that the Administration is convinced that health care costs can be better controlled through HMOs because medical providers, who receive a set monthly payment for each plan member, have an incentive to give the most efficient care. Also, they said they believe HMOs can give seniors greater access to preventive treatment.

They said the increased federal support of senior HMOs, which would go into effect in January, 1991, would cost the government an estimated $180 million in fiscal 1991 and $255 million in the subsequent fiscal year.

Health officials said they aren’t sure how great an incentive a $5 rebate will be in increasing the 1.1 million people currently enrolled nationwide in senior programs offered by HMOs. “It remains to be seen how price-sensitive people are,” said Carlos Zarbozo, special assistant to the director in the office of prepaid health care.

Additional federal support is particularly needed in sparsely populated states where Medicare reimbursements have been too low to entice HMOs into the senior health care business, Zarbozo said.

In Southern California, however, reimbursement rates for senior HMOs have been generous enough to support the growth of some of the largest senior programs in the country.

FHP, a health maintenance organization based in Fountain Valley, has a senior program with 146,000 members in Southern California, Arizona, New Mexico and Guam, up from 114,000 members a year ago.

Jack Massimino, vice president of corporate development for the FHP plan, predicted that the Administration’s proposal, if adopted by Congress, “will spark growth in our existing markets and help us to move into places like Utah.”

In Southern California, the increased federal reimbursement could bring improved benefits, such as a reduction in already nominal office visit fees, local HMO officials said.

Both FHP and Pacificare say their senior programs have been profitable. Pacificare’s Hartshorn said Secure Horizons was slightly more profitable than the company’s older commercial business that caters to working age people and their families.

But making senior HMOs operate profitably isn’t easy, he pointed out, since the cost of providing care to seniors generally is three to four times the cost of providing care to a younger population. “It is a high-volume, low-profit business,” he noted.

Hartshorn said one of the biggest barriers to the growth of senior HMOs has been the skepticism senior citizens show toward the promise of care for little or no out-of-pocket costs. The Administration’s new show of support for HMOs, he predicted, will go a long way to “shove (seniors) over the hurdle.”