Rate Medicare Pays HMOs Will Rise 5.9%
The Clinton administration, in an announcement with considerable impact on California HMOs, said Friday that the national rate Medicare pays the health plans will rise a lower-than-expected 5.9% next year.
That increase is not as high as the 7.2% preliminary increase Medicare announced in July. But the increase is still greater than commercial rate increases for health maintenance organizations in California and other states.
California is home to about 40% of the nation’s 4.5 million senior citizens enrolled in HMOs and to some of the country’s largest Medicare HMOs, such as PacifiCare Health Systems, FHP International and Health Systems International. (According to a recently announced $2.1-billion merger proposal, PacifiCare and FHP would become a single company.)
PacifiCare, a Cypress-based HMO that derives about 60% of its business from Medicare, said it was still studying how the rate increases would affect its business in certain counties where it has significant membership.
“There are some attractive rates for some of these counties where we have a membership base,” said David Erickson, investor relations director.
In California, the Medicare rate will rise 5.98% in Los Angeles County, 5.1% in Orange County, 7.58% in San Diego County and 2.45% in San Francisco County.
PacifiCare A shares closed at $77.75, down 50 cents, in Nasdaq trading. The Medicare rates were announced about one hour before the market’s close.
Ed Keaney, health care analyst with Volpe Welty & Co. in San Francisco, said before the rates were announced that any increase of 4% or more in those California counties would be considered healthy. Rates there are already higher than in many other regions of the country.
Medicare rates are adjusted nationally to take into account differences in health costs.
Medicare is the federal medical program for people age 65 and older and for disabled persons.
Nationally, about 10% of Medicare beneficiaries are enrolled in health maintenance organizations; the percentages are much higher in some California cities, however.
