HMOs Could Benefit From Medicare Hike

PacifiCare Health Systems Inc. and other Medicare health maintenance organizations could benefit from hefty increases in payments next year in some of the areas in which they do business.

The increases, which are expected to be announced Monday by the Clinton administration, would come as a result of federal funding to boost Medicare HMO payments in counties in the lower-middle range of reimbursement by the program, said Bob Berenson, the Clinton administration official who runs the Medicare HMO program.

The new funding “could well be a significant impact,” Berenson said after attending a congressional hearing on HMO payments by Medicare, the government health insurance program for the elderly.

Santa Ana-based PacifiCare is the nation’s largest HMO serving Medicare beneficiaries. In eight California counties that are among the 100 counties with the highest Medicare enrollment in HMOs, the HMOs will see rate increases of close to 9% or better, according to a report earlier this week by Prudential Securities Inc.

Although Berenson, the administration official, didn’t say what the rate increases would be, the Prudential report predicted rate increases of as much as 13% in 2000 in counties served by HMOs. That compares with 2% increases in 1999 in the counties where HMOs enroll the most Medicare beneficiaries.

“We see PacifiCare as the biggest beneficiary based on high rate increases in its core markets,” Prudential analysts Barbara Dreyfuss and Charles Boorady wrote in their report. About 6.5 million of the nation’s nearly 40 million Medicare beneficiaries are enrolled in HMOs as an alternative to traditional fee-for-service Medicare. HMOs with Medicare enrollees include PacifiCare, Humana Inc., United HealthGroup, Aetna Inc. and Foundation Health Systems Inc. They have attracted Medicare beneficiaries by offering prescription drugs and other benefits not available in the traditional Medicare program.

Medicare pays HMOs a flat monthly fee to care for each patient. Those fees are adjusted by counties to account for regional differences in health costs. Monthly Medicare payments to HMOs range from $380 to $798 per patient nationwide.

In January, the administration released a preliminary estimate that total Medicare payments to HMOs will rise by 5.2% next year, compared to 3.5% this year. The adjusted county rates will be released Monday.