Medicare HMO Members to See Rise in Drug Costs
Millions of senior citizens enrolled in Medicare health maintenance organizations will face significantly higher costs next year for prescription drugs.
Today is the deadline for HMOs to file their coverage plans for 2000, and they have told federal officials to expect increases in co-payments and deductibles for drugs and tighter spending limits on annual benefits.
Prices of popular drugs are growing at the rate of 10% to 20% a year, far above the rate of inflation, and companies have said they cannot maintain their bottom line without a price increase.
The industry also has said that the government is not paying enough to care for Medicare beneficiaries in HMOs, an assertion disputed by the federal government. “We always said we could compete and do better than the traditional program for less, but we never said we could work miracles,” one industry source said.
The price hikes for drugs, which would take effect Jan. 1, could add a new urgency to the debate in Congress over whether to include prescription drug coverage in the traditional Medicare program. Clinton called Tuesday for a new $1,000-a-year benefit, to be financed with a $24 monthly premium paid by beneficiaries. But even if enacted, the Clinton plan would not start until 2002.
At Kaiser Permanente, California’s largest HMO, co-payments for drugs, which currently range between $5 and $15 for each prescription, depending on a beneficiary’s plan, will increase by $3 to $5, a spokesman said Wednesday. Co-payments for doctor visits, which are set at $5 or $10, depending on the region, will rise by $5.
PacifiCare Health Systems, parent of Secure Horizons, the nation’s biggest Medicare HMO, warned Wednesday that because of rising drug costs “co-payments may be increased and annual limits may be established.”
Some HMO executives are saying privately that “prescription benefits are too generous and are not sustainable from a business perspective,” said Nancy-Ann DeParle, director of the Health Care Financing Administration, which runs the Medicare program. The executives are complaining that HMO costs are “rising and their revenues aren’t,” she said.
HMO members give up traditional Medicare--and the option of choosing any doctor or hospital--and enroll in a network with a fixed list of doctors in return for coverage of drugs and eyeglasses.
About 6 million of the nation’s 40 million recipients of Medicare, which serves those 65 and older and the disabled of all ages, are in HMOs. The Medicare HMOs are particularly strong in Los Angeles and Orange counties. About 35% of Medicare recipients in California have joined HMOs, far above the national rate of 15%.
Secure Horizons, for instance, has 991,000 members nationwide, including 611,000 in California. It dominates the Southern California market, with 155,000 members in Los Angeles County and 55,000 in Orange County.
Another big player, Health Net, is taking a close look at the drug benefit, reviewing co-payments and deductibles, said Lisa Haines, a spokeswoman for Foundation Health Systems, the parent of Health Net. Drug prices “are one of the biggest drivers of health care costs,” she said.
Cigna Healthcare spokesman Howard Drescher said that his company is looking at trimming its prescription drug benefit. “One of the things we’re looking at is drugs--prescription costs are a driving factor in medical costs, not the only thing, but an important one.”
Kaiser said that some beneficiaries can expect higher costs in addition to the increased drug expenses. Of the 750,000 Kaiser Medicare members, about 45,000 will have to pay a premium beyond what they now pay for Medicare to belong to the HMO. For most it would be no more than $1 to $10 per month, but for about 15,000 beneficiaries, it could be more than $50 per month, said Matthew Schiffgens, a Kaiser spokesman.
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Times staff writer Alissa J. Rubin contributed to this story.
