Medicare HMO Patients to Face Higher Charges
Millions of Medicare beneficiaries enrolled in health-maintenance organizations will be forced to pay much more for their health care next year, particularly for prescription drugs and visits to doctors’ offices.
The higher charges--in some cases tripling the cost for retirees to visit a doctor and setting strict caps on prescription benefits--will hit particularly hard in California, where about 1.5 million of the state’s 3.9 million Medicare beneficiaries are enrolled in HMOs.
The new HMO charges, disclosed Wednesday by the Health Care Financing Administration, which runs Medicare, seem sure to set off a new round of debate about medical costs, the role of HMOs and the way society should pay for the health care of an aging population. The higher costs could possibly increase political support for President Clinton’s proposal to offer drug benefits under Medicare.
Although the HMOs have been warning that benefits were likely to be trimmed in 2000, the size and scope of the increases were unanticipated.
The prime marketing tool for the HMOs, especially in California, has been the offer of prescription drugs, which are not covered in the traditional Medicare program. People have been willing to trade the unrestricted choice of doctors and hospitals, under regular Medicare, in return for joining an HMO’s network of doctors, with drugs thrown in for no extra charge. Now, some Medicare beneficiaries may view the HMOs as less appealing.
The nation’s largest HMO, PacifiCare’s Secure Horizons, for example, now gives its 220,000 members in Los Angeles and Orange counties unlimited coverage for brand-name prescription drugs. Beginning Jan. 1, patients will be limited to $2,000 a year in drug coverage. The $10 paid by a patient for each prescription, called a co-payment, increases to $15. Office visits are free now, but there will be a $5 co-payment next year.
PacifiCare said 75% of its 1 million members nationwide will have their pharmacy benefits reduced, and 60% will see increased charges for office visits. Kaiser Permanente, which charges $3 for an office visit in Southern California, will boost the charge to $10. The $7 co-payment for prescriptions will be raised to $10.
The additional charges by PacifiCare, Kaiser and other Medicare HMOs will vary widely because the federal government sets a different payment rate for each of the nation’s counties, linked to local health-care costs. It seems virtually certain that the vast majority of the 6 million individuals in Medicare HMOs will face higher charges next year.
As the HMO figures were made public Wednesday, a separate study by the National Academy of Social Insurance warned that an ever-growing share of the nation’s resources will be devoted to health-care costs.
Medicare, the fastest-growing of all federal programs, already consumes 2.5% of the total value of the nation’s output of goods and services, the study found. This will jump to 5.1% of the American economy by 2030, when all the baby boomers have turned 65 and can draw Medicare benefits, according to the study by the independent research organization that studies Social Security and Medicare.
Adding new benefits to Medicare, such as the drug coverage proposed by Clinton for the regular Medicare program, would boost the price tag even more.
The choices for dealing with the long-range financing problem are the stuff of political nightmares for citizens as well as their elected officials: collect more taxes or cut Medicare benefits. “Any comprehensive discussion about Medicare’s future must include the need for new revenues,” said the national academy report, titled “The Financing Needs of a Restructured Medicare Program.”
Raising taxes would be unpopular. Workers and their employers each pay 1.45% of the workers’ salary to support the Medicare system. In addition, general tax revenues pay for most of the Medicare spending for doctor bills.
HMOs said Wednesday that they are simply the agents in the middle, passing along the ever-rising price of a high-technology medical system.
“There is a widening gap between high inflation in medical costs and the amount Medicare HMOs are paid” by the federal government, said Alexandra Warnier, spokeswoman at PacifiCare Health System’s headquarters in Santa Ana. She said Medicare HMOs are getting an increase of 2.5% from Washington, while general medical inflation is climbing at the rate of 6.5% a year, and drug costs are rising by 10% to 20% annually.
“Not only health plans, but doctors and hospitals are being challenged by the widening gap,” she said.
At Kaiser, the cost of care is rising, said spokesman Jim Anderson. Prescription drugs, advances in technology and the cost of office visits all have become more expensive, he said.
But the federal government said its payment rates to Medicare HMOs are “more than generous.”
“The Medicare managed-care market reflects the trends in the larger health-care market,” said Michael Hash, deputy administrator of the Health Care Financing Administration. “We believe--and independent experts, including the General Accounting Office confirm--that Medicare payment rates are more than generous enough for plans to provide Medicare’s basic benefits.”
“And this year, every managed-care plan that wants to serve Medicare beneficiaries will be paid more in 2000 than in 1999, about 5% on average. In some counties, payment rates will increase as much as 12%.”
Nationally, about 15% of the 40 million Medicare beneficiaries--people over 65 and the disabled of all ages--are enrolled in HMOs.
