HMOs’ Cuts in Medicare Benefits, Availability of Coverage Draw Fire

A key state senator accused health maintenance organizations Wednesday of eliminating crucial benefits for Medicare enrollees and “redlining” to avoid certain areas where patient expenses are too high.

Using maps and graphics, Sen. Jackie Speier, chairwoman of the Senate Committee on Insurance, showed how in some cases HMOs have sliced up counties to avoid patients in certain ZIP Codes.

“In some counties, seniors living on one side of the street have the option for HMO coverage and seniors living on the other side of the street . . . don’t,” said Speier (D-Hillsborough) at a committee hearing.

“It’s called cherry-picking,” she said. “And we don’t allow it in many other industries.”

HMOs denied that they draw boundaries to eliminate high-cost patients. Rather, they said, they must pare back their coverage areas if they cannot negotiate reasonable rates for doctors and hospitals to care for patients.

Health plan executives also blamed the federal government for underfunding the Medicare HMO program, which has forced them to reduce such key benefits as prescription drugs. Historically, medication allowances have been key selling points for HMOs because drugs are not covered in Medicare.

“We just can’t afford it anymore,” said Nancy Monk, vice president of public affairs for PacifiCare of California. “We have to cover what we can cover with the funding we’ve got.”

In most parts of the state, PacifiCare’s Medicare HMO, called Secure Horizons, has told seniors it will no longer reimburse for any brand-name drugs, including insulin, starting Jan. 1. That restriction does not apply to Los Angeles and San Diego counties, where the plan will pay up to $2,000 per year for generic and brand-name drugs combined.

Secure Horizons will also impose a co-payment of $25 for each kidney dialysis visit in most counties, including Los Angeles. Some patients with end-stage renal disease must receive dialysis four times a week, which would amount to $5,200 out of pocket each year. Currently, dialysis patients pay nothing for their visits.

Changes to the Medicare HMO program are particularly sensitive in California because 38% of seniors and disabled people are enrolled in an HMO, compared with 15% nationally.

As of Jan. 1, about 84,000 California seniors will be forced to choose new HMOs or return to the traditional Medicare program because their current HMOs won’t provide service to their areas. Only 57,000 of the state’s senior citizens were similarly affected at the start of 2001.

California accounted for 14 of the 20 cases nationally in which an HMO sought to withdraw in 2002 from only part of a county, federal officials said at the hearing. More typically, HMOs withdraw from entire counties, said Barbara Weller of the Medicare regional office in San Francisco.

State Sen. Ross Johnson (R-Irvine) said allowing HMOs to leave certain ZIP Codes may make “perfect sense.”

“We ought not discourage that if the result [otherwise] is taking coverage away from everyone in a county,” he said.

Los Angeles County, in some ways, has been an oasis of calm in a sea of tumult. In 2002, nine health plans will offer products to Medicare enrollees, the widest choice in the state. The reason for the disparity is that the federal government pays Medicare HMOs a higher rate to serve Los Angeles enrollees, based on the cost of treating seniors who are not in HMOs.

In Orange County this year, only one HMO charged patients a monthly membership fee. Beginning next year, five of the nine health plans will charge a fee ranging from $25 to $50 a month.

Pharmacist Harry Ambrunn of Burlingame in the Bay Area testified that restrictions placed on HMO members may lead to more hospitalizations and emergency room visits. Requiring generic versions instead of better brand-name drugs is “equivalent to going back to the Dark Ages and using leeches,” he said.

Health plans attribute the cutbacks to small reimbursement increases compared with other insurance programs. Medicare HMOs, on average, expect to receive 16.6% more money from 1997 through 2002. That contrasts with a 21.1% increase for traditional Medicare and a 59.7% boost for health plans serving federal employees, according to the California Assn. of Health Plans.

“Nobody tries to shrink” their business, said Bill Wehrle, a lobbyist for the HMO trade group. “If a health plan could possibly stay alive in those areas, they would.”

Seniors with questions about Medicare may call (800) 633-4227.