2 HMOs to Curtail Senior Medicare Coverage in California

Two large HMOs said Friday that they are dropping Medicare coverage for 44,200 California seniors as part of a steady nationwide retreat by insurers from the federal health insurance program. Many more California seniors who aren’t losing coverage will pay more for it, the HMOs said.

Nationwide, the Department of Health and Human Services said 58 health plans are withdrawing or cutting services next year, meaning 536,000 seniors--about 10% of the 5.6 million in Medicare health maintenance organizations--will have to find another way to receive Medicare benefits.

The cuts in California affect mostly patients in rural counties outside Southern California where Medicare reimbursement does not adequately cover health-care costs, insurers said.

PacifiCare Health Systems Inc., the nation’s largest Medicare HMO operator, accounts for 73% of the cuts in California. It is withdrawing from eight counties, including Imperial and San Francisco, and reducing coverage in seven others--Ventura and Santa Barbara among them. A total of 32,700 seniors, or 6% of PacifiCare’s 519,000 California enrollees, are affected.

Health Net Inc. said it is dropping coverage for 11,500 seniors in seven California counties, or 9.5% of its 120,000 Medicare enrollees. It is withdrawing from five counties, including Ventura, and halting individual coverage in San Bernardino and Riverside counties, where employer-sponsored Medicare plans still will be offered.

The cutbacks become effective Jan. 1.

The HMOs are attractive to seniors because they provide broad prescription drug coverage, which is not available through Medicare. The federal program covers only drugs that must be administered in a hospital or a doctor’s office.

The cutbacks will leave many seniors without prescription drug coverage, said Betty Perry, policy director for the Older Women’s League of California. Prescription drug expenditures have been rising faster than overall health-care costs, driven by new, more expensive medications.

HMOs have been slowly leaving the Medicare business since 1998. Insurers said reimbursement limits enacted in 1997 as part of federal legislation to balance the budget have made Medicare HMOs less profitable. Health Net said, for example, that it currently receives $573 monthly for each senior in Ventura County, 17.4% less than the $694 it receives monthly for each senior enrollee in Los Angeles County. Yet health-care costs in the two counties are virtually the same, said Health Net spokeswoman Lisa Haines.

Regional disparities are only one part of the problem, according to insurers. The 3.2% overall increase in Medicare reimbursement is inadequate, they said, at a time when health-care costs are up 10%.

“Medicare payment rates do not track well with the costs experienced by HMOs,” said Paul B. Ginsberg, president of the Center for Studying Health System Change, a nonprofit research center in Washington.

Ginsberg said HMOs would rather withdraw from counties where reimbursement is low than charge seniors more for insurance.