Medicare HMO Pullouts: What Do They Portend for the Future of Medicare+Choice?
February 5, 1999
This invitation-only meeting was held at the request of senior health policy staff from Capitol Hill and the Health Care Financing Administration. National policymakers became alarmed in the fall of 1998 when, contrary to expectations, nearly 100 Medicare HMOs announced their decisions to pull out of Medicare in certain areas or to reduce their service areas. This meeting explored the reasons plans withdrew from certain areas, the Balanced Budget Act of 1997 provisions that most directly influenced these decisions, the impact of the withdrawals on Medicare beneficiaries, and policy options for ensuring the viability of the Medicare+Choice program. Participants cited several reasons for plan withdrawals, with Medicare payment rates and methodology noted most prominently. Other reasons mentioned include increased regulatory requirements; filing dates and requirements for determining adjusted community rates; a significant increase in cost trends, particularly in the area of pharmacy; network problems and marginal market penetrations; and risk adjustment uncertainty. Participants heard a variety of perspectives, including senior HCFA and HMO officials as well as people who work closely with Medicare beneficiaries as counselors or former employers. These beneficiary counselors noted that, contrary to popular opinion, often it is the poorest and sickest seniors who enroll in Medicare HMOs because they simply cannot afford Medigap insurance and/or the prescriptions drugs needed to treat their illnesses.
Robert Berenson, MD, Director, Center for Health Plans and Providers, Health Care Financing Administration; Kathy Claunch, Director, Senior Health Insurance Program, Illinois Department of Insurance; Sheila Meehan, Director, Health Benefits and Life Services, Bell Atlantic Corporation; Tom Anderson, Vice President, Medicare Programs, United HealthCare; Ellen Offner, Vice President, Medicare Programs, Harvard Pilgrim Health Care; Stephen J. deMontmollin, Vice President and General Counsel, AvMed Health Plan
More information available in the accompanying publication, Issue Brief No. 730.