HMOs dropping out of Medicare

Several large health maintenance organizations have announced that they are dropping out of the Medicare+Choice program, citing inadequate funding and overregulation. Humana Inc., Louisville, KY; Aetna U.S. Healthcare, Hartford, CT; Foundation Health Systems Inc., Woodland Hills, CA; and UnitedHealth Group Inc., Minnetonka, MN, among the largest plans, have announced that, as of Jan. 1, 2001, they will no longer be offering the supplemental insurance in many states and counties. Plan members in those areas will need to switch to higher-cost, traditional fee-for-service Medicare, which lacks a prescription drug benefit.

According to the American Association of Health Plans, the health plan withdrawals will affect more than 700,000 beneficiaries. "The significant underpayments to and the excessive regulatory burdens on Medicare managed care organizations have forced plans to make the painful decision to withdraw from the market," said Chip Kahn, president of the Health Insurance Association of America. "Most Medicare HMOs would like to continue offering quality healthcare coverage to seniors, but the current situation makes participation financially untenable."

To fix the problem, the health plan industry is calling for regulatory changes, as well as reforms in the way the government administers payments. "This [reform] package should include direct increases in government baseline payments, budget-neutral implementation of the risk-adjuster and steps to insure that counties receive blended payments as envisioned in the Balanced Budget Act of 1997," said Karen Ignagni, president and CEO of the American Association of Health Plans. "These payment changes should be accompanied by meaningful regulatory reform so beneficiaries are assured quality and value in their Medicare+Choice plans." PR