Medicare HMOs plan to cut premiums, enhance benefits

Posted: Tuesday, February 03, 2004

WASHINGTON Health maintenance organizations for the elderly are planning substantial rate cuts and benefit increases in response to a $500 million boost from the federal government this year.

The announced changes, which must be approved by the government, would affect at least 1.25 million seniors who are enrolled in Medicare HMOs in 15 states. Some premiums would be cut in half, co-payments would be slashed for doctor visits and hospital stays, and some seniors would get prescription drug coverage.

The proposals amount to a reversal of fortune for many of the 4.6 million Medicare beneficiaries who are enrolled in managed care plans. They had seen steady increases in payments and cuts in services since 1999.

Another 2 million older Ameri-cans lost their HMO coverage as insurers withdrew from the market because of skimpy increases in Medicare reimbursements, which averaged 2 percent in 2003 for Medicare HMOs.

The higher government payments, averaging 10.6 percent this year, are designed to encourage insurers to maintain and expand their Medicare HMOs, which are intended to have a much larger role under the Medicare law that President George W. Bush signed in December.

Pacificare Health Systems Inc., of Cypress, Calif., became the largest provider of Medicare HMOs to announce payment cuts and enhanced benefits Monday for most of its 700,000 enrollees in eight Western states Ari-zona, California, Colorado, Neva-da, Oklahoma, Oregon, Texas and Washington.

Aetna Inc., of Hartford, Conn., also said Monday that it would use higher government payments to help many of its 121,000 enrollees in California, Maryland, New Jersey, New York and Pennsylvania.

Health Net Inc., of Woodland Hills, Calif., made a similar announcement last week regarding its 171,000 participants in Arizona, California, Connecticut, New York and Oregon. Insurers in Massachusetts and Rhode Island also have detailed planned rate reductions.

Critics of the new Medicare law have said they fear the government and insurers will provide incentives to lure seniors to managed care plans as part of an effort to undermine traditional Medicare.

The health insurance lobby has said, however, that the higher government payments are a step toward stabilizing managed care plans under Medicare.

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