This move follows an alarming national trend of HMOs bowing out of the older adult/Medicare market in specific geographic areas — if not out of the Medicare business entirely. Statistics culled from multiple news sources suggest that an estimated 352,000 Medicare beneficiaries lost their HMO coverage during 1999. And the aforementioned Associated Press (AP) article states that nationally, " …about 16 percent of Medicare beneficiaries, or 6.2 million seniors, are enrolled in HMOs."

 

HMOs that were clamoring to get their share of Medicare business in the early to mid-1990s have been bailing out of the market because they're losing money due to the health and medication needs of older adults. What's puzzling about this phenomenon is that only about 10 percent of older adults are very ill and the majority of seniors signing up for Medicare — either HMO or traditional benefits — are healthy and active. But HMOs say they're losing money anyway.

 

Is the 1997 Balanced Budget Act to Blame?
HMO spokespersons state that the culprit for this financial loss is the Balanced Budget Act that was passed by the federal government in 1997. With the goal of reducing the government's Medicare spending by $115 billion over the next five years, this act sharply reduced monthly stipends paid to HMOs by the government. The effect will most likely be evidenced by even lower operating margins, which had previously hovered around the 3 percent level. Add to this reality the fact that Medicare reimbursement is based on formulas that make rates vary dramatically in different parts of the country and the situation for HMOs quickly becomes less than desirable.

 

Older Adults and Health Care
Perhaps there is more to this dilemma than meets the eye. It is possible that examining the relationship that older adults have with medical institutions could help to explain the current phenomenon. Some observations made over the years are:

Older Adults as HMO Subscribers
A review of the Final Report prepared for the National Coalition on Health Care, published on January 26, 1999, shows significant evidence that in the older adult population, HMO subscribers are not using their HMO benefits to their fullest. This means that they aren't taking advantage of preventive care in addition to acute or chronic care treatment. Only a little more than half of all older adults with hypertension receive treatment to control their blood pressure and just 55 percent of women enrolled have regularly scheduled mammograms. But isn't preventive health care what HMOs are supposed to encourage?

 

There isn't much evidence of comprehensive consumer education efforts on the part of HMOs to educate (or re-educate) older adults about prevention or the usefulness of wellness programs — or even specific ways to make the most of their HMO benefits. The answer seems obvious: A serious commitment on the part of HMOs to encourage well elderly subscribers to maintain their health would make a significant impact on driving costs down.

 

A Partial Remedy
Perhaps this sounds like a simplistic solution to the problem of HMOs losing money in the Medicare market but sometimes the most obvious and easy to implement answers are the ones that elude us. If HMOs and health care providers work together to encourage older adults to make the best use of their HMO benefits and maintain their good health, everyone wins — including the patient. In this scenario, there would be:

Some ways that older adults could be reached might include the following:

It's certainly worth a strong effort to drive costs down in a way that can benefit all the players — the HMOs, the government and the consumers. It has worked to some extent with the general population of HMO subscribers, so why not with older adults? If HMOs can financially survive the current crop of Medicare subscribers, the good news is this: The next generation eligible for Medicare, the Baby Boomers, comes already highly educated about preventive health care and HMO coverage. Many Baby Boomers have been in HMO plans for years.

 

Notes
"Aetna cutting Medicare HMO coverage," Associated Press (May 1, 2000).
J.F. Sheils; M.J. Coye, MD; G.B. Jacks; R.E. Dixon, MD; The Lewin Group Inc.

 

"Quality Health Care: New Challenges as Medicare Evolves" — Final Report prepared for the National Coalition on Health Care (Jan. 26, 1999).

"Many HMOs Backing Off Medicare Plans," New York Times re-published in San Jose Mercury News (Sept. 28, 1998).

"Some HMOs raise Medicare fees, others just leave: Low reimbursements spur some to drop patients and quit the Valley," The Fresno Bee (Aug. 2, 1999).