THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Tuesday, October 29, 1996 TAG: 9610290279
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: BY DEBRA GORDON, STAFF WRITER
LENGTH: 96 lines
Optimum Choice, one of two Medicare HMOs in Hampton Roads, is pulling out of this market.
In letters sent to its members late last week, the company blamed its decision on low reimbursement rates from the federal government and high medical costs.
The move, effective Jan. 1, will leave about 1,800 people 65 and older searching for health insurance alternatives to fill the gap between what Medicare pays for and what their health care actually costs.
Optimum Choice's decision may signal the start of a trend of HMOs to ``throw up their hands and say I quit'' when dealing with the special challenges an elderly population poses, said Robert Friedland, director of the National Academy on Aging, a Washington-based public policy research organization.
That could pose problems for legislators, who have been touting Medicare HMOs as one way to save the beleaguered Medicare system, expected to run out of money in the year 2002.
Optimum Choice, which is owned by Rockville, Md.-based Mid-Atlantic Medical Services Inc., is the second Medicare HMO to run into problems in Hampton Roads. In January, Sentara Medicare Choice, which has about 5,200 members, dropped its prescription drug coverage, also citing low reimbursement rates.
Sentara and Optimum Choice receive an average of $340 a month from the federal government for each Medicare member they enroll. The payments are set at 95 percent of the average cost per recipient in traditional Medicare, where the government pays doctors and hospitals for specific procedures.
Members pay Optimum Choice a $25 monthly premium and have $42.50 a month from their Social Security checks sent to the federal government.
The government payments ``just don't begin to cover the high medical costs of this population,'' said Michael Savage, Optimum Choice communications manager. That's because Medicare members as a group - compared to younger, healthier people in employer-sponsored HMOs - typically have several chronic ailments.
In fact, a recent study in the Journal of the American Medical Association concluded that elderly patients treated by HMOs had worse physical health outcomes than those treated by fee-for-service doctors.
Managed care seeks to reduce health-care spending by focusing on preventive health and by closely monitoring and controlling how and where members receive medical services.
In some parts of the country, such as Minnesota, Florida and California, Medicare HMOs have shown enormous growth. In fact, 60 percent of the 3.5 million Medicare beneficiaries enrolled in HMOs live in four or five states. One reason is that federal reimbursement rates - determined by a complex formula that takes into account cost of living and other variables - are higher in those areas.
Optimum Choice is ending its Medicare HMO plans in several other cities and counties in Virginia, West Virginia and Maryland where the reimbursement was judged inadequate, Savage said, affecting a total 5,886 members.
Maura O'Connor Ilich of Virginia Beach, for example, switched to Optimum Choice earlier this year from Sentara Medicare Choice because she needed the pharmacy coverage.
Now, the 67-year-old woman doesn't know what to do.
``I've been happy so far,'' she said Monday. ``I wouldn't even mind paying more. But it is a shock to hear they are pulling out.''
Members have until Jan. 1 to either join Sentara's Medicare Choice or re-enroll in the federal Medicare program.
Neither option covers prescription drugs, an enormous cost for the elderly, many of whom often take several medications daily.
They can buy insurance policies that cover health-care costs Medicare doesn't pay - called Medigap policies. Premiums for plans including drug coverage start at about $75 a month, but they are rising between 20 percent and 40 percent. That's on top of rising Medicare Part A deductibles, which cover hospital stays, and increasing premiums for Medicare Part B, which covers doctor visits.
Ted Wille, vice president for Sentara Health System, called the federal reimbursement for Hampton Roads ``barely adequate.'' Still, he said he was surprised to hear that Optimum Choice's Medicare HMO was leaving the market.
``I think it's awfully difficult to manage a product like that from Rockville, Md.,'' he said. ``We believe that the senior-citizen population has special needs and that being local means we can better meet their needs.''
Since it dropped its pharmacy coverage, Wille said, Sentara's Medicare HMO has been on a healthier financial footing.
He doesn't expect much, if any, increase in the plan's $35 monthly premium.
He also expects that other insurance companies, like Trigon and U.S. Healthcare, may enter the Medicare HMO market in Hampton Roads within the next year, offering new choices to consumers.
Until then, Cliff Spearman, a retired 79-year-old Optimum Choice member, has no idea what he's going to do.
Spearman, of Virginia Beach, takes seven medications a day, at a monthly cost of $350. Under Optimum Choice, he paid $10 each time he filled a prescription.
``It was the best thing I ever ran into.'' ILLUSTRATION: About 1,800 people 65 and up will have to find an
alternative to fill the gap between what Medicare pays for and what
their health care actually costs.
KEYWORDS: ELDERLY MEDICARE HMO MANAGED CARE by CNB