As a pivotal federal deadline looms, disgruntled representatives of the nation's health plans are conducting a 50-state lobbying swing, griping that Medicare is paying HMOs so poorly that many will be forced to start charging elderly patients more money--or stop caring for them altogether.
But a new government analysis adopts a very different view. Even though Congress has restricted Medicare payments for the growing cadre of older Americans in private health plans, the government still may be too generous, according to an as-yet unpublished report by the General Accounting Office.
Medicare overpaid HMOs by $1.3 billion in 1998, the first year after rate changes began to take effect, and that excessive spending can be expected to increase as more elderly patients sign up for managed health care, the GAO has concluded. "Some plans could make a normal profit and provide [more services] even if Medicare payments were reduced," according to a draft obtained by The Washington Post.
That appraisal is likely to further inflame a combustible relationship that has developed between the government and private health plans since 1997, when Congress and the White House adopted a federal budget agreement that seeks to rely more heavily on HMOs to care for the 39 million elderly and disabled Americans who qualify for Medicare. Six million Medicare recipients now belong to HMOs.
The health plans are now among many kinds of providers of health care--ranging from major teaching hospitals to tiny home-health companies--that are beseeching Congress for more money, complaining that the budget cuts set in motion two years ago went too far.
The timing of the report by Congress's investigative arm is particularly delicate. A few copies of the GAO's findings have begun circulating just a week before July 1, the deadline by which HMOs must inform the agency that runs Medicare whether they will continue to participate in the program for the coming year.
Federal health officials are steeled for a possible repeat of the tumult that erupted last year, when nearly 100 HMOs dropped out of Medicare or stopped serving certain communities, forcing 450,000 patients--including nearly 50,000 in the Washington area--to scramble for new sources of care.
As this year's deadline approaches, the conventional wisdom within both the government and the American Association of Health Plans, the industry's main trade group, is that the number of outright defections from Medicare is likely to be somewhat smaller. But they also expect that many health plans will cause disruption nonetheless by shifting a bigger burden of their expenses onto elderly patients, by requiring patients, for instance, to pay new premiums or new surcharges for prescription drugs.
The trade group has been quick to point out that several major HMOs already have announced they are retreating from Medicare next year. Among them, Cigna Health Care plans to drop about 10,000 patients in seven states, while Senatara Healthcare intends to drop nearly 14,000 patients in southeastern Virginia.
Yesterday, the association's president, Karen Ignani, reacted angrily to the GAO findings. "Their conclusions conflict with reality," she said. "This program is being destroyed."
The GAO analysis was conducted at the request of three senior Democrats, Sen. Daniel Patrick Moynihan (N.Y) and Reps. John D. Dingell (Mich.) and Fortney "Pete" Stark (Calif.). The study concludes that health plans are being overpaid partly because the federal budget agreement set rate changes based on what HMOs were paid in 1997, a year when it says Medicare payments were especially excessive. In addition, it says HMOs tend to attract healthy patients who need relatively little care--a conclusion that Ignani disputed.
Dingell said the GAO's findings raised fundamental questions about whether the government should rethink Medicare's growing reliance on HMOs. "If we can't pay enough to satisfy them, and if we still are overpaying them, we've got a big problem," Dingell said.