Health Plans Stream Out of Medicare While Medicare+Choice Starts Slowly

About 1 of every 14 Medicare enrollees is looking for new coverage this month. Call it fallout from Black Friday — Oct. 2, the deadline for health plans to decide whether to renew Medicare contracts with the Health Care Financing Administration. Citing unprofitable reimbursement, 43 HMOs and 22 other plans exited Medicare, while 52 HMOs trimmed service territory. A tenth of affected enrollees live in rural areas with no other managed care option.

HCFA got four Medicare+ Choice takers from provider-sponsored organizations, once seen as a catalyst for the proliferation of managed Medicare. One preferred-provider organization applied to enter Medicare. No insurers applied to offer medical savings accounts, another Medicare+Choice option.

The list of HMO casualties reads like a managed care Who’s Who. Foundation Health Systems terminated contracts in six states; United HealthCare dropped out of 86 of the 206 counties it serves; Oxford left markets in four northeastern states, and Prudential bolted from parts of six states.

The pullout prompted Florida’s attorney general to investigate whether six health plans conspired to violate antitrust laws. The American Association of Health Plans called the probe politically motivated.

Drug Expense Hits Home; Mississippi Pays Pharmacists

The expense associated with drug misuse is getting a close look from health plans, which are fighting cost battles on two fronts: a double-digit rise in pharmacy expenses and an upturn in medical costs, which have accelerated as utilization reductions have become difficult to sustain. Plans are leaning more on consultant pharmacy and technology for help.

Mississippi received HCFA approval to pay pharmacists for services to Medicaid recipients. Pharmacists will provide education, monitor compliance and manage prescriptions for diabetes and asthma patients.

Pharmacists will be paid $20 a visit. Mississippi is the first state HCFA has approved for such reimbursement, and several other states — fretting about the excessive cost of hospitalization resulting from inappropriate drug therapy — are interested. In Mississippi, that expense approaches about $80 million per year.

John Skhal, Pharm. D., president and CEO of Pharmaceutical Care Network, a Sacramento, Calif.-based pharmacy benefit management company, puts the problem in perspective. “Eighty-five percent of non-trauma-related hospitalizations are due to inappropriate drug therapy,” he says.

PCN recently introduced MedIntelligence, a line of software that helps case managers identify medication issues that could result in hospitalization or other unnecessary utilization. Skhal says the program has saved HMOs and independent practice associations $450 per drug-therapy change, not including hospital and physician costs that were avoided.

Similarly, researchers for Merck-Medco, the PBM, reported in the Journal of the American Medical Association Oct. 14 that electronic monitoring can reduce the risk of dangerous drug interactions. In a one-year study of 23,000 people age 65 and up, a computer program flagged 43,000 prescriptions for potential drug interactions and sent warnings to pharmacists. About 6,000 prescriptions were changed.

Premiums Rise, Medical Costs Lag, Says New Survey

Health plan premiums are headed up more steeply in the Southeast than in other areas next year, but the region will experience the slowest growth in per-capita medical costs.

Pennsylvania-based Sherlock Corp., a managed care research and consulting company, reports that nationwide, employers expect premiums to rise significantly — 8.3 percent. Southeastern employers say their premiums are rising, on average, 9.6 percent, while at the low end, purchasers in the Mid-Atlantic region anticipate an average 7.3-percent hike.

Simultaneously, Sherlock foresees a 2.4 percentage-point decrease in medical-loss ratios — translating into a 5.3-percent increase in medical care costs for managed care organizations. Medical-loss ratios will show the most improvement in the Southeast — 5.9 percentage points — while a 1-point rise is predicted in some plains states.

Triple Benefit Plan, Hospitalist Pact Attract Attention

Some new wrinkles of note:

Consultants say an emerging type of plan that one-ups the point-of-service option could be the wave of the future. The idea rolls a preferred-provider organization, HMO and POS plan into one. Members choose how to use benefits in exchange for differing out-of-pocket expenses. In Texas, Aetna U.S. Healthcare and Harris Methodist Health Plan are reportedly studying variations of this.

In Southern California, Permanente Medical Group and Hospitalists Inc. signed a pact that Kaiser Permanente hopes will control the cost of care for members who seek emergency treatment at non-Kaiser hospitals. Kaiser patients will be evaluated by the attending ER physician and a Hospitalists Inc. doctor about whether to treat and release, admit the patient to the non-Kaiser hospital or stabilize and transport the person to a Kaiser facility.

Texas Case Tests Whether HMOs Can Be Sued

The family of a Texas man who died after drinking antifreeze during a bout with depression has sued NYLCare Health Plans in the first test of a Texas law allowing residents to sue their HMOs.

According to a lawyer for the family, NYLCare’s behavioral health carveout contractor, Merit Behavioral Health, told a hospital to discharge the man over his physician’s objections. The incident occurred a day later. NYLCare says it was not involved in the decision and intends to fight the case.

Headlines On Deadline…

Total HMO enrollment grew 6.1 percent, to 76.7 million, during the last six months of 1997, according to InterStudy, which tracks HMO trends…. Enrollment in PPOs is soaring. The American Association of Health Plans says PPOs have added 44 million members in the last five years, while HMOs have attracted 30 million…. How many doctors are enough? A Harvard School of Public Health survey yields differing opinions. Fifty-five percent of HMO executives said there is a general oversupply of physicians; 70 percent thought there are too many specialists. Six in ten specialists disagreed…. American Osteopathic Association delegates approved a resolution that D.O.s who provide primary care and osteopathic manipulation should get higher capitations than M.D.s.

How plans manage pharmacy costs

Multiple formulary controls are becoming more prevalent among HMOs as managed care organizations and purchasers look for ways to keep pharmacy expenses within budgets. Formulary control trends suggest that the uses of therapeutic interchange and variable copayments are HMOs’ fastest-growing cost-control strategies.

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