NCPA - National Center for Policy Analysis

An Unhealthy Triangle

July 6, 1999

Health maintenance organizations, the federal government and seniors on Medicare are caught in a financial web which promises pain for almost all, according to reports.

  • Health maintenance organizations attached to Medicare contend the plan is not reimbursing them enough and they are leaving the Medicare market or reducing benefits to seniors, according to the American Association of Health Plans.
  • About 17 percent of members in the Medicare program -- or 6.2 million people -- are enrolled in those programs.
  • The industry pullbacks will affect about 250,000 or more seniors when the plans exit certain markets at the end of the year -- while 450,000 HMO seniors were affected by HMO pullbacks last year.
  • Moreover, most of the 6.7 million elderly Americans who belong to HMOs are going to be charged more for their medical care.

The announcement from Medicare was tied to a July 1 deadline which required HMOs to notify Medicare officials if they intended to drop out of the program, reduce their service areas or prepare changes in their benefits and premiums packages.

Some HMO representatives say that they must increase their premiums next year, while others are being forced to reduce their prescription drug benefit to make up for lost government funding.

Source: Nancy Ann Jeffery, "Seniors' Benefits Slip as HMOs Battle Medicare," Wall Street Journal; and Amy Goldstein and David S. Hilzenrath, "Elderly to Face Hikes in HMO Fees," Washington Post, both July 2, 1999.


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