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Kaiser Opts Out of Area Medicare HMO Plan
Kaiser Opts Out of Area Medicare HMO Plan By Bill Brubaker
Washington Post Staff Writer
Tuesday, September 10, 2002; Page E01

Health insurer Kaiser Permanente said yesterday that it will drop out of the federal government's Medicare HMO program in the Washington-Baltimore area as of Jan. 1, signaling higher costs for about 25,000 elderly and disabled members.

Yesterday was the deadline for HMOs to notify the government of their intentions about the program. Kaiser also said it will cut its Medicare plan in Ohio.

Kaiser is the last Washington area HMO to participate in the Medicare+Choice program, which was rolled out by the government in 1997 in hopes of reducing federal health spending while offering seniors benefits, such as prescription-drug coverage, not provided by traditional Medicare.

About 200,000 Medicare beneficiaries across the United States will be dropped next year by their HMOs, the American Association of Health Plans said.

"Two hundred thousand more Americans with Medicare will have the rug completely pulled out from under them. No doubt hundreds of thousands more will see their premiums increase and benefits cut," said Robert M. Hayes, president of the Medicare Rights Center, a consumer interest group.

Like many other HMOs, Kaiser contends that it has not been adequately reimbursed by the government for the services it provides to Medicare patients. While the government will give Medicare HMOs a 2 percent raise in 2003, health-care costs are increasing 10 to 12 percent, insurance executives say.

Karen Ignagni, president of the American Association of Health Plans, said this "funding shortfall" will result in higher premiums and "major benefit changes" for many of the remaining Medicare HMO enrollees next year.

Some studies have found that the government has paid more to Medicare+Choice plans than it would have if the same patients had remained in traditional Medicare. That's because Medicare+Choice plans have attracted relatively healthy seniors who require little care, and the government pays the plans a flat fee for every member they enroll, the studies said.

In June, when the House passed a bill that would add prescription-drug coverage to Medicare, it also included about $30 billion in extra subsidies to health-care providers -- including some $2.9 billion for HMOs by 2012. The Senate defeated prescription-drug legislation but may reconsider the issue before the end of the year.

President Bush, who has made strengthening Medicare+Choice a priority, has proposed nearly $14 billion in additional subsidies to Medicare HMOs over the next decade.

Yesterday, senior-citizen groups began bracing for a wave of phone calls from Medicare patients. "If this means increased premiums, then that will be a burden on seniors in the District of Columbia," said Suzanne Jackson, who directs a health insurance counseling center at George Washington University.

Members of Kaiser's Medicare+Choice plan -- which the HMO has marketed under the name Senior Advantage -- were notified by letter beginning last week that unless they opt out they will be enrolled in an alternative plan, known as Medicare Plus, beginning Jan. 1. More details will be provided next month, said the HMO's Medicare sales director, Jerri Steinkraus. Members also may return to the traditional Medicare program or buy a supplemental "Medigap" policy.

The letter did not indicate whether Kaiser's new plan will offer a prescription-drug benefit. Yesterday, Kaiser spokesman Matthew Schiffgens said the plan would have a drug benefit.

Asked if the new plan will be more expensive than Senior Advantage, Schiffgens said: "Yes, members will see increased out-of-pocket costs."

Kaiser's withdrawal reflects growing discontent among insurers with the Medicare+Choice program. In 1999 about 6.3 million Americans participated in the program. Today, about 5 million are enrolled. In the Washington area, nine HMOs once offered Medicare+Choice plans. Today there is one.

At first, Kaiser did not charge a monthly premium for its Medicare+Choice plan. By 2000, as other local HMOs were shutting down their Medicare plans, Kaiser was charging monthly premiums ranging from $69 in the District to $89 in Northern Virginia.

This year, the monthly premiums range from $79 in the District to $119 in Northern Virginia.

Schiffgens said Medicare HMO members who enroll in the alternative plan can retain their present Kaiser doctor.

That "is a really important point for seniors," he said, "that these folks don't feel like they're going to be thrown into a mix and they're not sure of where they are going."

Staff writer Amy Goldstein contributed to this report.


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