ROANOKE TIMES 
                      Copyright (c) 1997, Roanoke Times

DATE: Monday, January 13, 1997               TAG: 9701130131
SECTION: NATIONAL/INTERNATIONAL   PAGE: A-1  EDITION: METRO 
DATELINE: WASHINGTON
SOURCE: The Washington Post


HMO PREMIUMS MAY BE REDUCED TO AID MEDICARE

The White House is considering substantial cuts in premiums Medicare pays to health maintenance organizations as part of a broader effort to keep the federal health insurance program for the elderly afloat, administration sources said.

Although the proposed reductions have not been put in final form and would require congressional approval, if adopted they would cut an estimated $20 billion from HMO premiums over the next five years. HMOs are the nation's fastest-growing health care providers, and Medicare HMO enrollment is growing by 1 million a year, government figures show.

As word of the proposals has spread, it has caused great trepidation within the HMO community, which fears that the changes could jeopardize business.

If the premiums are cut too sharply, HMOs argue, they would have less money to care for patients, and fewer resources with which to provide extra services that traditional Medicare doctors don't offer.

Right now, many Medicare HMOs offer patients free prescription drugs, dental benefits and other perks to lure them away from traditional providers. With their fees cut, the HMOs believe they would become less attractive both to existing and potential enrollees.

The proposal to cut HMO premiums is only one part of the administration's overall plan to cut the growth of Medicare by approximately $100 billion over the next five years and stave off the bankruptcy of the Medicare hospital trust fund projected for the year 2001.

Clinton's proposed Medicare savings, which will be part of the budget he sends to Congress next month, would extend the trust fund through the year 2006. His plan also calls for substantial cuts in the growth of reimbursements to doctors, hospitals and other health care providers in the traditional fee-for-service part of the program.

Medicare reform was a big issue during the presidential campaign and one that played well for Clinton. In 1995, the president vetoed a Republican bill that would have cut $270 billion from Medicare over seven years, calling it excessive and accusing Republicans of cutting more than was necessary to finance a tax cut for the well-to-do.

As lawmakers take up the issue again, the proposal to cut HMO payments could trigger another explosive fight in Congress, legislative and industry sources say.

Of the 37 million Americans who are covered by Medicare, more than 4 million have opted to join HMOs. Under existing law, when people turn 65 they become eligible for the traditional Medicare fee-for-service program. But they may join an HMO and have the government pick up the premium. Medicare is now paying premiums to HMOs at the rate of $24 billion a year.

The theory behind the administration's proposed cuts is that many HMOs are being overpaid in comparison with other Medicare providers.

HMOs are thought to attract a disproportionate share of the healthiest seniors and, as a result, they have lower costs than the current premium formula now assumes. This leaves the sicker, more costly patients in the traditional Medicare fee-for-service program. The current fee schedule, the administration will argue, doesn't properly account for this, and as a result overpays HMOs by about $2 billion a year.

A second argument for the proposed cuts is that HMOs do not incur the level of hospital bills that traditional Medicare providers do.

HMOs are less likely, for example, to send patients to costlier ``teaching hospitals'' whose fees are higher because they train new doctors and take care of large numbers of the uninsured.

The administration plan as it now stands proposes cuts that will adjust for these two types of overpayments, saving about $10 billion on each.

Susan Pisano, spokeswoman for the HMO industry trade organization, the American Association of Health Plans, disputed the notion that the hospital costs or patient population of HMOs differ from those in the fee-for-service Medicare plan. She contends that the notion HMOs have healthier patients is based on outdated studies.

``We're getting larger and larger numbers of people, and they represent the population as a whole,'' she said. And even people who initially join in good health tend to stay in the HMOs as they age and begin relying on health care more.

A recent study, she said, shows that even people who get cancer do not quit the HMOs and return to traditional fee-for-service programs, which would free the HMOs of those high costs. She also said that HMOs are increasingly training health professionals through their own residency programs, as well as using teaching hospitals.

Pisano also contended that decreasing payments to HMOs would reduce the extra benefits to patients that HMOs provide, reduce seniors' options on which health plan to choose and increase out-of-pocket costs for seniors.

If the administration goes ahead with the cuts, it is unclear whether the estimated $20 billion reduction in HMO premiums would translate into an equal savings to the Medicare program. Some of the money might have to be rechanneled to academic medical centers and teaching hospitals.

As the administration weighs measures to cut Medicare's costs, it also is evaluating plans to adjust premiums to make them more generous to rural areas. A large congressional coalition representing rural areas has complained that, under current law, Medicare premiums available to HMOs in less-populated counties are so low compared with those paid in urban areas that few HMOs have reason to locate there. The administration plan, like a Republican proposal in the last Congress that ultimately failed, would narrow the difference between payments in rural and urban regions.

A recent report by the Prospective Payment Assessment Commission, a congressional agency that advises Congress on Medicare issues, said that the Medicare premium rate for Richmond County (Staten Island), N.Y., was set at $767 a month for each individual in the program - the highest in the country. In contrast, the rates for the lowest counties, Arthur and Banner, Neb., were set at $221.


LENGTH: Long  :  105 lines






















by CNB