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Medicare Managed Care Plans Cutting Seniors’ Prescription Drug Coverage

Originally published by Reuters Health, October 16, 2001

WASHINGTON (Reuters Health) — Seniors participating in Medicare’s managed care option could soon see their prescription drug benefits reduced or cut altogether, plan executives said Tuesday. Health plans that carry the program through government contracts argued that the cuts add new urgency to their calls for increased funding of the Medicare managed care system.

Dropping prescription drug coverage could pose a major blow to the struggling program, known as Medicare+Choice. Since its inception in 1997, the program has attracted seniors with the appeal of prescription drug coverage that traditional Medicare does not provide.

Private HMOs blamed the cutbacks on rapidly rising pharmaceutical costs. The recent terrorist attacks and the ensuing war have preoccupied Congress, delaying action on a Medicare prescription drug benefit until next year and probably putting off enactment of a benefit until 2003.

“We’re getting to the point where if Medicare doesn’t cover it, we’re not going to be able to cover it,” Nancy Stalker, vice president of Blue Shield of California, said at a conference sponsored by the American Association of Health Plans (AAHP).

Stalker said that her company, which runs Medicare+Choice plans in several counties in California, has already limited coverage to generic medications, refusing to cover more expensive brand-name drugs. Faced with double-digit rises in prescription drug costs, the company is likely next year to increase seniors’ out-of-pocket drug payments or drop drug coverage altogether.

“We probably will have some counties next year with no benefit,” Stalker said.

Medicare+Choice is intended to give seniors a managed care alternative to traditional Medicare coverage. Private health plans carrying the program are free to provide join-up incentives such as prescription drug coverage, but are usually paid at a lower total rate than Medicare’s fee-for-service carriers.

Managed care plans have blamed low government payments for the steady decline of Medicare+Choice since 1998. The plan, once envisioned to cover 30% of all Medicare beneficiaries, now covers just 13%. The Centers for Medicare and Medicaid Services last month announced that 536,000 of the nation’s 5.9 million Medicare+Choice beneficiaries will lose their managed care options next year because their plans will not participate in the program.

Cutting drug coverage will probably lead to more cut-backs in terms of enrollment, Marilyn Moon, a senior fellow at the Urban Institute and a former Medicare trustee, said in an interview with Reuters Health. “A lot of people have been attracted to these plans on the basis of drug coverage,” she said.

AAHP spokesman Mohit Ghose told Reuters Health that 60% to 70% of all Medicare+Choice plans still offer prescription drug benefits, but he did not know how many Medicare+Choice plans across the country are likely to cut seniors’ drug benefits. He said that declining benefits should bolster the industry’s efforts to convince Congress that the program deserves more money.

But Ghose also acknowledged that the promise of prescription drug coverage not offered elsewhere in Medicare “is one of the major factors” attracting seniors to the program.

Government reimbursement rates for Medicare+Choice plans vary across the country but typically hover at around 90% of fee-for-service rates. The program’s supporters have pegged rate increases as key to saving the faltering option, and Congress is currently considering proposals to increase Medicare+Choice payments to equal fee-for-service payments across the country.

“I think it’s absurd that we don’t pay you at 100% of fee-for-service,” Rep. Nancy Johnson (R-CT) told HMO executives at the AAHP conference Tuesday. Johnson chairs the health subcommittee of the House Ways and Means Committee.

Democrats have in the past scoffed at boosting federal payments for Medicare+Choice, arguing that the plans have not fulfilled their promise of saving taxpayer money. Some lawmakers have also expressed concerns that the program unfairly subsidizes the private HMO industry.

Johnson noted that in both the Senate and the House there is bipartisan sponsorship for proposals to increase Medicare+Choice payments this year. But the program remains unpopular with both Democrats and Republicans from rural sections of the country, where managed care plays a small role in healthcare delivery. Many see Medicare+Choice as a bleed on the overall Medicare system, which is struggling to find enough money to cover the soon-to-retire Baby Boom generation.

“It’s just eviscerating fee-for-service,” said Sen. John D. Rockefeller, a West Virginia Democrat who chairs the Senate Finance subcommittee on health. Rockefeller said that he “would be violently against” increasing Medicare+Choice payments.

Sen. Charles E. Grassley of Iowa, the committee’s senior Republican, said that he “likes Medicare+Choice” but that he would not support boosting payments until Congress comes up with fixes for rural health systems in general.

“Thirteen percent of seniors are in Medicare+Choice. I want to see what we’re going to do for the other 87%,” he told Reuters Health.