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Medicare HMO Enrollees See Soaring Out-of-Pocket Costs

Originally published by Reuters Health, February 14, 2002

NEW YORK (Reuters Health) — Seniors enrolled in Medicare HMOs, particularly enrollees in the poorest health, are facing escalating out-of-pocket healthcare costs, according to two reports issued today by the Commonwealth Fund.

Higher premiums, reduced prescription drug coverage and other cost shifting meant enrollees paid nearly 50% more out-of-pocket for their healthcare in 2001 than they did in 1999, according to one of the reports.

The sickest enrollees encountered the most substantial growth in out-of-pocket spending, with costs rising $1,367 over the three-year period, a whopping 62% increase. Prescription drug costs accounted for $745, or nearly 55%, of the total increase.

While many Medicare+Choice plans provide some prescription drug coverage, it’s typically quite limited. In 2001, 50% had a benefit with an annual limit of $1,000 or less. The sickest enrollees can reach that limit rather quickly, forcing them to shell out for needed medications out-of-pocket.

What’s “scary” is that it’s going to get worse in 2002 as health plans participating in Medicare+Choice cut back on benefits, said Marsha Gold, a senior fellow at Mathematica Policy Research Inc. and co-author of the reports.

In a separate analysis, Gold and co-author Lori Achman found that average monthly Medicare+Choice premiums jumped to $22.94 in 2001 from $14.43 the prior year. Meanwhile, the proportion of seniors getting prescription drug coverage dropped to 70% last year from 78% the year before.

Despite those costs, seniors are still better off financially in a Medicare+Choice plan than in traditional Medicare, which doesn’t cover prescription drugs, or under a supplemental insurance policy, which can be expensive, Gold told Reuters Health.

The research suggests that Medicare+Choice is no panacea for Medicare’s problems, underscoring the need for an overhaul of the federal health insurance program for seniors.

“My sense is that the most important message that comes out of here is that it’s important to address the basic limitation of the Medicare package,” Gold told Reuters Health.