Blue Cross & Blue Shield of Rhode Island posted an estimated $13 million gain on its BlueCHiP for Medicare program in 2001, bucking a national trend that has put many Medicare HMO plans in financial doldrums.
HMOs for seniors have been hemorrhaging money in recent years amid rising prescription-drug and other health-care costs, which have far outstripped paltry increases in Medicare reimbursement, industry analysts say. Operating losses have forced many insurers to terminate Medicare HMO plans, and most that remain have jacked up premiums and co-payments to stem losses
On Jan. 1, 58 Medicare HMO plans in the U.S. either shrank service areas or folded altogether, according to the federal Centers for Medicare & Medicaid Services (CMS), which administers the Medicare program. The closings affected 536,000 Medicare beneficiaries, who were forced to find other plans or revert back to traditional Medicare. A year ago, nearly 1 million seniors saw their plans close, according to CMS.
But the situation is the polar opposite for Blue Cross. Membership in its BlueCHiP for Medicare plan climbed 14 percent to nearly 40,500 during 2001.
After losing a combined $28 million on the program between 1997 and 1999, the BlueCHiP for Medicare plan posted a $6.3 million surplus in 2000 and saw profits jump to an estimated $13 million last year, according to Blue Cross spokesman Scott Fraser. He said the gain was largely from improved Medicare reimbursements, as well as increased premium revenue from membership growth.
Despite the surplus, Blue Cross implemented modest premium increases for the BlueCHiP for Medicare plan and raised co-payments for prescription drugs and inpatient hospital visits as of Jan. 1.
Medicare HMO plans – which operate under the federal Medicare+Choice program – are run like normal HMOs, but premiums are paid by the federal Medicare program. The plans limit seniors’ choice of doctors but add coverage for services not included under the traditional Medicare program – most notably for prescription drugs.
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Just a few years ago, about a half dozen health insurers offered Medicare HMO plans in the Rhode Island market, including Tufts Health Plan, Harvard Pilgrim Health Care and Aetna U.S. Healthcare. But all of those plans have since pulled out of the market after suffering losses, leaving Blue Cross and UnitedHealthcare of New England as the only players.
The BlueCHiP for Medicare apparently has been buoyed by the federal Benefits Improvement and Protection Act of 2000, which boosted Medicare payments to plans in smaller markets.
"Rhode Island is one of those areas that has been helped by legislation to increase funding in small-urban and suburban areas," said Mohit Ghose, spokesman for the American Association of Health Plans, which is lobbying Congress for additional funding for Medicare+Choice plans. He said in some cases, Medicare HMOs in smaller cities – populations of less than 250,000 – have seen reimbursement increases of as much as 100 percent.
Ghose said in urban markets – home to roughly 70 percent of the 5.6 million Medicare beneficiaries enrolled HMO plans – Medicare HMOs are seeing 2 percent reimbursement increases, while health-care costs are climbing at double-digit rates.
"Insufficient federal funding and rising medical costs have pushed many HMOs to dump their elderly enrollees," said Martin D. Weiss, chairman of Florida-based Weiss Ratings, in a written statement. The company provides ratings on Blue Cross plans and other HMOs.
In Connecticut, for example, at least five Medicare HMOs have shut down in the past year – including two as of Jan. 1, according to The Hartford Courant. A Dec. 9 article described the state’s Medicare HMO business as being "in shambles."
In Massachusetts, the three largest Medicare HMOs all raised premiums for 2002, reportedly blaming the increases on inadequate Medicare payments.
BlueCHiP’s "standard" plan still is free, but the monthly premium for its "plus" plan went from $49 to $59 and "preferred" members will pay $129 this year, up from $119. Prescription-drug co-payments also went up, from $5 to $7 for generic drugs and from $15 to $25 for brand-name medications.
But the most striking change is an increase in co-payments for inpatient hospital stays. Instead of paying $100 per hospital admission last year – regardless of the length of stay – members pay $150 for each day in the hospital, for a maximum of 10 days. Seniors on BlueCHiP’s "plus" plan pay $100 per day, and "preferred" members pay $25 a day.
"Even with the slight premium increases and benefit changes, it’s still the best deal on the market," Fraser said of the BlueCHiP for Medicare plan.
UnitedHealthcare did not increase premiums for its Medicare Complete plan and actually lowered co-payments for some benefits, including prescription-drug coverage. Its co-payment for hospitalization remains at $275 per day, but the plan caps members’ total out-of-pocket cost at $3,500 a year.
"Fortunately in the last year there haven’t been any real disastrous changes, compared to two or three years ago when (Medicare HMOs) were pulling out," said Larry Grimaldi, spokesman for the Rhode Island Department of Elderly Affairs. The department hosted dozens of workshops during the fall to help seniors understand the changes in store for 2002.
But he added that hospital co-payments are among the most daunting expenses for many seniors. "When you’re talking about $275 a day in the hospital, that’s a fair chunk of change," Grimaldi said.
He said the department encourages seniors to analyze their health-care needs to make sure they’re spending health-care dollars wisely. For example, if someone takes a lot of medication, it might make sense to risk a higher hospital co-payment if the plan offers better prescription-drug coverage.
"It’s really a dollars-and-cents proposition," Grimaldi said. "You have to determine what you might need, what you have to spend and how best to match those dollars to the needs. It’s like putting together a puzzle."
Fraser said if Blue Cross did not raise premiums and co-payments on BlueCHiP for Medicare this year, it could risk swinging to a loss on the program in 2002.
"It’s still a very volatile program," Fraser said, adding that unforeseen circumstances – such as a bad flu season or a prolonged summer heat wave – could have sweeping effects on costs. "There may be a $13 million surplus this year, but you can turn around and lose that amount in 12 months time."
Fraser added that the Rhode Island company still needs to add to its reserves, ranking 35th out of 44 Blue Cross plans nationally in terms of financial stability. The insurer’s overall operating result for 2001 is not available yet, Fraser said.
UnitedHealthcare, meanwhile, dropped co-payments for both generic drugs – from $15 to $8 – and brand-name drugs, from $60 to $35.
"We were able to make a few benefit enhancements this year, and we thought the reduction in the pharmacy co-pay would be important to the largest number of people," said UnitedHealthcare spokeswoman Debora Spano.
