Blue Cross & Blue Shield of Rhode Island continues to have success with its Medicare HMO – much to the dismay of hospitals, who say the insurer’s bounty is coming at their expense.
The BlueCHiP for Medicare plan netted an estimated $9 million in excess reserves during 2002, after taking in around $10.5 million in 2001. The plan operates under the federal Medicare+Choice program, created in 1997 to give seniors more choices and greater coverage than traditional Medicare.
But hospitals in Rhode Island say they’re losing money on Medicare HMO patients because those plans pay substantially less than what traditional fee-for-service Medicare pays.
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Payments from Medicare HMOs like BlueCHiP for Medicare and UnitedHealthcare’s Medicare Complete plan – the only two Medicare+Choice plans in Rhode Island – reimburse, on average, just 70 percent of what traditional Medicare pays, according to the Hospital Association of Rhode Island. The difference costs the state’s hospital industry $40 to $50 million a year, the association estimates.
“Blue Cross has aggressively marketed that product in recent years, and they’ve been very successful in keeping seniors under their roof,” said Edward J. Quinlan, president of the Hospital Association of Rhode Island.
Quinlan said the result is an uneven playing field: Hospitals are obligated to take patients regardless of what plan they’re on, but patients and insurers have a choice. UnitedHealthcare, for instance, dropped its Medicare Complete plan in Newport County and the East Bay a few years ago because the plans weren’t money-makers in those markets.
Hospitals in Rhode Island feel the financial effects of Medicare HMO plans more acutely than in other states, Quinlan said, because 34 percent of the state’s Medicare beneficiaries are enrolled in them, compared to 12 percent nationally.
Louis Giancola, president of South County Hospital, concurs with the estimate that managed-cared plans reimburse about 70 cents for every dollar that the federal Medicare program pays.
“Think about getting 30 percent less per hospital stay, when most hospitals already are struggling to break even,” Giancola said.
Scott Fraser, a spokesman for Blue Cross, concedes that the BlueCHiP for Medicare plan pays hospitals less than traditional Medicare does, although he said the 70 percent figure “sounds a little bit low.” But, he said, the reimbursement is on par with the fee schedules of Medicare+Choice plans elsewhere. And, hospitals agreed to accept the payments as part of their negotiated contracts with the insurer.
“I can’t imagine a hospital would agree to rates that they felt they would lose money on,” Fraser said.
He added that BlueCHiP for Medicare members tend to be healthier than traditional Medicare recipients, so they use fewer services, spend less time in the hospital and ultimately are less expensive to treat. The plan’s membership has grown nearly 20 percent since 2000, to 42,415 as of October.
Blue Cross’s success in the Medicare market is an aberration. Nationally, many health plans have lost money on their Medicare products – with some dropping the plans altogether – because of dwindling reimbursement from the federal Medicare program.
More than 200,000 Medicare recipients nationally have been forced to find a new HMO for 2003 because their insurer pulled out of the market, according to the American Association of Health Plans. In 2000 and 2001, about 1.5 million Medicare beneficiaries saw their HMOs fold. Millions more were hit with steep increases in premiums and co-payments.
Congress adjourned in November without acting on a bill that would have increased reimbursement payments for the Medicare+Choice program in 2003 and 2004 – a move that would have benefited both hospitals and insurers.
Blue Cross also struggled with its Medicare business for a time, losing a combined $28 million between 1997 and 1999.
Now, despite gaining roughly $25 million on its Medicare HMO plan over the last three years, Blue Cross in January is increasing co-payments and premiums for the third consecutive year.
For example, seniors in BlueCHiP for Medicare will pay a $50 co-payment for MRI and CAT scans, which now are free. New co-payments for outpatient surgery will carry co-payments of $50 to $100, while co-payments for hospital stays will increase by $50 a day.
Fraser said the increases are necessary to keep pace with the cost of providing services. The federal government will increase Medicare payments to insurers an average of 2 percent next year, he said, while the cost of services is growing 7 to 10 percent.
“We have to adjust our rates and premiums to make up the difference,” he said.
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