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Growth industry: Pittsburgh market is fertile ground for medicare HMOs

Sunday, March 28, 1999

By Pamela Gaynor, Post-Gazette Staff Writer

As some of the nation's biggest Medicare HMOs abandoned markets around the country late last year, a funny thing happened in Pittsburgh: more HMO choices appeared.

Pat and W.C. Schmeltzer of Mt. Lebanon opted for Aetna U.S. Healthcare's Medicare HMO over a traditional health plan and have been pleased with their choice. (Bob Donaldson, Post-Gazette) 

One newcomer, QualMed, has begun rolling out its Wise Choice Medicare HMO, and the region's oldest and largest health insurer, Highmark Blue Cross Blue Shield, in January, added a third Medicare health plan to its Security Blue lineup.

The upshot is that many of the region's retirees can now pick from nine Medicare HMO plans operated by four different insurers.

The difference here with the markets where an estimated 360,000 seniors were left scrambling for coverage is no mystery among health care experts: reimbursement rates are high.

Major Medicare HMO operators pulled out of markets where they received the lowest payments. Those markets tend to be rural and thinly populated.

In Pittsburgh and other major metropolitan markets, "reimbursement is adequate to cover costs, so you see growth," said Cynthia Hatcher. She is vice president of Medicare operations for Health America, which offers two Medicare HMO plans under the Advantra trademark.

The federal government spends about $7,436 a year to take care of the average Medicare beneficiary in Allegheny County, one of the most richly compensated markets in the country. That sum compares with as little as $4,404 in the most poorly compensated markets.

For each member a Medicare HMO signs up, the agency that administers Medicare turns over most of what it would otherwise pay to take care of the beneficiary to the HMO.

Even though reimbursement rates here have kept the options open, joining a Medicare HMO remains an anxious step for many seniors, particularly those who've grown accustomed to unlimited choice among physicians and hospitals and access to specialists without the referrals that HMOs require. Those are two of the biggest differences between the HMOs and the so-called Medigap supplements that the majority of the region's seniors have traditionally purchased to pick up costs that Medicare doesn't cover.

White Oak resident Andy Hyduk confesses that he's been stewing for months about whether to join an HMO or buy a traditional Medigap supplement - and he won't turn 65, the age at which eligibility usually begins, until next year.

He's heard some negative things about Medicare HMOs. "You hear they don't pay for this or that - and maybe you don't find out until later," Hyduk said. "I have a number of friends who are angry with the service."

To be sure, there are many other seniors who have dumped their supplements for an HMO and are happy with the choice.

W.C. Schmeltzer of Mt. Lebanon doesn't regret it in the least. He joined one of Aetna US Healthcare's Golden Medicare plans a couple of years ago. "I'm totally satisfied with it. I can't understand why somebody wouldn't join," he said.

But if Hyduk's a skeptic and Schmeltzer a true believer, they're in total agreement on one thing: Cost is probably the biggest issue.

If Hyduk chooses a traditional Medigap supplement for himself and his wife, "It's going to be our biggest cost from our pension money," he said.

Traditional Medigap supplements cost anywhere from $91 to $166 a month per person. Monthly premiums for Medicare HMOs range from nothing to $43 a month and frequently offer more benefits than the supplements.

The difference in monthly premiums alone has driven the county's seniors into Medicare HMOs at a fast clip. Nearly 30 percent of those who are eligible have enrolled, compared with about 17 percent nationally.

"This market has grown to a high penetration more quickly than any other in the country," said Health America's Hatcher. "Other markets took 10 years to do what this market did in four short years."

Other benefits offered by the Medicare HMOs have also proved attractive to seniors. Probably the biggest of them is prescription coverage. With the exception Highmark's Security Blue Basic plan, which charges no monthly premium but affords no prescription benefits, all of the other Medicare HMOs plans here provide a minimum of $1,000 in annual prescription coverage. Aetna U.S. Healthcare's Golden Medicare 5 plan offers the highest prescription allowance, $1,750 a year.

Only the highest cost Medigap supplement carries prescription benefits

Unlike the more costly Medigap supplements, all of the Medicare HMOs here also offer some allowance for eyeglasses, and a couple have started to provide some "routine" podiatry or chiropractic services. Highmark's new Security Blue Deluxe plan offers some of both. Health America's Advantra plans and QualMed's Wise choice plan offer some routine podiatry.

Someone with traditional fee-for-service Medicare and one of the Medigap supplements, on the other hand, would be covered only for "medically necessary" podiatry and chiropractic services. In the case of podiatry, that would mean coverage only for actual disease or injury of the foot. For chiropractic care, it would mean treatment only for a spinal misalignment that shows up on an x-ray.

So what is the downside of the Medicare HMOs?

For one, there's always a question about what benefits will last if cost pressures from Medicare impinge too heavily on the Medicare HMO's profits.

Unlike Medigap supplements, which are designed to pick up certain costs that Medicare does not pay entirely, Medicare HMOs are free to change any benefits they offer beyond those that Medicare provides by law.

If the HMOs start to feel cost pressures, they can trim some of the extras, like prescriptions, or withdraw their plans entirely.

Like the Medigap supplement insurers, they can also raise premiums. And while HMO premiums are still modest compared to those charged by the supplements, some have gone up pretty sharply.

For 1999, Aetna U.S. Healthcare raised the monthly premium for its Golden Medicare Premier plan by 60 percent, to $24 and hiked its Golden Medicare 5 plan premium by 50 percent to $12; Highmark raised the price of its Security Blue Standard plan by 40 percent to $35; and Health America began charging $13 for what had been a zero-premium plan, while raising the price of its Advantra Plus plan by 56 percent to $25.

Another perceived drawback is that there's only one insurer here, Highmark, that offers access to virtually all of the region's hospitals. One way HMOs keep costs low is by negotiating discounts with providers who in turn expect to get more patients. That means insurers have to restrict the number of hospitals and physicians they deal with.

The wide access that Highmark's Security Blue plans offer is one of the things that have made them the most popular plans among the region's seniors, even though they offer skimpier benefits at higher premiums.

Those who are adamant about having access to all hospitals had a few nervous moments last fall when the insurer came close to an impasse over 1999 contract terms with UPMC Health System, the region's largest and most prestigious. Had the two not come to agreement, UPMC's huge network of hospitals might not have been available to seniors this year. Highmark did lose three hospitals from its network in counties outside the region.

Schmeltzer, the retiree who dropped his Medigap plan to join U.S. Healthcare, said he doesn't think having access to fewer specialists or hospitals is the big issue that many seniors perceive it to be.

He figures that you'd go wherever your doctor sent you.

In his mind, that was a limitation on choice that patients have long accepted.

Schmeltzer feels the same way about having to get referrals from his primary care doctor to see specialists, another feature of HMOs to which many seniors object.

Having just seen his wife go through back surgery, he reckons that few people are likely to go to a neurosurgeon unless their primary care doctors recommend it.

But there have been many seniors who have seen specialists on their own, at least after an initial referral from a primary care doctor.

Someone with a heart problem, for example, might continue making frequent visits to a cardiologist even after the problem has been diagnosed and treated.

To save money, HMOs often want to keep ongoing treatment in the hands of a primary care doctor.

There's much unresolved debate about whether some conditions should be monitored by primary care doctors or by specialists.

Generally, however, Medicare HMOs argue that their emphasis on primary care is the key strength of their plans. Regular checkups can mean earlier diagnosis, quicker treatment and lower costs, benefiting both the patient and the insurer.

Coordination of care by one physician can also save costs and mean better care, in the insurers' view. For example, on the cost side, it could prevent duplication of a test.

On the care side, it could prevent adverse interactions between medicine that one doctor might not know that another doctor had prescribed unless all of the treatments were being reviewed by a single physician.

Medicare HMOs are also beginning to tout "disease management" programs as boons both to cost and quality of care.

Under such programs, members with chronic illnesses such as diabetes or asthma get more routine care in hopes of diminishing their need for expensive hospitalization or treatment by specialists.

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