The Rising Cost Of Care The State’s Health Plans Will Charge Seniors More For Medicare Program

It’s touted as a great health insurance package for seniors — but, for the third straight year, the cost is going up. For many elderly residents, the timing could not be worse.
It’s called Medicare + Choice, a Medicare product offered through private health plans. Once adequately funded by the federal government, budget cutbacks and skyrocketing health costs have combined to make it increasingly difficult to afford.

None of Massachusetts’ health plans, including the four largest — Blue Cross/Blue Shield, Tufts Health Plan, Harvard Pilgrim Health Plan, and Fallon Community Health Plan — plan to stop selling their programs to seniors on Medicare.

But, as costs rise much more quickly than federal spending on Medicare + Choice, the increase is being transferred back to seniors — and at a particularly tough time, when stock market shock has put a crimp in many of their retirement goals.

“Medicare + Choice is a great product, seniors like it, and health plans want to provide it,” said Dr. Marylou Buyse, president of the Mass. Association of Health Plans (MHAP). “Now Congress needs to adequately fund this program.”

If lawmakers want to do that, she explained to The Healthcare News, they have a lot of ground to make up.

Crunching the Numbers

Soaring medical costs aren’t news, even if increasing health plan premiums are. But the statistics are striking nonetheless. As medical costs continue to spiral upward at a rate of 10{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} to 12{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} per year, the U.S. Congress is funding this specific Medicare program at a rate of just 2{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} annually.

“That’s an 8{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} to 10{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} difference, and it’s not clear where that money is going to come from,” Buyse said.

However, much of it will come out of seniors’ pockets. As a result of the funding discrepancy, Medicare + Choice will be more expensive for seniors this year no matter what health plan they use — in some cases doubling the premiums they paid last year.

For both Hampden and Hampshire county residents who have the program administered through Blue Cross/Blue Shield, the average monthly premium will rise from $115 to $122, but co-payments will double for primary care, hospital care, and time in skilled nursing facilities. For Tufts customers in Hampden County, the co-payment increases are less steep, but the average monthly premium will rise from $70 to $105.

Other plans report similar or greater increases. For example, the average Harvard Pilgrim customer in Massa-chusetts receiving the Medicare + Choice program will see monthly premium rates rise from $60 to $120, with co-payment increases across the board.

Peter Meade, executive vice president of Blue Cross, recently told the Boston Globe that its Medicare product, Blue Care 65, has lost $70 million for the company since 1996. “This product doesn’t work for seniors, for providers, or for health plans,” he said. “It’s so unstable, I don’t recommend it for people.”

Buyse has a different perspective on such plans, saying seniors prefer the HMO-administered Medicare products over traditional Medicare, which covers 80{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} of hospital and doctor bills but has never been strong on extra benefits or preventive care. On the other hand, Medicare + Choice plans may include prescription drug coverage, cover visits such as routine physicals and eye exams, and pay for a greater share of hospital and doctor bills.

“This goes a long way to help particularly low-income seniors with both prescription drug costs and coordination of care,” Buyse said. “We think it’s a very important product to keep seniors healthy. Even with the increased rates, this product is still a bargain compared to traditional Medicare because it’s much more comprehensive and covers a full range of services.”

With HMO-administered Medicare, the federal government pays health plans a monthly, per-member fee, which the HMO then uses to pay doctors, hospitals, and pharmacies. By tightly managing members’ care, the original idea went, health plans could provide seniors with more services than traditional Medicare at a lower cost.

For that reason, seniors jumped on such plans when they were first offered in the 1980s. But partly as a result of the Balanced Budget Act of 1997 — and a feeling among federal officials that the government was overpaying health plans — funding levels started to increase at a much slower rate than health care costs — just as those medical costs began to far surpass the general inflation rate.

Dropping Out

With the population simultaneously increasing and aging, and with seniors living longer than ever but needing more — and more expensive — care to get by, health care costs have spun rapidly upward nationwide, and now HMOs say the government simply isn’t pulling its weight in providing these services.

As a result, many plans have dropped out of the program, although the ones currently serving Massachusetts residents plan to keep offering it. Nationwide enrollment is around 5 million, down 17{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} from only three years ago, when the government began reining in the funding.

“The federal government is, in a sense, trying to keep costs down, and we applaud that. We think that’s a reasonable thing to do,” Buyse said. “But they have to fund it so it breaks even. Health plans are losing money — and I mean large amounts of money — on this, so it’s more important than ever that Congress straightens this out.”

The issue is even more acute in Massachusetts, which boasts the second-highest amount of spending per Medicare enrollee in the nation, she said — well over $7,000 per recipient.

And because it has been proven that preventive care not only helps people live longer but keeps health costs down, a program like Medicare + Choice, with its focus on prevention, is important for thousands of residents. “We know prevention is the key to keeping seniors healthy,” Buyse said.

The Bush administration has proposed a 6.5{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} increase in payments to the program next year, and the U.S. House of Representatives came back with a 4{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} proposed hike — both of which would be improvements over the current situation, but neither of which makes health plan administrators very happy.

“We’ve been concerned,” Buyse said, “and for good reason.”

For now, senior citizens in Massachusetts who have come to rely on Medicare + Choice — and are worried about an uncertain economy and shaky retirement funds to begin with — have reason to be concerned as well.