Mathematica Policy Research, Inc.
September 2002
Medicare+Choice Withdrawals: Experiences in Major Metropolitan Areas
by Marsha Gold and John McCoy
Recent experience highlights the importance of local market features in
shaping beneficiaries’ experience with Medicare+Choice. Medicare managed
care developed unevenly across the country and is eroding unevenly as well.
Under current policy, it is likely that Medicare+Choice will continue to
diminish
nationally, with enrollment increasingly concentrated in those markets where
conditions are most hospitable. Since markets vary, often in ways that
federal policy can only marginally influence, a market-based insurance
strategy like Medicare+Choice will almost always mean that plan choices vary
substantially across the nation.
http://www.mathematica-mpr.com/PDFs/opinsights8.pdf
Comment: Ā Medicare+Choice was an attempt to control Medicare costs by using
private health plans competing in the marketplace. It was a dismal failure.
All studies demonstrated that costs actually increased and that access to
the plans varied greatly depending on local market conditions.
Now the Bush administration is introducing Medicare+Choice PPO plans. They
will pay the plans 99% of the costs of the traditional programs plus
one-half of the cost overruns. The plans most likely will demonstrate
initial success by directing their marketing to the healthy sector of
Medicare patients. Low cost patients will leave them with profits initially.
But, as their beneficiaries age and develop greater health care needs, the
private PPO Medicare plans also will be unable to meet the higher costs,
especially when adding in the greater administrative expenses of the PPO
plans. And the cost overruns will again be borne by the taxpayers. As the
current Mathematica study indicates, we can expect these plans to provide
unstable insurance support because of the continual need to modify their
targeted markets based on local market profitability.
It is particularly ironic that Bakersfield, California is one of the ten
worst markets for Medicare+Choice contracts since Bakersfield is the home of
William Thomas, Chairman of the House Ways and Means Committee and one of
the strongest supporters of Ā the plans to privatize Medicare. It is fair to
ask Congressman Thomas whether he is representing the interests of the
residents of his district or representing the interests of the health plans.
All of us should be asking our candidates for elective office precisely what
policies they support. Do they support policies that enhance the markets for
private health plan profitability, or do they support policies that enhance
mechanisms that improve allocation of our health care resources for the
benefit of patients? Knowing that answer, we’ll all be better informed
voters.