know your HMO facts

KNOW THE FACTS BEFORE YOU SUPPORT
INCREASED FUNDING FOR MEDICARE HMOS

October 16, 2000

Medicare HMOs are asking their enrollees to contact Congress in support of provisions that would increase dramatically payments made by Medicare to HMOs. Before you call or write your Senators and Congressmen on behalf of your HMO, know the real facts.

Independent studies show that HMOs are overpaid, not underpaid. Medicare HMOs are telling their enrollees that they do not receive enough Medicare money to continue providing care to Medicare beneficiaries or to continue providing Medicare-covered services. That is simply not true. The General Accounting Office has found that Medicare HMOs receive almost $1,000 per enrollee more than they should be paid. The GAO also found that, instead of lowering payment rates as expected, the Balanced Budget Act of 1997 actually caused HMO payment rates to grow faster. In a separate study, the Office of Inspector General found that some HMOs use as much as one-third of their income to cover administrative costs. If Congress gives HMOs the additional money they request, the amount of overspending on HMOs will increase and less Medicare money will be available for services that are needed and that reach beneficiaries more broadly.

The proposed increase in Medicare payments to HMOs comes with no strings attached. HMOs do not have to commit to remain in any market or to maintain benefit levels in order to receive the extra payments. Americans know what happens when HMOs are not held accountable for providing services. Despite an increase of $1.4 million in Medicare payments to HMOs in 2000, HMOs still decided to terminate their Medicare contracts, causing nearly 1 million Medicare beneficiaries nationwide to lose their HMO at the end of the year. Yet the bill HMOs want enrollees to support comes with no strings attached. HMOs will get increased payments without having to stay in Medicare for at least two years and without having to maintain their level of benefits. The increased funding bill provides no guarantee against another rash of HMO contract terminations at the end of 2001.

The proposed Medicare Agive-back@ bill raises payments to HMOs at the expense of older people, people with disabilities, and other health care providers. Although the increased funding for HMOs is part of a bill to restore Medicare and Medicaid money in a number of different health care settings, HMOs reap the real benefits. Only about 16% of Medicare beneficiaries are enrolled in HMOs, yet Medicare HMOs are slated to receive about one-third of the total funds allocated for the bill. As a result, money is not available to fund other proposals that would:

add a uniform, meaningful prescription drug benefit to the Medicare program;

improve enrollment of low-income Medicare beneficiaries in the Medicaid program;

eliminate cost sharing for Medicare preventive services;

increase access to Medicare home health benefits by modifying the definition of "homebound" and delaying the 15 % cut in home health payments;

improve nursing home quality of care by increasing the staffing ratios;

improve access to health care for children and low-income immigrants.

Increased Medicare payments to other health care providers result in increased payments to HMOs. Reducing or eliminating increased payments to HMOs in the restoration bill will not leave HMOs high and dry. If money allocated to HMOs in the restoration bill were allocated to increase payments to other health care providers under Medicare Parts A and B, HMOs would still see an increase in their payments. HMO payments are linked to what other providers are paid, so when other providers get payment raises, HMO payment rates rise as well.

Too much money is being allocated to HMOs without any patient protections. Rather than asking Congress to increase payments to HMOs, ask them instead to decrease their proposed restoration allotments to HMOs, and to provide more funds for provisions which will improve health care for all Medicare beneficiaries.