HMOs Threaten to Pull the Plug on Medicare

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Just before the holiday weekend, HMOs threw a monkey wrench into the already convoluted politics of Medicare. The trade association for the managed care industry announced that HMOs would be increasing premiums or cutting benefits for most of the 6 million Medicare patients enrolled in their programs next year. Worse, some 250,000 Medicare patients would be dropped from HMO rolls altogether. The reason: The federal reimbursements for taking on Medicare patients are insufficient, said the industry. Medicare officials disagreed, but they limited their immediate public reaction to that of a muted “disappointment” over a development that could seriously complicate President Clinton’s attempt to reform Medicare and expand its coverage to include prescription drugs.

“The President’s long-term health strategy has heavily relied on moving the elderly into HMOs,” says TIME congressional correspondent John Dickerson. One of the big attractions for the White House and its allies was that HMOs could cut costs because of their presumed economies of scale. Another major point was that such economies allowed many HMOs to provide prescription drug coverage. But the latest move by the industry throws many of these assumptions up in the air. Moreover, the development comes at a time when a growing number of patients have started to complain about HMO policies that smack of practicing medicine on the cheap. “This has put the President in the position of backing a patient bill of rights against HMOs while he also presses them to take care of the elderly,” says Dickerson. The result is that HMOs have decided to fight back, leaving many seniors with a continuity dilemma for next year: whether to accept fewer benefits at higher fees, sign up with a different HMO, or return to the standard Medicare program.