Medicare and Medicaid managed care over the top
December 1, 1997 3 minutes read
Medicare and Medicaid managed care over the top
Revenues triple 1994 figures
The number of Medicare and Medicaid beneficiaries enrolled in managed care plans has experienced a spurt of unprecedented growth over the last few years. If these burgeoning populations haven’t already affected your job and organization, be assured that they will perhaps with a vengeance. (See related articles on integrating managed care into quality efforts, pp. 173-179.)
This growth has been fueled primarily by the need to contain costs and provide quality care. Revenues are expected to top $115 billion by the end of this year triple the 1994 figure. The Health Care Financing Administration (HCFA) is now the largest purchaser of managed care, accounting for approximately 18 million Americans.
The Medicaid managed care category has experienced the fastest growth. This year sales are projected to top $90 billion, up 60% from last year. In 1993, the size of the market was $20.9 billion. By last year, revenues increased by 45% to $56.4 billion, largely a result of mandatory enrollment of all eligibles. By 2003, revenues will likely reach $504.7 billion.
Medicare sales are expected to increase 40% this year to $25 billion. In 1993, the market generated revenues of $8.4 billion. By last year they were at $17.8 billion. An average of 80,000 Medicare beneficiaries per month voluntarily enrolled in HMOs last year. In 2003, revenues will likely reach $131.9 billion.
Will fee for service disappear?
Alain Enthoven, Marriner S. Eccles Professor of Public and Private Management at Stanford (CA) Business School, sees fee-for-service Medicare disappearing entirely because such plans won’t be able to compete.
People are joining Medicare HMOs at a rate that sometimes exceeds 100,000 a month, says Rick Smith, vice president for public policy and research for the American Association of Health Plans in Washington, DC, because they offer benefits traditional Medicare does not, including prescription drug coverage and hearing and vision care.
Over the past three years, Smith says, the percentage of seniors who were able to move into a managed care plan without having to change their primary care physician grew from 23% to 43%. Since 1996, when Medicare began allowing HMOs to offer point-of-service options (allowing care to be obtained outside the network), 11% of plans have exercised that option.
In 1993, the Medicaid managed care market accounted for 71.4% of the total Medicare-Medicaid managed care market, and the Medicare managed care market accounted for 28.6%. Last year the Medicaid managed care market still dominated with a 76% share, while the Medicare managed care market held a 24% share. While the number of Medicare beneficiaries choosing managed care had risen, there was a more dramatic increase in the number of states mandating Medicaid recipients to enter managed care programs.
A number of Medicare managed care providers are offering new health plan products. Kaiser Permanente of Oakland, CA, has submitted Medicare point-of-service products under the names Kaiser Permanente Senior Advantage Gold and Senior Advantage Gold Plus for approval to HCFA. Under these plans, beneficiaries would be permitted to go to doctors in or outside the HMO network of physicians.
As in other businesses, mergers and acquisitions have swept through the managed care industry throughout the 1990s. The activity increased 22% in 1996 alone, and 70% between 1991 and 1993. In 1996 the value of merger and acquisition activity was $77 billion. At least three mega-mergers dominated that year Foundation Health with Health Systems International, PacifiCare with FHP, and Aetna Life and Casualty with U.S. Healthcare.
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