Providers remain cautious about Medicare+Choice
'Oversupply of plans' cited as reason
The anticipated flood of physician groups applying for a license to operate one the new provider-sponsored organizations (PSO) and other Medicare risk vehicles sanctioned under the new Medicare+Choice program is still only a trickle, note health care experts.
As of early September, HCFA had received only three applications from newly qualified physician groups wanting to offer Medicare+Choice plans to the nation's 38 million elderly and disabled Medicare beneficiaries starting Jan. 1, 1999, when the program formally goes into effect. These applications included one PPO and two PSOs. There were also some 50 HMOs applying for Medicare+Choice status.
Why the lack of response on the part of providers? "There already is, quite frankly, an oversupply of plans, many of which are owned by providers, who are struggling to stay in business," says Craig Schub, president of California's PacifiCare Health Systems' Medicare HMO. "As such, others are waiting to see what happens in the market." With some 1 million members, PacifiCare operates the nation's largest Medicare risk plan.
Another explanation is simple logistics. The final Medicare+Choice regulatory guidelines were not available until June 26, so many providers are still analyzing them to determine what they can and cannot do as they work to put their business plan and application together, says one HCFA spokesperson who did not wish to be identified.
"Medicare is very risky business. Like any smart entrepreneur, providers want to understand what they are getting into before proceeding headlong. And that process takes a little time," says Robert Berenson, MD, director of health plan programs at HCFA.
Some plans shut down; others gear up
Some plans, however, are not waiting. Anthem Blue Cross and Blue Shield, based in Indianapolis, for instance, has notified over 18,000 Medicare beneficiaries in 19 Ohio counties that it may shut down operations next year. PacifiCare says it will pull out of Utah in January, where it serves 15,000 senior citizens.
Meanwhile, St. Joseph Healthcare, a physician-controlled group that includes five local hospitals in Albuquerque, NM, already has received the first PSO license.
While there has been a shake-out recently with a number of Medicare risk providers moving out of unprofitable and oversaturated markets, many experts are waiting to see if this spells decreased interest among managed care organizations in Medicare risk - or simply a consolidation among fewer, stronger players as has happened in more mature managed care markets.
For instance, while 15 Medicare HMOs have thus far officially given notice that they are cutting back service areas next year, another 30 have also announced expansion plans, and about 40 have told HCFA they will be doing business as usual.
"Most plans are staying in, doing well, providing substantial supplemental benefits," Berenson said. "But one can't be surprised that some plans make the business decision that maybe this isn't for them."
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