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Click here to see 2001 Medicare HMO pullouts.

More than 115 health insurance companies will drop Medicare HMO plans covering more than 930,000 elderly and disabled Americans on Dec. 31, 2000 — nearly triple the number of beneficiaries who lost their plans during last year's exodus.

"The escalation of this trend in Medicare HMO withdrawals will cause serious hardships for many beneficiaries," according to Donna Lee H. Williams, Delaware's Insurance Commissioner. "The purpose of the Medicare program is to give our seniors a sense of security regarding their health care needs. Under its current structure, however, the Medicare HMO option provides no such security." Williams, vice chairperson of the National Association of Insurance Commissioners' Senior Task Force, is urging the federal government to make HMO contracts "guaranteed renewable." Currently, Medicare HMO contracts expire each year on Dec. 31.

The number of Medicare beneficiaries who will be affected is much higher than the originally anticipated figure of 700,000. The government is trying to soften the blow by highlighting the fact that 83 percent of these beneficiaries live in areas where there are other Medicare HMO plans. They will be able to pick up coverage if — and it's a big "if" — other Medicare HMOs are accepting new patients.

Close to 160,000 beneficiaries will be left without any access to Medicare managed care plans where they live.

Election-year rhetoric and finger-pointing are on the rise as managed care plans continue to abandon the Medicare+Choice program, reduce benefits, or increase premiums. Unless Congress takes action to raise payment rates and cut regulatory red tape, "the program is in danger of collapse," according to the Health Insurance Association of America (HIAA), a trade organization that released a report on June 8 titled The Medicare+Choice Program: Is It Code Blue? (You will need Adobe Acrobat Reader to download this information.)

Why it's come to this

Congress enacted the Balanced Budget Act (BBA) in 1997, creating the Medicare+Choice program. This program introduced a wider range of private health plan options to Medicare members. However, of Medicare's 39 million beneficiaries, the majority receives care through original fee-for-service Medicare, while only 6.2 million — about 16 percent — belong to HMOs. These managed care plans are paid a congressionally mandated rate for each Medicare beneficiary.

Exiting heath plans blame the BBA for handcuffing them with an unprofitable annual cap of 2 percent on payment increases. This cap is considerably less than the current medical inflation rate of 8 percent, according to the HIAA report.

The federal Health Care Financing Administration (HCFA) rebuts this argument by claiming health plans are actually making money. HCFA, which administers Medicare, points to a federal law that stipulates health plans must provide their enrollees with extras, such as routine vision and dental care, and prescription drugs, at no added cost, if their revenues are higher than their costs. And health plans are indeed providing these extras.

In a June 2000 press release titled The Medicare+Choice Payment Methodology, HCFA notes: "While some plans have said their payments are not adequate to continue in Medicare, they have been able to provide the basic Medicare benefits and spend 22 percent of their Medicare revenue on additional benefits."

Inadequate government reimbursement is cited by Aetna Inc. Chairman and CEO William H. Donaldson as the main reason why Aetna U.S. Healthcare of Blue Bell, Pa., will exit 11 states in 2001. These states are: Connecticut, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maine, Ohio, Texas, and Washington. Aetna also will leave 23 counties in New York, Pennsylvania, and northern California. This decision by Aetna, the nation's largest health insurer, will affect approximately 355,000 Medicare members.

You shouldn't panic if your HMO is dropping Medicare patients, according to HCFA and elder-advocacy groups such as the American Association of Retired Persons (AARP). You will be covered by your present HMO until Dec. 31, 2000. This gives you some time to find another HMO or enroll in traditional Medicare, although you may have to switch doctors.

If you choose to return to the original Medicare program, you'll be submitting your health care bills directly to the federal program for reimbursement. Although there is no federal prescription drug benefit with the original Medicare plan, you may purchase a Medigap supplemental policy to augment your traditional Medicare coverage. (See the 10 standardized Medigap plans.)

If you're being dropped from your Medicare HMO plan and you don't decide what to do by Dec. 31, 2000, you automatically will be enrolled in the original Medicare program.

To avoid being overwhelmed by any last-minute decisions, it's best to start thinking now about the benefits you want and how much you can afford to spend. HMO plans and Medigap policies vary in the benefits they offer and the rates charged, and both may change from year to year. Do some research and take notes so you can make an informed decision based on actual facts and comparisons.

Your Medicare HMO must notify you in writing of its decision to drop you no later than Oct. 2, 2000. Keep this letter because it should outline your options and tell you what other Medicare HMOs, if any, will be available to you in 2001.

To assist Medicare beneficiaries and their caregivers, HCFA established the Medicare Choices Helpline at (800) 633-4227. Hearing-impaired individuals using a telephone device for the deaf can call (877) 486-2048. This toll-free number is staffed by English and Spanish-speaking customer service representatives from 8 a.m. to 4:30 p.m., EST.