Medicare PPOs off to a slow start

You won't get rich off these plans, but the government is determined to find out whether they'll fly.

By Ken Terry
Senior Editor

While Medicare HMOs haven't caught on with most seniors, the federal government has begun a demonstration project to show that less tightly controlled plans, including PPOs and point-of-service plans, can be successful in the Medicare arena. Thirty-five such plans will be offered in 23 states by the end of this year.

Some demonstration plans aren't paying capitated physicians any more than senior HMOs do; and if their fee schedules follow those of the HMOs, they're unlikely to pay more than traditional Medicare does. Horizon Blue Cross Blue Shield of New Jersey, for instance, pays specialists 100 percent of the Medicare fee schedule or slightly below it in its senior POS plans. All demonstration plans let members go out of network.

Between Jan. 1 and May 1 of this year, approximately 63,000 Medicare beneficiaries enrolled in 31 demonstration plans—46,000 of them in two point-of-service plans run by Horizon Blue Cross Blue Shield of New Jersey. Most of these members were previously in an HMO that Horizon shut down last year. Rather than return to traditional Medicare and lose many of their benefits, the seniors enrolled in the new plans.

About 10,000 of the remaining beneficiaries are enrolled in Aetna point-of-service plans in Maryland, Pennsylvania, and New Jersey. In one New Jersey county, Aetna kick-started POS enrollment by dropping its Medicare HMO.

Why are Aetna and Horizon offering POS plans (HMOs with an out-of-network option) rather than the more open-ended PPOs? "It was an easier transition for everybody, and the POS plans are less expensive than PPOs," says Robert Meehan, vice president of consumer and commercial markets for Horizon. "This is a very cost-conscious population."

Medicare Part B premiums this year cost $58.70 per month. To belong to the less expensive of the Horizon POS plans, seniors pay an extra $86.40 a month for a total of $145.10. The more expensive plan—which includes unlimited coverage for generic drugs—costs $174.40 a month. Meehan doesn't believe there will be a big surge in enrollment unless the government pays enough for Horizon to lower prices significantly. Members pay an average of $138.70 a month to belong to Aetna's Medicare POS plan, which covers generics and gives discounts on brand-name drugs. A PPO would cost even more, says FP Sandra Harmon-Weiss, Medicare compliance officer and head of government programs for Aetna. Aside from cost, she adds, Aetna chose the POS option because "we want to make sure we can provide coordinated services to Medicare patients," and POS members usually select primary care physicians who manage their care.

Other insurers such as UnitedHealthcare and Highmark are offering Medicare PPOs. United's plan in the Birmingham, AL, area costs enrollees less than $100 a month, including the Medicare Part B premium. Asked how UnitedHealthcare could provide PPO coverage for so little, compared to what other plans charge, a company spokesperson replied that "we have designed the best benefit package we can offer."

 

Ken Terry. Medicare PPOs off to a slow start. Medical Economics Aug. 8, 2003;80:36.