Drug Coverage Diminishes

More than 536,000 Medicare beneficiaries have been dropped by their health plans for 2002. Most others still enrolled in the Medicare+Choice (M+C) program face steeper premiums and/or reduced benefits next year. And many thousands will lose their prescription drug coverage.

The number of beneficiaries hit by this year's round of M+C plans pulling out of Medicare or reducing service areas is not as high as last year, when nearly a million people were affected.

But the shrinkage still disappoints Thomas Scully, head of the Centers for Medicare and Medicaid Services (CMS), which runs Medicare.

This year the CMS had given the health plans (mainly HMOs) more time to decide whether they would stay in Medicare and had cut a lot of red tape to keep them from leaving the M+C program, which can offer more benefits than traditional fee-for-service Medicare.

"It could have been a lot worse" without those efforts, Scully said. "I've done everything I could."

The plans say their payments from Medicare have not kept pace with rising costs, particularly for prescription drugs and hospital care.

"With health care inflation running at 12 percent and Medicare reimbursement capped at an increase of 2 percent, you have a mathematical formula that does not work," says Karen Ignagni, president of the American Association of Health Plans.

Of the 536,000 M+C enrollees who will lose their present plan's coverage after Dec. 31, more than 92,000 will have no other Medicare HMO in their area to fall back on.

All of them will still receive health care from traditional Medicare, but this gives no coverage for prescription drugs—one of the main reasons, surveys show, why some beneficiaries choose a managed care option.

The other 444,000 beneficiaries have at least one other HMO in their area. This may give them remaining choices as long as those local HMOs accept new enrollees.

But even so, an AARP Bulletin analysis of CMS statistics shows, some 90,000 of these beneficiaries—about 52,000 in New Jersey, the rest in seven other states—will not have access to prescription drug coverage, because the HMOs available to them will not be offering it in 2002.

In this regard, New Jersey is the hardest hit. In 2001, all Medicare HMO enrollees there have had the choice of at least one plan (and often two) offering prescription drug coverage. But next year those living in only one of the state's 21 counties will be offered a drug plan.

That exception, Salem County, will have three Medicare HMO plans next year. Only one, with a premium of $130 a month, will offer drug insurance, and it will cover only generics, not name brands.

Beneficiaries who lose their HMO drug coverage have few or no remaining options—assistance programs in some states or expensive medigap insurance policies.

The current pullouts mean that in 2002 nine states (two more than this year) will not have any Medicare HMO choices: Alaska, Arkansas, Maine, Montana, S. Carolina, S. Dakota, Utah, Vermont and Wyoming.

In addition, four states will have no plans that offer drug coverage: Delaware, Kentucky, Nebraska and West Virginia. Some others, like Mississippi, New Hampshire and New Jersey, will each have only one plan, in one county, which covers drugs.

"These withdrawals, and the loss of drug coverage accompanying them, mean it's more important than ever to pass a prescription drug benefit for all Medicare beneficiaries," says AARP's policy director John Rother.

As the Bulletin goes to press, not all plans remaining in Medicare for 2002 have published their new rates. Among those that have, it is clear that the majority are increasing premiums and/or reducing benefits.

But changes in prescription drug coverage stand out most: not only increases in copayments and lowered caps (down to $75 quarterly in one case) but also in some plans a new policy of covering only generics and dropping brand name drugs.

This is a new trend, experts say, that follows other ways in which plans have tried to reduce their drug costs in the past two years.