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PacifiCare pulls back further in the Medicare market, in the Healthcare column



PacifiCare Pulls Out of Medicare Market in More Areas Survey Finds Nearly Half Have Had Problems With Their Health Plans

Back in the mid-1990s, health insurers PacifiCare Health Systems Inc., Santa Ana, Woodland Hills-based Health Net Inc., Hartford, Conn.-based Aetna Inc. and Louisville, Ky.-based Humana Inc. saw opportunities for green, thanks to the graying of America.

PacifiCare and others plunged headlong into the Medicare HMO market, enticing seniors with benefits such as prescription drug coverage and health club memberships. A few years later, however, the party cooled when the government capped Medicare payments with the Balanced Budget Act of 1997.

The cooling continued late last month, when PacifiCare and Health Net announced they were dropping Medicare HMO coverage for around 44,200 people in California. About 32,700 of those,none of whom are in Orange County,are PacifiCare members.

OC won’t be untouched, though. PacifiCare said it would ask its 45,177 local Secure Horizons Medicare HMO enrollees to dig deeper for healthcare. Among other things, PacifiCare is planning to cease covering name-brand prescription drugs in 2002 for OC Medicare members. There will be no exceptions.

“Profitability was much greater than it is today,” said Paul Feldstein, a healthcare economics professor at the University of California, Irvine, Graduate School of Management. “At that time, HMOs were paid more generously. They could get much more savings and reduce hospitalization.”

Today, however, “costs have gone up a lot, (especially) pharmacy,” Feldstein said.

Medicare HMOs also have had to deal with issues such as increased negotiating power by hospitals and physicians in setting reimbursement rates, government reimbursement issues and the fact that traditional Medicare has become more efficient.

“This is not a conspiracy. Each HMO is acting in its own interest,” said Feldstein, who also praised PacifiCare’s role in Medicare HMOs. “They were really innovators. Their patients did well and got more benefits.”

Even so, PacifiCare Chief Executive Howard Phanstiel and analysts who follow the company have emphasized that PacifiCare needs to diversify to reduce dependence on Medicare.

PacifiCare’s taken early steps toward diversification, including offering a preferred provider organization and Medicare supplement insurance.

Overall, the Department of Health and Human Services said that 58 health plans are either withdrawing from Medicare HMOs or slicing benefits in 2002. The decision means that a total of 536,000 seniors, roughly 10% of those enrolled in Medicare HMOs, will have to find alternative benefit arrangements.


Half Report HMO Problems

Although it seems unlikely that Congress will take action on any patients’ rights bill while terrorism holds its attention, the issue isn’t going away, if a new survey is an indicator.

The Kaiser Family Foundation, Menlo Park, and the Harvard University School of Public Health released results from a study that showed, among other things, that 48% of privately insured American adults younger than 65 reported having some type of problem with their health plans. According to Kaiser, the consequences ranged from simple hassles to paying more to adverse effects on respondents’ health.

The poll surveyed 1,205 adults. It also found, for instance, that 69% believed it was either very or somewhat important to include the right to sue a health plan in any patients’ bill of rights that comes out of Congress. But 80% were willing to accept limits on damages in any lawsuits,a good portion of industry right-to-sue fears are fueled by the perception that unlimited damages would be a windfall for the patients’ trial bar.


Bits and Pieces:

CaliforniaChoice, Orange, said it would allow its members who selected Maxicare, Los Angeles, as their health plan the right to switch carriers effective Jan. 1. Additionally, CaliforniaChoice said it wouldn’t accept any new Maxicare enrollment beyond Nov. 1. In a release, CaliforniaChoice said its action was driven by concerns about Maxicare, whose California subsidiary filed for Chapter 11 bankruptcy reorganization in June Micro Therapeutics Inc., Irvine, said it is establishing a direct sales force in Europe for its embolization product lines. Micro Therapeutics also said its distribution agreement with Guidant Corp., Indianapolis, will be terminated after the end of this year Biolase Technology Inc., San Clemente, received permission to market its Waterlase dental device in South Korea Dr. Ahmad Shaban, a Mission Viejo physician and founder of Orange County Institute of Gastroenterology, has launched the Colon Cancer Prevention Network. The network’s initial goals include working with businesses to offer screening for the disease.

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