Rising healthcare premiums challenge MCOs to cut costs

October 1, 2004
Jill Weschler

The cost of family coverage under a PPO hit $10,000 this year, boosting concerns about the growing unaffordability of healthcare and future increases in the number of uninsured.

The cost of family coverage under a PPO hit $10,000 this year, boosting concerns about the growing unaffordability of healthcare and future increases in the number of uninsured. Healthcare once again is a hot political issue, fanned by several developments:

BLAMING MCOs The Bush administration also acknowledged that a good portion of the Medicare premium hike (about $1.75 of the $11.60 increase) was because of higher payments to Medicare Advantage plans. The rate hike is allowing MA plans to offer additional benefits while reducing out-of-pocket fees, but critics complain that seniors in fee-for-service (FFS) Medicare bear the added cost.

That figure prompted some members of Congress to urge a delay in the planned increase in payments to MA plans for 2005. Democrats also backed legislation to delay or reduce the sharp Medicare premium boost. One proposal is to limit next year's premium increase to the rise in Social Security payments, which would mean about a 3% premium hike. A related plan is to link Medicare premium increases to a percentage of an individual's Social Security check. McClellan warned that such moves would only require an even bigger increase for 2006.

Meanwhile, seniors who don't want to pay higher Medicare premiums and copays might decide to try managed care again. Instead of plans dropping out of Medicare and stranding thousands of seniors, as in recent years, insurers anticipate increased participation in the MA program, Karen Ignagni, president of America's Health Insurance Plans, told the Senate Finance Committee. MCOs filed Medicare offers for 2005 last month, and she predicted that "our members are planning for growth in all products: HMOs, PPOs and managed FFS plans."

MA enrollment, however, has not increased significantly this year despite moves by plans to cut premiums and boost benefits. Policy makers expect MA plans to provide better care to seniors at rates comparable to FFS care; if health plans fail to deliver, criticism and cuts are sure to follow.

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