Medicare seeks to lure private HMOs back

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Medicare is working to entice insurers back into the fold after years in which private plans fled from the federal health insurance program for the elderly, complaining of poor payment rates, a top agency official said on Tuesday.

The Bush Administration needs the health maintenance organizations (HMO’s) and other private plans back in Medicare, the federal insurer of 41 million elderly and disabled.

Republicans say the private managed health care plans will cut costs over the long haul and are key to the $500 billion overhaul of Medicare.

“I’m picking up the phone and calling HMOs, insurers” and other private players, in a bid to lobby them to take part in Medicare, Leslie Norwalk, deputy administrator at the Centers for Medicare and Medicaid Services, told the Reuters Health Summit.

Participation by the private plans is sharply down from the late 1990s, when the government first lured the companies into the program in an effort to contain costs.

About 10 percent of Medicare beneficiaries, or 4.7 million people, use private plans, such as ones offered by Aetna Inc. and UnitedHealth Group Inc. That number peaked at 6.5 million, or 17 percent of the Medicare population in 1998.

Medicare and Medicaid, which insures the needy, account for $1 out of every $3 spent on health care in the U.S.

But investors consider it a risky business. They scorned publicly traded companies with significant Medicare exposure, like PacifiCare Health Systems, leading the companies to diversify into commercial business.

HMOs contend they were burned when the payment rates were locked in while medical inflation rose by double-digit rates. Norwalk acknowledged the agency had lobbying to do.

“The government in particular with managed care has not been a stable partner,” Norwalk said at the summit, held at Reuters offices in New York.

But managed health care companies are skeptical. Many say they are taking a wait-and-see attitude until the new regulations are finalized.

“We had a substantial business six years ago and left the business,” Allen Schaffer, Cigna’s chief clinical officer said. “We always said we would look at it ... when it makes sense for our shareholders.”

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