Sunday, March 18, 2018

AARP Medicare plan cuts signal major changes, says UnitedHealthcare CEO

ST. PETERSBURG — Roz Vellines attends her local YMCA three times a week for an exercise class in the swimming pool — a $43-per-month perk from her AARP Medicare plan.

"I love it," said Vellines, 70. Classmates "are my Y family. Some of these ladies don't have much other contact with people.''

But come Jan. 1, Vellines will lose her free ride. Her insurance plan is dropping the popular fitness program Silver Sneakers.

"It's pretty dumb,'' Vellines said. "They are supposed to be promoting health.''

AARP Medicare plans, administered by insurance giant UnitedHealthCare, have been under scrutiny lately for belt tightening, ranging from dropping Silver Sneakers to dropping thousands of physicians from their networks. Major providers like Moffitt Cancer Center and St. Luke's Cataract and Laser Institute are out for 2014.

As a result, many of AARP's 50,000 Tampa Bay customers have indicated they will drop their plans during Medicare's current open enrollment.

But this trend is neither temporary nor confined to AARP plans, said Jack Larsen, CEO of UnitedHealthcare, in an interview with the Tampa Bay Times.

"This is the new frontier" for all of health care and for private Medicare plans in particular, said Larsen. "The reason we are moving with such urgency is because of a systematic under-funding.''

For all the current focus on Obamacare lurching into its infancy, 50-year-old Medicare is also undergoing profound and disruptive change as Congress struggles with soaring medical bills and a growing senior population. Among the changes:

• After years of generous compensation, Washington is squeezing payments to managed care plans like AARP's — collectively known as Medicare Advantage. The idea is to bring these private plans in line with the cost of original, fee-for-service Medicare.

• At the same time, insurers are being required to spend a greater share of their income on patient care, further squeezing profits.

• Insurers can earn bonuses from the government if they can get the doctors in their networks to follow specific treatment guidelines. Smaller networks are easier to monitor, Larsen said, so AARP is cutting back.

Florida has long been a fertile market for Medicare managed care — witness the incessant advertising this time of year as people are choosing next year's coverage.

Though consumers must accept limited networks and other features of managed care, Medicare Advantage plans are often more economical. With original Medicare, consumers must buy separate drug plans and often face higher copayments. Some people buy pricey supplemental insurance to hedge against a major illness.

In the Tampa Bay area, 45 percent of Medicare beneficiaries signed up for Medicare Advantage plans this year, compared with just 28 percent nationally.

For 2014, though, financial pressures have Medicare Advantage plans scrambling to raise copayments and shift more costs to consumers — a trend that will sound familiar to most insurance customers these days.

Medicare estimates that a Tampa Bay resident in good health who is in AARP's MedicareComplete HMO plan will spend an average of $4,220 out of pocket on health costs next year, up 21 percent. Other companies' customers can expect double-digit increases as well, and some firms, like Coventry, have dropped plans altogether.

Several plans still offer the Silver Sneakers benefit, including one AARP plan, the MedicareComplete HMO. But these extra perks will be less sustainable as Congress applies more and more pressure to Medicare Advantage, Larsen said.

"When reimbursement (from the government) is declining, the decision is trying to get people not what they value but what they need,'' he said. "What they need is basic hospitalization and physician coverage.''

Even rebates — which lured many into managed care — are diminishing. In 2013, 14 Tampa Bay plans offered full or partial rebates of consumers' Part B premiums. In 2014, that will drop to 11 plans.

Shooting for parity

UnitedHealthcare, the nation's largest health insurer, is hardly hurting. It earned a $2 billion profit in the third quarter of 2013, company reports say. But that was down $200 million from the same quarter last year, largely due to changes in Medicare Advantage.

The Affordable Care Act incorporated financing changes for Medicare managed care, but these cost-reducing trends are not new. For years, many in Washington have worked to reduce Medicare Advantage's high cost to taxpayers until it reaches a level playing field with original Medicare.

Medicare managed care programs began years ago, when insurance companies assured the government they could run their networks for 5 percent less, per person, than what traditional Medicare was paying — and still turn a profit.

Though Advantage plans were a hit with consumers, the cost savings did not last for long. Over the years, the average Medicare Advantage payment ballooned to 114 percent of traditional Medicare's rates.

Now, with baby boomers and rising health costs threatening Medicare's solvency, the Medicare Advantage disparity has become hard to defend.

AARP will not disclose its royalties for letting UnitedHealth use its name, but a report to Congress pegged the total at $427 million in 2009. That included AARP Medicare supplement insurance, Part D drug insurance as well as Medicare Advantage plans.

Ironically, AARP has been among the loudest advocates for reform.

"Paying more for Medicare Advantage is just not acceptable,'' said AARP health policy expert Joyce Dubow. "People in both the traditional program and managed care are paying more for their Medicare premiums because of these overpayments. The system should not tilt one way or another.''

As of this year, Congress has pared Medicare Advantage's average stipend to about 103 percent of what traditional Medicare pays, shooting for parity by 2017.

Profits and bonuses

Starting in 2014, Congress will limit Medicare Advantage profit and overhead to 15 percent of revenue. At least 85 percent must be spent on member care.

Larsen said his company "will have no problem'' meeting the new requirement, but declined to say how much his company spends on care now.

Meeting Medicare's quality bonuses appears more of a challenge.

By 2015, plans that earn a 4- or 5-star rating from the government can receive up to a 10 percent bonus in some counties. So far, AARP plans have never topped 3.5 stars in the Tampa Bay area.

The ratings are based on measurements such as whether a physician orders all the recommended tests, prescribes the recommended drugs, and completes Medicare's paperwork properly. People debate whether these standards always mean better care, but no one questions their financial impact for insurers.

Humana, the bay area's largest Medicare Advantage carrier, has made a concerted push to earn those bonuses, even appointing a "star czar'' to keep network doctors in line. Most Humana plans in this region have earned 4 or 4.5 stars.

UnitedHealthcare was slower to act. Among other issues, some AARP plan networks topped 20,000 providers, making monitoring difficult, Larsen said. "We need to be in each other's offices frequently,'' he said. "We need to share data.''

UnitedHealthcare will shrink its AARP networks by 10 to 15 percent for 2014, Larsen said, keying particularly on specialists. One casualty: the Tampa General Medical Group, which does most of the hospital's organ transplants.

A Tampa General surgeon can still operate on AARP members — the hospital is the area's sole adult transplant provider — but some aftercare will shift to in-network doctors.

Medicare's annual open enrollment runs through Dec. 7, and it will be some weeks after that until it is clear just how many AARP Advantage customers have jumped ship. Generally, Medicare consumers are loyal to their plans. But Wesley Chapel insurance broker Rosie Paulsen, who handles about 300 AARP members, thinks that won't be the case this year.

"The majority of clients I am seeing are already switching plans.''

It's not a change to be made lightly. Consumers must compare not only upfront costs, but also physician networks, drug formularies and coinsurance — in addition to extras like gym classes and rebates.

But Clearwater resident Katherine Campbell has resolved to leave her AARP plan. She wants to stay with her rheumatologist — "a brilliant diagnostician who does not order tons of expensive tests or load patients on drugs,'' she said. Where she'll go isn't yet clear.

"My husband and I have college degrees and are computer literate, but trying to find the best new plan for us is a difficult and painstaking process.

"We would much rather be kayaking.''

Stephen Nohlgren can be reached at [email protected]

This story was changed to reflect the following clarification:

One AARP Medicare Advantage plan -- the MedicareComplete HMO -- will cover the Silver Sneakers fitness program in 2014. A story Sunday did not make that clear.

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