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HMOs Defect From Medicare, Decry Drug Rider

Health insurers are getting behind a bill that would ditch a federal requirement that annual increases in Medicare+ Choice payments fall below spending increases for fee-for-service beneficiaries. Rep. Mike Bilirakis, a Florida Republican, introduced the bill as plans stampeded out of Medicare.

HMOs with 300,000 members said they will quit Medicare next year because of low capitation rates. The same phenomenon forced 400,000 people to change coverage this year.

HCFA chief Nancy-Ann DeParle, chastising HMOs for "scaring" enrollees about their benefits, points out that managed care plans will be paid, on average, 5 percent more per head next year. Plans also get little sympathy from the General Accounting Office, which concluded in late June that they are paid enough to provide care and still make a profit.

It isn't just capitation rates that will drive HMOs away, the industry contends, if President Clinton's drug-benefit plan for Medicare sees light. That proposal, in essence, removes prescription coverage as a key selling point for Medicare HMOs by offering a prescription rider to beneficiaries who don't now have a pharmacy benefit.

It's bare-bones coverage. For $24 a month, beginning in 2002, those choosing the benefit would pay half of a medication's cost, which would be determined by pharmacy benefit managers (and not by price controls). The annual benefit in 2002 would be $2,000, rising to $5,000 with a $44 premium by 2008. The administration's 10-year price tag, $118 billion, was disputed by the Congressional Budget Office, which says $168 billion is more like it.

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