HMOs plan to raise senior member rates

Higher rates expected to reduce Medicare revenue

Health maintenance organizations plan to raise Medicare member premiums, decrease benefits, and reduce provider compensation in response to reduced Medicare revenues per member resulting from the 1997 Balanced Budget Act (BBA), according to a recent survey by Milliman & Robertson’s Milwaukee office. What HMOs say they won’t do is reduce Medicare member growth.

The 1998 Intercompany Rate Survey, now in its seventh year, includes data from roughly 40% of all HMOs in the United States. Other changes HMOs surveyed plan include lower prescription drug benefits, strict use of formularies to control drug costs, and designing and operating risk pools with incentives based on objective quality measures.

The BBA caps government payment rates to HMOs at an increase of 2% annually until 2003, compared to recent average annual increases of about 7% to 10%.