Humana, Blue Cross to introduce Medicare managed care plans

By Scott Shepard

Memphis Business Journal

Updated: 8:00 p.m. ET Oct. 2, 2005

It's been a decade since anybody has offered a Medicare managed care program in West Tennessee, but the coming of the new year will see two such plans followed by various permutations.



Humana, Inc., and Blue Cross Blue Shield of Tennessee, Inc., will soon begin enrolling Medicare recipients in fee-for-service managed care plans, which are the easiest to organize on short notice. Those will soon be followed by Medicare PPOs, offering a bevy of discounts and additional services.



The changes come as part of the Medicare Modernization Act, which provides a risk-free fee-for-service option to insurance carriers and providers in conjunction with Medicare's new prescription drug benefits.



The last Medicare HMO in Memphis was operated by Prudential and withered away about 10 years ago, when reimbursements were about 93% of actual costs. Since then, Medicare managed care has only thrived in areas with large retirement populations that provide the critical volume, places like Miami, South Texas and the Arizona region of Phoenix and Mesa.



The risk-free plan is designed to attract carriers to set up state-wide and even regional managed care networks, and reach into rural areas with the same benefit packages that city dwellers can enjoy. The reimbursement rates are even quite generous to providers in order to get them on board. Medicare's desire isn't to save money on services, but to gain expert management at the front lines.



"The rates are not lower compared to traditional Medicare, even for physicians," says David Elliott, vice president of managed care for Baptist Memorial Health Care Corp. "They're turning over the management of the care of the patient to someone who already does that for a commercial population."



Expect to see an actual PPO plan in another year, with marketing to begin next summer. These plans will offer enhanced benefits such as lower co-pays, a modest dental benefit, $5 physicals, preventive care and discounts at health clubs and other health-enhancing services.



"Medicare doesn't want any more PPOs until 2007," says nurse Sylvia Sherrill, vice president of Medicare Advantage for Blue Cross. "In this go-around, Medicare is supporting the Medicare Advantage plans and providing a drug benefit. It's awfully hard to be a good managed care organization if your members don't have access to medications that help with their conditions."



After insurance companies have some experience with the fee-for-service plans they'll be in a better position to negotiate genuine PPOs, with a per-person capitation fee that reflects reality. Medicare so turned off its population in the past by over-squeezing the health plans to death that this time rates will probably be realistic in order to keep the plans viable.



Blue Cross is also considering a Medicare HMO, with many more restrictions than a PPO, but only for those who are dual-eligible. Those are older Medicare recipients also poor enough to qualify for TennCare. That population, Sherrill says, needs the close management that only an HMO can provide.



Humana has been carefully balancing its outreach efforts, cautious not to run afoul of its current ban on marketing. The company is providing educational outreach, with such things as RVs that park at Wal-Mart and offer information on the new drug plans, and how to evaluate the new range of health plan offerings.



"We've had an outstanding response from local communities; people are looking for information and timelines," says Mark Staffen, director of Medicare operations for Humana in Tennessee.



Humana is one of 16 companies approved to operate a Medicare Part D program for prescription drugs in Tennessee. The monthly premium for that will range from $20-$80, depending on how rich a plan the individual chooses.



In the managed care realm, the company will offer a Medicare version of its Suite products, plus a local and regional PPO eventually. Medicare has tied Tennessee to Alabama, so the benefits package in each state will be the same.



Physicians lack the negotiating clout of other providers, and over time end up with the shortest end of the deal. For now the Medicare rates are reasonable, but that could change once they begin negotiating with the same companies that they now complain about in the private commercial arena.



"Physicians complain, but Medicare pays their overhead," says pharmacist Terry Shea, director of Pharmacy Management at Blue Cross. "There's approximately 900,000 Medicare beneficiaries in Tennessee, and you can't throw away a quarter of your practice."