Harvard Pilgrim Cancels Medicare Advantage Plan
& Analysis

 

Harvard Pilgrim Health Care has notified customers that it will drop its Medicare Advantage health insurance program at the end of the year, affecting 22,000 senior citizens in Massachusetts, New Hampshire, and Maine.

The decision by Wellesley-based Harvard Pilgrim, the state’s second-largest health insurer, was prompted by a freeze in federal reimbursements and a new requirement that insurers offering the kind of product sold by Harvard Pilgrim — a Medicare Advantage private fee for service plan — form a contracted network of doctors who agree to participate for a negotiated amount of money. Under current rules, patients can seek care from any doctor.

“We became concerned by the long-term viability of Medicare Advantage programs in general,’’ said Lynn Bowman, vice president of customer service at Harvard Pilgrim’s office in Quincy. “We know that cuts in Medicare are being used to fund national health care reform. And we also had concerns about our ability to build a network of health care providers that would meet the needs of our seniors.’’ Under Medicare Advantage plans, the federal government pays private health insurers to sell customers over 65 years old enhanced policies, many of which offer prescription drug coverage not covered by standard Medicare. But the US Centers for Medicare and Medicaid Services has been seeking to reduce the amount it pays to private insurers for such programs.

Counter Point

Some might disagree with that assessment however. In a May 2010 report from the Economic Policy Institute, Monique Morrissey argues that Medicare Advantage plans are private plans funded through Medicare to provide similar benefits, but at a 14% higher cost on average (according to the Medicare Payment Advisory Commission (MedPAC), an independent Congressional agency). Eliminating these overpayments would free up $157 billion over 10 years, a substantial down payment on health care reform. But, according to the report, the cost to taxpayers is only the most obvious reason to rein in these plans, which pose a real danger to Medicare. The industry uses the overpayments to offer sweeteners like free dental check-ups or reduced premiums that entice seniors to enroll in the plans. As MedPAC Chairman Glenn Hackbarth recently testified, the enhanced benefits provided to Medicare Advantage enrollees are “overwhelmingly…not financed out of plan efficiency, but rather by the Medicare program and other beneficiaries.” These overpayments, which come at the expense of other Medicare enrollees and the long-term health of the program, go toward profits and higher administrative costs, including the cost of marketing the plans to seniors. And the plans may leave seniors worse off than with Original Medicare, even though the private plans are routinely marketed as having the “same” coverage, plus “extras.” One study found that in almost one in four plans, out-of-pocket costs would be higher for beneficiaries in poor health. This is not to say that some seniors would not be better off with these plans, but many would face higher costs when they can least afford it.

More than 60 percent of senior citizens in Massachusetts are covered only by Medicare, according to Harvard Pilgrim research. Those who buy supplemental insurance are divided roughly evenly between Medicare Advantage and Medicare Supplement plans.

-From “ Harvard Pilgrim cancels Medicare Advantage plan” by Robert Weisman, Globe Staff, The Boston Globe, September 28, 2010 , http://www.boston.com/business/healthcare/articles/2010/09/28/harvard_pilgrim_cancels_medicare_advantage_plan/, retrieved 10/6/10 (thanks to Maranda Ransdell for forwarding), and “ Medicare Privatization: A Cautionary Tale”, Monique Morrissey , Economic Policy Institute, at http://www.epi.org/publications/entry/pm142/ , retrieved 10/6/10.

 

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