Medicare HMOs To Get Increase In Payments
December 10, 2003
Associated Press

WASHINGTON -- Health maintenance organizations will start reaping the benefits of the new Medicare law with higher payments beginning in March, well before most seniors get significant help with their pharmacy bills.

The new prescription drug benefit does not begin until January 2006. Even the new physical exam for new enrollees in Medicare won't be covered until 2005.

But the HMOs in Medicare, serving 4.6 million seniors, will receive an additional $1.3 billion in 2004 and 2005 under the law President Bush signed Monday, according to the Congressional Budget Office.

The industry's representatives said the increase is needed because the payment formula has shortchanged HMOs in past years. Health and Human Services Secretary Tommy Thompson said the HMOs, which limit choice of doctors to those on a list, are a key component of the expanded role for private insurers in the new law.

"We want them to stay. We want to make sure they're included in it and therefore some of the increases have been phased in earlier than 2006," Thompson said Tuesday. Thompson will set the new payment rates in January.

Opponents of the new law said the increased payments are evidence of a bias toward private insurers by the Bush administration. By 2006, the government will be paying HMOs 25 percent more than traditional Medicare costs for the same beneficiaries, said Robert Berenson, an expert on health care at the Urban Institute.