Healthcare March

The march after the "Rally Against Greed" at City Hall, in Colorado Springs, October 13, 2009.

In the mid-1980s, under Raygun, Medicare also began encouraging elderly people to enrol in private HMOs. Raygun paid the private plans a fixed monthly premium for each person who switched from traditional (fee for service) Medicare, with the HMO taking over responsibility for purchasing (or, rarely, providing) care. This arrangement was touted as a means to bring athe "free market' to the public programme and to broaden patients choices.

The first crop of Medicare HMOs yielded mainly scandal—for example, a major political donor whose plan enrolled thousands of aged patients in Florida (and collected tens of millions of government dollars) but neglected to contract with doctors or hospitals to care for them. He fled prosecution, eventually seeking refuge in Spain.

Medicare applied stricter regulations. Raygun set the HMOs payment at 95% of the average monthly cost of care for a patient in Medicare, with the expectation of 5% savings through improved efficiency. Patients who chose an HMO—attracted by free spectacles, lower copayments, and other benefits not covered under traditional Medicare—were free to return to traditional Medicare.

HMOs recognised an financial opportunity in the skewed distribution of health costs. Most patients use little care—indeed 22% of elderly people cost Medicare nothing at all each year—while the fraction who are severely ill account for the lions share of expenditures. HMO's quickly realized windfall profits through cherry picking—recruiting healthier people who brought hefty premiums but used little care—and returning sick patients, and their high medical bills, to the traditional Medicare program—disrupting care for millions and costing the tax payers Billions.

HMO' devised selective recruitment schemes to attract healthier people, like free fitness club memberships, complimentary recruiting dinners, and advertisements painted on the bottoms of swimming pools. HMOs used financial incentives to encourage doctors to persuade sick patients to leave the HMO—for example, deducting payments to specialists from the primary care doctors own capitation payment. Hence, a general practitioner could raise her income by advising patients needing hip replacement to leave the HMO, and even convince herself that such advice might benefit patients by freeing them of HMO restrictions on the choice of surgeon and hospital.

When an HMO found itself saddled with too many unprofitably ill patients in a particular county, execs simply closed up shop and returned the patients to traditional Medicare.

As enrolment fell, HMOs lobbied hard for government rescue, and Congress upped their payments. Currently, Medicare pays private plans $77bn annually; the cost of caring for the eight million Medicare members who have switched to HMOs is 12% above the cost of caring for comparable patients in traditional Medicare.

So much for "free market" pressure lowering costs.

Kjersten Forseth, Change That Works
Kjersten.Forseth@changethatworks.net
303-865-7985 x120
http://www.seiu.org/changethatworks/colorado/
http://www.healthcareforallcolorado.org
http://CSaction.org

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