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HMOs provide benefits to urban Medicare patients; rural areas miss out

March 3, 1997

WASHINGTON (AP) _ In California, senior citizens can jazzercize and pump iron, courtesy of Medicare. In big cities coast to coast, Medicare is paying for glasses, prescription drugs and dental work.

But forget about glasses or aerobics in Wapiti, Wyo. And in Cheyenne County, Colo., you’ll pay extra for drugs and dentists.

Health maintenance organizations are spreading extra benefits at cheaper prices to the urban elderly, but Medicare pays so little to HMOs in rural America, they don’t even bother to set up shop.

The Clinton administration, picking up proposals first offered by congressional Republicans, wants to change that. And the political stars may be lining up to deliver a victory for the hinterlands.

``This is the year,″ said Dena Puskin, acting director of the government’s Office of Rural Health Policy. ``Without getting equity, you’ll never get managed care out there.″

In the traditional Medicare plan, the government pays bills one at a time. But HMOs are paid a flat fee no matter how many doctor’s appointments a patient makes or how much surgery she needs.

Overall, about 13 percent of Medicare beneficiaries are in HMOs and other managed-care plans. In some areas, more than 20 percent of seniors are in HMOs. But in nine states, not a single HMO is offered. And 37 percent of Medicare beneficiaries overall _ including most rural residents _ have no HMO option.

Medicare sets its payments based on past spending in traditional programs. Thus, high-cost areas get high HMO payments _ high enough that some California plans offer memberships in health clubs to attract customers. In most big cities, four or five HMOs compete for Medicare patients.

Meanwhile, low-cost areas don’t pay enough to attract a single plan. Eighty percent of Medicare recipients living in rural areas have no HMO option.

In the Bronx, N.Y., Medicare will pay HMOs $728 a month for every Medicare beneficiary they enroll. In Adams County, Neb. _ population 5,000 _ HMOs get $260.

President Clinton’s plan would narrow that gap. It would guarantee HMOs in every county at least $350 a person _ about what HMOs say they need _ and it bases payments on a combination of local and national costs.

``It makes managed care a possibility in areas where managed care could not make a go of it,″ said Bruce M. Fried, director of the administration’s Office of Managed Care.

Counties with a few people spread over great spaces cannot support the large network of hospitals and doctors needed for a plan with such low payment rates, Fried said.

But many rural areas can and will support an HMO if given the chance, said Tim Size, who helped establish HMO Wisconsin in 1983 to spread managed care to rural areas.

``You just have to have a wider geography to get the critical mass to make it make sense,″ said Size, of the Rural Wisconsin Health Cooperative.

Soon, Medicare beneficiaries in Madison, Wis., will have an HMO option, Size said, but it won’t be available to outlying areas because payments there are too low.

``There’s a real sense of underlying injustice,″ he said.

Republicans first proposed reducing the gap between high- and low-cost areas in their 1995 balanced budget bill, which Clinton vetoed for other reasons. They also proposed allowing doctors and hospitals to create their own managed care networks, an idea Clinton also picked up this year. Those are the best hope for rural areas, where an outside company might not venture, many say.

Unlike the private sector, where workers rarely have a health insurance choice, no one in Medicare is forced to choose an HMO, which makes patients use certain doctors and hospitals.

But the government hopes to save Medicare money by encouraging more seniors to choose managed care, which holds down health care costs.

And HMOs are attractive to senior citizens because they don’t require co-payments and they include extra benefits such as prescription drugs (offered by 78 percent of plans), eye exams (96 percent) and dental care (36 percent).

In 1995, HMOs gave the average Medicare enrollee $42 a month in free benefits.

Yet with more money, it still won’t be enough for some very remote areas to support a network.

Charlene Korrell has a hard time picturing an HMO operating in her Colorado county of Cheyenne, near the Kansas border, where she’s an administrator at the local hospital. The county has just 2,400 people, barely one person per square mile. But she figures she has something better than free dental benefits.

``It’s quiet and peaceful and we have clean air,″ she said. ``I guess that it’s just a lifestyle for us out here.″

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