Like thousands of other elderly Americans, Eugene DeLorenzo of
Chico, Calif., cannot find a Medicare health maintenance organization
in his area.
DeLorenzo, a 75-year-old retired real estate broker and his wife,
Yuriko, enrolled July 1 in the Medicare plan of Health Net, a unit of
Foundation Health Systems. Just three weeks later, Health Net --
unable to make a strong profit in Butte County, the rural northern
county where DeLorenzo lives -- said it was ending its coverage
"My first thought was, `Well, what are we going to do now?'"
DeLorenzo recalled. "It wasn't going to do any good to get angry.
That's just the way these HMOs operate."
With few options, the DeLorenzos enrolled in traditional fee-for-
service Medicare, the federally financed health care plan for the
disabled and people 65 or older. They may also have to pay hundreds
of dollars more in premiums for a supplemental policy to replace the
generous benefits Health Net had offered.
People like the DeLorenzos are fast becoming common statistics.
After aggressively recruiting the elderly and the disabled into their
Medicare plans, many of the nation's HMOs are now heavily retreating.
United Healthcare, once a darling of Wall Street, recently took a
$900 million charge against earnings, in part to scale back its
Medicare operations in 35 counties. In the last year, Aetna,
Pacificare Health Systems, Oxford Health Plans, Foundation Health
Systems, Kaiser Permanente and Blue Cross and Blue Shield
associations have canceled Medicare plans in parts of 13 states.
Virtually no Medicare HMOs are available in Utah or in rural Ohio.
With Medicare costs escalating wildly, Congress has long looked to
managed-care plans as the prime remedy. Introduced in 1985 to allow
private insurers to cover the elderly, Medicare HMOs provide health
care more cheaply than the government does. They also tend to offer
more benefits to consumers and reduce the amount of claims paperwork.
Despite the HMO problems in the Medicare market, Washington is now
pushing for even more people to enroll in the plans. Yet financial
setbacks for some HMOs have raised serious questions as to whether
they can prosper covering Medicare patients.
Though critics of managed care are quick to say they cannot,
analysts say that several HMOs -- namely Humana and Pacificare, two
of the nation's largest Medicare providers -- are making money on
their plans, at least for now. But even these companies have had to
"There are a few HMOs that can be successful with Medicare, and
they should prosper," said Kenneth Abramowitz, a health care analyst
with Sanford C. Bernstein & Co. …