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DENVER-Managed care plans and their allies, after persuading a federal court to temporarily halt a Medicare managed care demonstration project in Colorado this month, are preparing to spar again with federal health officials to keep the program dormant.

The Health Care Financing Administration's project would have required managed health plans in the Denver area to submit bids to insure Medicare recipients, and the bidding deadline was May 16. That day, however, U.S. District Judge Walker Miller granted a temporary restraining order after several local health maintenance organizations and the Washington-based American Assn. of Health Plans criticized the project for its potential adverse effects on HMOs, plan sponsors and Medicare beneficiaries.

The lawsuit was jointly filed by the AAHP; five local HMOs; the Colorado HMO Assn.; the Colorado Assn. of Commerce & Industry; the Colorado Medical Society; the Colorado Hospital Assn.; and a local Medicare beneficiary.

The judge will rule June 12 on the plaintiffs' motion for an injunction.

The managed care plans argue they are being forced to take part in a poorly designed experiment, one that they say is unfair to them and will drive some retirees out of managed Medicare and into fee-for-service plans for fear of losing benefits.

For plan sponsors, the plaintiffs argue, this exodus could erode any savings to be achieved through enrollment of retirees in managed care plans.

The HCFA initiative, designed to be a prototype for paring Medicare expenses nationwide, presents HMOs with a package of standard health benefits that they must, at minimum, provide to all enrollees.

HMOs were to be allowed to enter the program by submitting bids. Taking all bids into account and finding a middle ground, government actuaries would then set a single rate for all retirees in Medicare HMOs in the Denver area.

HMOs declining to accept the rate would be excluded from serving local seniors.

Although there would be no premium charged to Medicare HMO enrollees under the HCFA plan, managed care plans say reduced payments from HCFA will force a reduction in some of the benefits that seniors in Denver-area HMOs already enjoy.

Susan Cox-Wagoner, executive director of the Denver-based Colorado HMO Assn., gave the example of several managed care plans that now offer a prescription drug cap of $1,500 to seniors in Medicare, whereas HCFA's standard benefit package has a cap of $1,000.

Many local HMOs also offer free transportation to doctor appointments while the HCFA package does not, she said.

"We felt the people who would be most affected by this would be the people who are least able to afford it," she said.

HCFA designed the package with little input from the health care industry, she said. In addition, the HMOs argue that because the government will not also be mandating any changes in Denver's fee-for-service Medicare pricing, the attention being paid to managed care is unfair.

HCFA still believes its proposal is "very solid" and would benefit Denver residents, despite fears of some senior citizens that they would lose benefits if it became reality, an agency spokeswoman said.

"They're all going to make bids to make themselves as attractive as they can in the marketplace," she said. That, HCFA claims, will translate into lower costs for Denver-area plan sponsors.

That day may never come, however, because the HCFA plan has opponents in many corners. In addition to the pending lawsuit, U.S. Sen. Ben Nighthorse Campbell, R-Ohio, is trying to defeat the plan, and Colorado Gov. Roy Romer is seeking to postpone its implementation.