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We can understand why Massachusetts politicians are so eager to step into a controversy involving whether HMOs have to offer unlimited prescription drug benefits to retirees eligible for Medicare.
As we reported last month, HMOs say a 1997 federal law giving retirees new private-market alternatives to the Medicare program pre-empts a Massachusetts requirement that they offer either unlimited prescription drug benefits or no drug benefits to retirees.
HMOs have the support of the top official of the Health Care Financing Administration, the agency that administers Medicare. HCFA Administrator Nancy-Ann DeParle says the 1997 Balanced Budget Act unambiguously pre-empts state laws and regulations that dictate the kind of benefits that must be offered by HMOs and other plans that provide coverage to retirees who opt out of the traditional Medicare program.
But Massachusetts officials see the matter differently. Gov. Paul Cellucci says he won't stand by while HMOs cut benefits, while a spokesman at the state Division of Insurance has put out the word that HMOs risk legal action if they do not abide by the prescription drug benefit mandate.
Certainly, intervention in this controversy by state officials must seem irresistible. They see themselves, no doubt, as protecting vulnerable retirees from benefit cuts by HMOs, which, for a variety of reasons, are none too popular anyway.
Of course, the reality is very different. Putting the legal issues aside for the moment, we think HMOs are acting very much in the public interest in proposing to offer benefit plans with reduced prescription drug benefits.
The cost of prescription drugs is rising at a rate of 15% to 20% annually, or several times the rate of increase of other medical goods and services. HMOs, like other buyers of health care goods, are not immune from these increases and have to pass them on, in the form of higher premiums, to policyholders.
Forcing Medicare HMOs to offer unlimited prescription drugs can have only one result: making the plans less affordable to enrollees, many of whom probably would be satisfied with a less costly plan that has a dollar limit on prescription drugs. Making plans less affordable by burdening them with benefit mandates doesn't strike us as acting in the public interest.
Indeed, what makes the most sense -- hardly a revolutionary idea -- is to allow Medicare risk HMOs to offer plans with varying levels of prescription drug benefits and to let enrollees decide which plans best meet their needs.
This is more than a local battle between Massachusetts regulators and state HMOs. If Massachusetts regulators are allowed to prevail, surely it will send a signal to other state politicians to try to do the same thing.
Then, it would be only be a matter of time before Medicare risk HMOs -- just like commercial insurers and HMOs that write policies in the under-65 market -- are loaded up with benefit mandates that jack up their costs.
When that happens, Medicare risk HMOs will become a much less attractive option to retirees, and employers will find it much more difficult and expensive -- if they subsidize premiums -- to get retirees out of corporate-sponsored Medicare supplemental plans and into Medicare risk HMOs.
Fortunately, we think the law is so clear that the HMOs will prevail in Massachusetts. Regrettably, though, unless state regulators and politicians back off, HMOs will have to wage an expensive legal battle in order to win.
Given what is at stake, though, it is very much a battle worth fighting.