GOP Pushing HMOs as Key to Curbing Medicare Costs : Reform: Proposal to get elderly to join health care networks is a central part of the drive to balance budget.

Sam Markson spent his working life painting rooftop signs, and he likes to think it gave him a special bird’s-eye perspective. So when it came time to decide about his retirement health care, Markson passed up the traditional Medicare package and enrolled in a health maintenance organization, even though it restricts him to a network of participating doctors.

“Why I joined?” said the 84-year-old Markson. “The price is right, lady.”

Thousands of other Portland seniors have reached the same conclusion. Lured by the prospect of free eyeglasses, prescription drugs and other items not normally covered by Medicare, more than half of Portland’s Medicare-age population is enrolled in HMOs, the highest such rate in the country.

And if the Republicans in Congress have their way, Portland’s experience will be duplicated across the country. To save Medicare from bankruptcy and, incidentally, help balance the federal budget, congressional Republicans want to encourage, entice or shove millions of the elderly into HMOs.

The GOP-controlled Congress included Medicare overhaul in its gigantic measure aimed at balancing the budget in seven years. The bill would for the first time impose annual spending limits on what has grown into the government’s fourth-biggest spending program.

The principal means of achieving these limits is the HMO, which offers to provide complete medical care for a fixed monthly payment. For the elderly, that payment would come from the federal Medicare program.

Even in Portland, where HMOs have proven so popular, the elderly are not entirely satisfied. Many say that they regret that they no longer visit the doctor of their choice.

“The doctors here got no time when you go in there,” Markson said. “The doctor comes in, I’ve got nine minutes, I’m still talking and he starts walking out. That’s a hell of a way to treat a senior.

“I pay $7 a visit, but the amount of time I see a doctor, I could count it on one hand and you’d get change back,” he said.

Benefits Are Allure

Yet for all his griping, Markson plans to stay with his HMO, Secure Horizons. Holding him is the fact that Secure Horizons, unlike traditional Medicare, can afford to cover the costs of his prescription drugs and eye exams.

Secure Horizons is only one of five HMOs here that offer Medicare services to 88,348 elderly citizens. Enrollment jumped 15% during the first six months of this year alone.

“I’ve been shocked at the growth of Medicare HMOs,” said Geraldine Dallek, executive director of the Center for Health Care Rights in Los Angeles, which helps people with insurance and Medicare problems. “We thought the Medicare patients did not want to leave their physicians. But they are leaving in droves. It turns out that saving dollars is often more important than keeping your physician.”

Indeed, in a large-scale statewide survey earlier this year, the Times Poll found that Medicare patients enrolled in HMOs rated their health coverage as positively as did those with traditional Medicare coverage. The poll, conducted in June, surveyed 3,297 adults in California, including 465 Medicare patients.

California Tops All

California offers the richest array of benefits because the government payment for Medicare in the state--$580 a month in Los Angeles, for example--is far above average, reflecting the high cost of service. HMOs in Southern California typically offer prescription drugs and preventive exams. And they take care of Medicare’s deductibles ($716 for the first day in the hospital and the first $100 a year in payments to doctors) and the co-payments (20% of additional doctor bills).

This enables the beneficiaries to drop their “Medi-gap” coverage, the supplemental insurance carried by 70% of senior citizens to cover what Medicare doesn’t. That coverage often costs seniors up to $2,000 a year.

The government’s monthly payment to Medicare HMOs is equal to 95% of the average cost of taking care of someone in each county under the traditional fee-for-service system. The national average is about $400 a month. In the Portland metropolitan area, the payment ranges from $350 a month to $373.

Because Portland is a low-cost area, the amount available to pay for expanded benefits is far less generous than in California.

“I have a brother-in-law who lives down in Laguna Niguel, and when he told me they were on this [HMO] and it didn’t cost him anything, I really didn’t think he knew what he was talking about,” said Hans Running, a retired school photographer in Portland who pays $34.50 a month for his Kaiser Permanente enrollment and doesn’t receive full prescription drug coverage. “It wasn’t until after I started to look into it, and it just made me kind of mad,” he said.

There is no doubt that HMOs can save individual senior citizens lots of money. What is still a subject of intense debate is whether the taxpayers benefit in the long run.

Medicare spending is skewed; the sickest 10% of the senior citizens, with expenses averaging $28,000 a year, consume 40% or more of all Medicare outlays.

If HMOs attract only healthy senior citizens and the sick stay in traditional fee-for-service medicine, the effect on government spending is up rather than down, critics argue.

Government payments to HMOs are linked to the average cost of caring for all the elderly, including those in fee-for-service. If only the sick, high-cost elderly opt for fee-for-service, the payments to HMOs could be excessive.

HMOs, asserting that they attract a cross-section of the elderly, insist that they do not “cherry-pick” only the healthy. They note that they cannot turn away any customer regardless of health or age.

The nation’s biggest Medicare HMO, Secure Horizons--operated by PacifiCare of Cypress, Calif.--has 489,000 members, including 345,000 in California. The average age of its members is 73, virtually the same as the general Medicare population, according to Dr. Roger Taylor, the organization’s chief medical officer.

Physician Networks

He disputes the contention that people with chronic health problems prefer to stay out of HMOs and keep their familiar doctors. The physicians are moving increasingly into managed-care networks, Taylor said, adding that “it will be a rare patient who can’t find a doctor the family knows and trusts,” he said.

Medicare HMO profitability is in the 3% to 5% range, about the same as for commercial HMOs, according to Taylor.

Although their profits are roughly equivalent, providers of conventional fee-for-service medicine and HMOs have very different ways of getting there. Fee-for-service providers typically try to maximize income by ordering more tests and performing more procedures. By contrast, HMOs have fixed income, and so they try to minimize costs by performing fewer tests and procedures.

That may have a beneficial effect on medical inflation, but HMO clients are not convinced it always benefits them.

“There are problems,” said Penny Davis of Multnomah County Legal Aid Services in Portland, which represents many elderly Medicare clients. “Some of the HMOs have a lot of hoops to go through to get an appointment. Sometimes you have to wait months, literally months, to get an appointment.”

And to save money, HMOs are going high-tech. “With Kaiser, I made an appointment with a touch-tone phone, and that was fine for me,” Davis said. “But for someone who has impaired vision, poor hearing, is not as attuned to technology, this can be a big problem.”

In Portland, elderly HMO clients complain most vigorously about their primary-care physicians’ role as “gatekeeper,” responsible for authorizing access to outside health services and specialists.

When Thomas Davis--a 70-year-old retired plumber who is enrolled in one of Portland’s HMOs--felt severe chest pains recently, he went to the nearest hospital emergency room, which was not part of his HMO. The hospital sent him home when the pains subsided after a few hours, and Davis got stuck with an $800 bill when his HMO refused to pay.

“They claim you’re supposed to see your primary-care doctor first,” Davis complained. “Well, this was at night. And at that time, there was no way to get in touch with my primary-care doctor because the clinic was closed.” The hospital affiliated with his HMO was nearly 20 miles away, and he wasn’t about to risk such a long drive, he said.

Goldie Powell, 77, was dizzy and walking erratically recently. Her neighbor, suspecting a stroke, took her to her HMO’s hospital. At first, Powell said, the hospital did not even want to see her.

“They told me I hadn’t had a referral by a doctor,” she said. “I said when this happened there was nobody I could get a hold of, plus my doctor had been transferred. . . . We sat there for about two hours and finally got waited on. If I’d have had a heart attack, I could have had it right there in the lounge.”

When it was over, she got a bill for $380, which the HMO later paid after she appealed.

Many doctors, particularly surgeons and other specialists, are just as unhappy with HMOs because the system of fixed monthly payments bleeds them not only of their income but also of their autonomy and prestige.

“To turn all of medicine into the hands of a bunch of primary-care people, pay them not to take care of people and give them incentives not to get things done to people is a terrible mistake,” said Dr. Michael Kendrick, a neurosurgeon who is president of the Central Oregon Independent Physicians Assn.

But most HMO Medicare customers are pleased most of the time, surveys indicate.

“It’s hard for me to say all HMOs are great. But as far as I’m concerned, Kaiser has always done a good job for my family, and that’s from 1957 to the present,” said Nate Davis, who retired to Salem, Ore., after working for Kaiser Steel in Fontana, Calif., for 23 years. His retirement plan picks up the part of the premium Medicare doesn’t pay for, and Davis pays nothing.

Last month, Davis’ 77-year-old wife underwent triple-bypass surgery. Kaiser Permanente’s cardiologist conducted all the necessary tests and sent her to an outside team of heart surgeons--among the best-known in the state--for the surgery. She was transferred back to a Kaiser hospital four days after the operation and was later discharged. She paid nothing.

“You can imagine, that would have been thousands and thousands of dollars if we would’ve had to pay it,” Davis said.

Taylor of Secure Horizons said that any system would have perverse incentives--to spend either too much or too little. “The solution is to have a system to monitor good care and make sure it happens,” he said.

“Medicare HMOs can and do provide high-quality care,” said Dallek of the patient-rights group in Los Angeles. But she said she wants reforms to require an easier and speedier appeals process if HMOs reject treatment or refuse referrals to a specialist. And she warns of widespread abuses by some commission salespeople who enroll new HMO members without explaining that the customers must stay within the HMO medical network for their care.

For such markets as California and Oregon, with long histories of HMOs, the revolution promoted by the GOP has been under way since World War II, when Henry J. Kaiser provided prepaid health plans for his shipyard workers.

Kaiser Permanente’s long history in Portland and the large proportion of Oregon residents who live near the metropolitan area made the state ripe for managed care. Many workers who enrolled in HMOs as part of their company health plans simply aged into the new Medicare HMOs.

“Managed care is not as frightening a prospect to patients and providers here as it is in the rest of the country,” said Oregon Gov. John Kitzhaber, a physician and one of the key architects of the state’s health plans. “I would defy anybody to show that our elderly population suffers any less quality of care than anywhere else in the country.”

Murphy reported from Portland and Rosenblatt from Washington, D.C. Times researcher Doug Conner in Seattle also contributed to this story.