HMOs To Begin To Benefit From New Medicare Law in March

HMOs will begin to benefit from the Medicare legislation signed into law by President Bush in March 2004, well before the prescription drug benefit for beneficiaries takes effect in 2006.

Under the law, HMOs will receive an additional $1.3 billion from the federal government in 2004 and 2005 to encourage them to participate in Medicare, according to the Congressional Budget Office. HHS Secretary Tommy G. Thompson, who will set new Medicare reimbursement rates for HMOs in January 2004, said that HMOs represent an important part of the expanded role for private health insurers established under the law.

"We want them to stay. We want to make sure they're included in it, and therefore, some of the increases have been phased in earlier than 2006," Thompson said.

HMOs will have to use the additional funds to reduce premiums or improve benefits for Medicare beneficiaries who enroll in their health plans, officials said. AAHP-HIAA President Karen Ignagni said that HMOs also could also use the funds to offset the cost of increased reimbursements for physicians and hospitals or retain them for future use.

Opponents criticized the increased funds for HMOs under the Medicare law as evidence of a bias toward private insurers by the Bush administration.