US to lift HMO rates
Insurers plan to cut premiums of seniors

By Christopher Rowland, Globe Staff, 1/17/2004

The federal government said yesterday it will pay an average of 10.6 percent more to health insurance companies that operate private Medicare HMO plans, welcome news to Massachusetts insurers that were losing customers.

The size of the rate increases will vary from plan to plan, but Tufts Health Plan, for example, said it would receive an average of 10 percent more in 2004 for the 60,000 Massachusetts patients it has in its Secure Horizons program.

Tufts said it would roll most of the new money into premium reductions, effective March 1, and put the remainder into higher payments for doctors and hospitals. Tufts has not yet calculated the size of the reductions or payment increases, said spokeswoman Julie Rosen. Reductions would follow several years of hefty increases. "We're hopeful that we'll see an increase in membership," she said. "We're trying to make this as affordable as possible."

Congress approved the additional funds as part of the Medicare prescription drug benefit law signed by President Bush in December. The increase was criticized by Senator Edward M. Kennedy, who released a Senate report claiming the money wouldn't help senior citizens but instead would increase HMO revenues by $189 billion annually by 2010, and profits as much as $26 billion annually.

"This mandate is symptomatic of the flaws in the Republican plan. Long before senior citizens see a dime in coverage, the HMOs will get billions of dollars in extra payments," Kennedy said in a statement.