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MEDICARE MUST NOT SUBSIDIZE HMO PRIVATE CARE

As health maintenance organizations for the elderly struggle with the same problems facing all HMOs -- how to assure quality while curbing costs -- sticking the Medicare program with a disproportionate share of the bill should not be one of the options.

That's what a federal report says the industry has been doing, to the tune of more than $1 billion annually over the past three years.

A study by the Department of Health and Human Services inspector general found that HMOs treating Medicare patients charged the program for 31.7 percent of the health organization's administrative expenses even though Medicare patients accounted for only 8.9 percent of the enrollment in 1996.

That means that Medicare -- the financially threatened government program for the elderly -- may have been subsidizing care for the HMOs' commercial customers.

While making changes to reduce such future overpayments, officials for the Health Care Financing Administration -- which runs Medicare -- objected to any efforts to recoup that overbilling. A spokeswoman argued that the money helps HMOs offer the elderly extra services like prescription drugs, which Medicare doesn't normally cover.

The only problem with that argument is that the report found evidence that the HMOs were not providing all of the extra benefits that they claimed in reports to the government. That means that Uncle Sam should recoup that money and put it to its intended purpose -- serving the elderly.

Managed-care providers have long complained that Medicare does not reimburse enough for elderly care, and some have dropped out of the program as a result.

But it's hard to know whether Medicare actually doesn't pay enough or whether those who've dropped out simply figured they could make even more elsewhere.

In any case, Medicare suffers from its own funding problems and can't afford to subsidize other customers. The program for 38 million senior citizens is projected to run out of money in 10 years. That's one reason Congress and the Clinton administration have been trying to entice more Medicare beneficiaries to join HMOs. So far, about 6 million have.

But Medicare hardly benefits much if the savings achieved by utilizing HMOs is siphoned off by managed-care companies to help pay for their other programs.

The problem of how HMOs balance cost, access and quality for all of their patients is one that Congress and the public will have to grapple with in a comprehensive way. But it can't be addressed by letting HMOs get back-door subsidies for generalized care at the expense of Medicare.

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