Local Conditions Matter: Report Examines Medicare(plus)Choice Plan Withdrawals in Major Markets Nationwide; Mathematica Fact Sheet

9/5/2002

From: Marsha Gold, 202- 484-4227, mgold@mathematica-mpr.com, or Cheryl Pedersen, 609-275-2258, cpedersen@mathematica-mpr.com, both of Mathematica Policy Research

WASHINGTON, Sept. 5 -- This coming Monday, September 9, Medicare(plus)Choice (M(plus)C) plans must notify the Centers for Medicare & Medicaid Services of the counties in which they will offer or stop offering products in 2003. About 2.2 million Medicare beneficiaries were affected by plan withdrawals between 1999 and 2002, and this number will likely grow in 2003. However, local conditions make a difference in market dynamics, and withdrawals have affected some areas more than others. A new publication from Mathematica Policy Research, Inc., analyzes trends in plan withdrawals by market through 2002, detailing the program's recent history in 66 major metropolitan areas. These trends provide critical background for interpreting the 2003 announcements.

The 66 large Metropolitan Statistical Areas studied for this report accounted for 76 percent of M(plus)C enrollees in 1999 and 79 percent in 2002, even though only 43 percent of Medicare beneficiaries lived there. While 1.3 million enrollees were affected by plan withdrawals in these areas, the markets, as a whole, fared proportionately better than the rest of the country, and accounted for only 59 percent of enrollees affected by plan withdrawals.

Ten markets accounted for 48 percent of enrollees affected by withdrawals in the 66 markets and 28 percent of the nation's total. These markets are concentrated in the Northeast (around New York City and in Philadelphia and Boston) but also include Texas (Houston and Dallas), the Midwest (Chicago and Cleveland), and Florida (Tampa). The ten markets with the largest net loss of contracts were Dallas, Texas; Nassau/Suffolk, N.Y.; New Haven, Conn.; Fort Worth, Texas; Houston, Texas; Newark, N.J.; Seattle, Wash.; Tucson, Ariz.; Bakersfield, Calif.; and Baton Rouge, La. Researchers found that M(plus)C remains strong in the following places where penetration was 40 percent or more: Fort Lauderdale, Fla.; Miami, Fla.; Riverside, Calif.; San Diego, Calif.; Salem, Ore.; Santa Rosa, Calif.; Portland, Ore.; Sacramento, Calif.; Phoenix, Ariz.; and Denver, Colo.

Factors influencing recent plan withdrawals include minimal Medicare capitation payment increases (only about two percent in most years), as well as market-specific conditions. These conditions include local market history with managed care, practice patterns and beneficiary expectation in each market, beneficiary characteristics and coverage, the extent and form of provider organization, trends on other lines of business, state regulations, and geographic proximity to other markets.

"Barring any major changes from Congress or the administration, it is likely that Medicare(plus)Choice will continue to diminish nationally," said Marsha Gold, a senior fellow at Mathematica and co-author of the report. "And we'll see enrollment increasingly concentrated in those urban markets where conditions are most favorable."

Operational Insights No. 8, "Medicare(plus)Choice Withdrawals: Experiences in Major Metropolitan Areas," by Gold and John McCoy, is on Mathematica's web site at http://www.mathematica-mpr.com/PDFs/ redirect.asp'strSite=opinsights8.pdf. Related fact sheets and reports can be found at http://www.mathematica-mpr.com/3rdlevel/med(plus)choicehot.htm. For printed copies, contact Publications at 609-275-2350.

Data sources for the study included publicly available Centers for Medicare & Medicaid Services data, such as state/county/plan market penetration files, files of plan nonrenewals and service area reductions, and the geographic service area file for various quarters. The highlighted Metropolitan Statistical Areas have at least 1.5 million people or managed care penetration of 30 percent or greater. The study is funded by the Robert Wood Johnson Foundation.

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