NU Online News Service, Aug. 27, 5:55 p.m. – The U.S. Department of Health and Human Services has persuaded health insurers to operate 33 Medicare preferred provider organization plans starting Jan. 1, 2003.

The new Medicare managed care PPOs will be available in 23 states: Alabama, Arizona, California, Florida, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Missouri, North Carolina, Nevada, New Jersey, New York, Ohio, Oregon, Pennsylvania, Rhode Island, Tennessee, Virginia, West Virginia and Washington.

The PPOs will be able to appeal to patients by offering prescription drug benefits and easy access to large networks of doctors and hospitals, but they will also be able to build in incentives for thrift by charging co-payments and deductibles similar to those charged by the commercial PPOs that serve patients under 65, HHS says.

HHS officials are hoping the new PPO demonstration program will help revive the Medicare+Choice managed care program, by reducing its dependence on tightly managed, difficult-to-underwrite health maintenance organizations.

“The under age 65 market is rapidly flocking toward PPO products, which give patients the flexibility they need,” Tom Scully, administrator of the Centers for Medicare & Medicaid Services, says in a statement about the new PPO program. “Seniors want the same options, and this is a big first step in getting them there.”

Private health insurers and insurance trade groups have been asking federal officials to open up the Medicare program to PPOs for years.

Even the American Association of Health Plans, Washington, a group that includes PPOs but is better known for representing HMOs, is praising the government’s new effort to work with PPOs.

“America’s health plans strongly support efforts to strengthen and expand Medicare+Choice,” AAHP Chief Executive Karen Ignagni says in a statement. “Beneficiaries are counting on Congress to do its part to strengthen this program for seniors in all parts of the country.”

The PPO program will help by giving beneficiaries a wide range of health plans, the AAHP says.

Congress set up the current Medicare managed care program in 1997, in an effort to keep medical cost inflation from bankrupting the system.

In the past, most Medicare beneficiaries have had to enroll either in traditional fee-for-service programs that offered no built-in prescription drug benefits, or in tightly managed health maintenance organizations. Many of the HMOs have provided free or inexpensive prescription drug benefits, but carriers have fled from the Medicare HMO program over the past three years because of complaints about excessive red tape, high claims costs and unrealistically low government reimbursement levels.

HHS recruited insurers for the PPO demonstration program with a solicitation for proposals issued in April.

HHS has let a few small PPOs participate in the Medicare managed care program over the past five years. But the new demonstration program will be different, because will be open to 11 million Medicare beneficiaries, or more than one-quarter of all beneficiaries, HHS says.

The solicitation is available on the Web at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=2002_register&docid=02-9196-filed

A list of the participating plans is available at http://www.hhs.gov/news/press/2002pres/20020827att.html