Antero's withdrawal from five counties in the Denver metro area was expected, since PacifiCare purchased Antero's Medicare Preferred plan nearly a year ago. Kaiser Permanente Senior Advantage plans, HMO Colorado Blue Advantage for Seniors plan, and Rocky Mountain hMO plans will continue in current service areas in 2001. In other words, they combined costs for the very sick with the very healthy to come up with an average per person cost. Since HMO's can operate less expensively than o riginal Medicare , this type of generous payment formula allowed enough excess money to offer prescription drugs, routine eye exams, and dental services, which are not covered by original Medicare. Original Medicare refers to the system whereby Medicare pays claims as they are incurred.
Beneficiaries have free choice of physicians and hospitals.
The Balanced Budget Act of 1997 created a new payment formula that reduced these generous payments. At the same time HMO's encountered higher physician and hospital costs, as well as soaring prescription drug costs. As a result the Medicare market is no longer as profitable a market for HMO's and many plans have either ended Medicare services entirely or have raised premiums and reduced benefits. An official notice on coverage choices will be sent to affected enrollees by October 2, 2000. This letter will explain options and emphasize that if a consumer takes no action, he or she will automatically have original Medicare coverage beginning on January 1, 2001.