Report Says Good Values Harder to Find Among California Medicare HMOs

Nonprofit groups release 2002 Guide to California Medicare HMOs as Medicare lock-in deadline nears

The 2002 Guide to California Medicare HMOs found that some Medicare HMOs offer good values for California seniors, but the number of plans and the average value they offer are declining.

The Guide, released today by Consumers Union and the California HealthCare Foundation, concluded that it may be harder to find a top plan this year, but it’s worth the effort for seniors and other Medicare beneficiaries to investigate all their options.

This information is especially timely, because a new federal “lock in” policy sharply limits seniors’ ability to change Medicare plans. Under the “lock in” rule, Medicare beneficiaries can change plans only once between January and June 2002 and are prohibited from switching plans between July 1 and December 31. Previously, seniors could change plans each month.

The 2002 Guide to California Medicare HMOs rates every Medicare HMO offered in California for both financial value and prescription drug coverage using a one- to five-star scale. It concluded that the value of Medicare HMO plans varies widely and that paying more for an expensive plan does not guarantee a better value. The study also found that prescription drug coverage was especially inconsistent — some plans offer no drug coverage, while California’s most generous plans pay more than half of an average senior’s drug costs.

“To make the best choice, seniors should carefully study the plans available and pick the one that comes closest to meeting their individual health care needs,” said Ann Monroe, director of the California HealthCare Foundation’s Quality Initiative. “When it comes to choosing a Medicare HMO, it pays to do your homework.”

The trends found were remarkably consistent throughout the state. According to the study, conducted by Consumers Union’s Center for Consumer Health Choices, the number of plans offered in California dropped from 196 to 100 over the past year, and the average score for financial value fell from three stars (out of five) to 2.6. Average scores for prescription drug coverage increased to 2.2 stars from 1.9, largely because a greater share of plans now offer at least some prescription drug benefits. Although the trend toward additional prescription drug coverage is a positive one, the study also found a significant drop in the number of four- and five-star prescription drug plans.

“Because of their low cost and expanded benefits, HMOs may be the best choice for many Medicare beneficiaries,” said Trudy Lieberman, director of Consumers Union’s Center for Consumer Health Choices. “This guide gives seniors the information they need to make an informed decision before the June 30 lock-in deadline.”

Medicare HMOs are currently offered in 34 California counties. Where plans are available, seniors may choose to receive their Medicare benefits from an HMO plan instead of a traditional Medicare fee-for-service arrangement. Medicare HMOs may offer more benefits than traditional Medicare, including valuable prescription drug coverage, but they also may limit participants’ ability to choose a physician or receive care from a specialist. Most American citizens and legal permanent residents automatically qualify for Medicare when they reach age 65, although those with disabilities or end-stage renal disease may become eligible at an earlier age.

More than 4 million Medicare beneficiaries live in California and nearly 1.5 million are currently enrolled in Medicare HMOs.

Note: The Guide to California Medicare HMOs Web site was discontinued in December of 2004.

About the Consumers Union Ratings

Consumers Union assigned ratings to all Medicare HMO plans offered in California on a scale of one to five stars. Ratings were determined by measuring the total benefits provided to plan members and subtracting the amounts they pay for premiums and copayments. A similar system was used to evaluate prescription drug coverage. More details about the study’s methodology are published as Appendix C of the report.

About the California HealthCare Foundation’s Quality Initiative

Serving as a catalyst to improve the overall quality of health care in California, the Foundation’s Quality Initiative partners with objective, credible organizations to develop and disseminate information to California consumers about quality of care. By involving consumers and their representative organizations in the quality discussion, the Quality Initiative hopes to accelerate quality improvement, public accountability, and informed health care decision making.

About Consumers Union

Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization serving only consumers. It is a comprehensive source for unbiased advice about products and services, personal finance, health and nutrition, and other consumer concerns. Its ratings may not be used for commercial purposes. For more information on Consumers Union, visit

About the Consumers Union Center for Consumer Health Choices

The Center for Consumer Health Choices exists to illuminate imperatives for change in the health care system, to equip consumers and other stakeholders to participate in dialogue and debate concerning health policy and to enable consumer choice by providing evaluations of insurers, providers, and products to drive quality improvements in health care.


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About the California Health Care Foundation

The California Health Care Foundation is dedicated to advancing meaningful, measurable improvements in the way the health care delivery system provides care to the people of California, particularly those with low incomes and those whose needs are not well served by the status quo. We work to ensure that people have access to the care they need, when they need it, at a price they can afford.