FOR IMMEDIATE RELEASE:
July 5, 2000

CONTACT:Bonnie Hyatt
(916)734-9040

UC DAVIS HEALTH SYSTEM TO NEGOTIATE NEW MEDICARE HMO CONTRACTS

(SACRAMENTO, Calif.) -- UC Davis Health System has notified its Medicare HMO plans that it intends to negotiate new contracts for medical services. The Medicare plans include Blue Cross Senior Secure, Blue Shield 65, Health Net Seniority Plus, Secure Horizons and Western Health Advantage Care Plus.

The 6,901 UC Davis patients who are currently enrolled in these plans will not be immediately affected by the negotiations.

Health system leaders are working diligently to negotiate new agreements that provide an adequate level of reimbursement for care provided to patients. Currently, the reimbursement the health system receives under these contracts is not enough to cover the cost of care.

UC Davis Health System expects to lose about $6 million this fiscal year alone from its Medicare HMO contracts. This annual figure translates to a loss of nearly $1,000 a year (or $80 per month) for each and every UC Davis patient enrolled in a Medicare HMO plan.

The need for higher reimbursements for patients in Medicare HMO plans is not unique to UC Davis. Inadequate funding of the Medicare HMO program affects both medical providers and health insurers. The Balanced Budget Act of 1997 capped annual increases to Medicare HMO plans at an average of 2 percent. Yet, the costs of delivering care are increasing at much higher rates. In the past year alone, industry analysts estimate that pharmaceutical drugs increased an average of 15 percent, while overall medical costs increased an average of 8 percent.

The added costs of caring for Medicare HMO patients are driving some insurers and medical providers to discontinue these plans. According to the Health Insurance Association of America, since 1998, a total of 86 HMOs have dropped their Medicare coverage, while another 112 have pulled out of various markets.

Medicare is the government health program for seniors and the disabled, which provides health insurance for more than 7 million Americans. The majority of these individuals receive their benefits through a fee-for-service delivery system, often called "traditional Medicare." However, Medicare HMO plans have become a popular alternative for some patients. Approximately 6.2 million Americans are enrolled in Medicare HMO plans; 1.5 million of these HMO members live in California.

At UC Davis, about 23 percent of its Medicare patients are enrolled in HMOs. The other 77 percent of Medicare patients who are enrolled in the traditional Medicare plan are not affected in any way by the negotiations with HMOs.

UC Davis officials are hopeful that they can reach agreements with the Medicare HMO plans.

Current Medicare HMO patients who have UC Davis doctors do not need to make any changes or decisions at the present time. If UC Davis does not reach agreements with the health plans, patients will be notified in time to make decisions about their health care.

The UC Davis Medical Group Member Services department has staff available to answer patientsŐ questions. Patients who have concerns may call 1-800-445-3936.

Copies of all news releases from UC Davis Health System are available on the web at http://news.ucdmc.ucdavis.edu