How Cherry Picking Could Hurt Obama's Health Care Plan

William Vaughan was in St. Petersburg, Fla. this past winter taking care of his ailing father. He noticed the large number of newspaper ads for Medicare HMO plans. The private plans, offered by Humana ( HUM - news - people ), UnitedHealth ( UNH - news - people ) and others, would hold seminars with free food at restaurants or hotels to pitch senior citizens on the virtues of swapping their government Medicare for the HMO alternative.

Most of the events were in nice parts of Pinellas County. Very few were downtown or in other poor or minority areas. He collected information on 70 events and found that 45 were in affluent zip codes. Vaughan, whose day job is a policy analyst at Consumers Union in Washington, was pretty sure he knew why. "When 50% of the people spend only 3% of health dollars, you'll stay up all night trying to find that 50%," Vaughan says. Or, he jokes, "the [Medicare HMO] marketing people in Pinellas County must think low-income people and certain minorities don't like doughnuts as much as rich people do."

Insurance companies find ingenious ways to get healthy members in the door while being inconvenient to sickly applicants. That's bad news for reformers, who imagine an egalitarian world that doesn't discriminate against the sick. The four health care proposals now getting the most attention in Congress all require HMOs to offer coverage to all who apply, regardless of their health status.

Good luck with that. Insurance companies will have a financial motive to attract and keep the healthiest members, the ones who don't rack up hospital visits or take costly medications. If Obama Care means HMOs will have to compete with a new public plan, a disproportionate number of unhealthy people will end up in the latter.

Health plans started playing games with Medicare in the early 1990s--when the program started its experiments with privatization, paying a fixed amount to private health insurers for each member they could sign up. HMO companies would hold seminars for prospective new members on the third floor of elevatorless buildings or in places that required a long drive. You could count on only the fittest and most self-sufficient seniors to show up. Others would recruit at a 5k charity run or offer gym memberships as a perk and pat themselves on the back for promoting fitness. Barbells are not of much interest to those who are demented, bedridden or in a wheelchair--all health care gobblers, notes Paul Precht of the Medicare Rights Center.

Insurers would also structure benefits so that sick patients would be deterred or never re-enroll. "If you didn't want to attract cancer patients you would put in copayments and coinsurances that were less attractive than [regular] Medicare," says George Rapier, a doctor in San Antonio whose 60-physician practice contracts with Medicare HMOs.

(Source: Forbes, Link: http://www.forbes.com/forbes/2009/0713/health-obama-insurance-hmo-cherry-picking.html?partner=biotech_newsletter)