Geographic discrimination?

Supporters of a new lawsuit against the federal government want to know why Minnesota seniors receive less money for their health care.

Topics: Healthcare Reform,

Rose Grigsby admits she didn’t go to her Arizona health club much. But the short, plump 78-year-old didn’t exactly waste her money by not going. Her tab was picked up by the federal government — as part of her Medicare HMO package.

This fall, when Grigsby moved back to her native Minnesota, she found that the local Medicare HMOs not only wouldn’t pay for the gym; they wouldn’t cover one of her high-blood-pressure medications, either. While her Minnesota plan does cover the two inhalers she needs to battle asthma, Grigsby now pays $270 a month for coverage more limited than her $50 plan in Arizona.

“It burns the heck out of me that I can’t get decent coverage here, but I get great coverage if I go to Arizona,” says the retired business owner.

Grigsby pays hundreds more out of her fixed income because the alternative was worse: dying among strangers. “I wanted to be near my family,” she says. “I’d seen people down there in Arizona, living in nursing homes, all alone. That wasn’t going to be me. So I said to heck with it — I’m coming back here, and if I go broke, I go broke.”

Luckily, she says, she is still doing OK financially. “[But] if I was somebody in real need, I wouldn’t dare come back here, even if it meant not living close to my family,” she says.

Like Grigsby, Charles and Margaret Van Guilder will keep living in Minnesota — but they may get divorced to do so. Margaret suffers from advanced Parkinson’s disease, and Charles says Medicare reimbursements are so small that they pay $595 a month more than they would in south Florida, where even taxi rides to the doctor get covered. Divorcing Margaret would allow Charles to shelter assets that will otherwise be drained until she qualifies for indigent care. They say this is their only choice, because they refuse to move out of state.

“We want to live where we want to live,” Charles Van Guilder says. “Why should we move to a [high-reimbursement] state when the money should be equitably distributed in the first place?”

Minnesota residents are not suffering from bad health care; treatment costs are among the lowest in the country. But they are victims, a new suit claims, to geographic discrimination by the federal government. Millions of Americans are affected by Medicare’s varying subsidies to local HMOs, but Minnesota is the first state to do something about it.



Residents of places as diverse as Honolulu, Albuquerque, Salt Lake City and Rochester, N.Y., as well as most rural towns, are paying hundreds more for far less coverage than those throughout the urbanized Sun Belt and in many big Eastern cities, according to a study by the Dartmouth Atlas of Health Care.

“This is a nationwide rural health-care issue,” says Peter Wyckoff, executive director of the Minnesota Senior Federation, Metropolitan (Minneapolis-St. Paul) region, a consumer rights group. “[But] Minnesota is one of the few states where nearly everyone has gotten the shaft.”

A federal lawsuit filed here last month alleges that reimbursements in the 39-million-person program are so geographically irrational that they are unconstitutional. The suit claims that individuals such as Grigsby are denied the Fifth Amendment right to equal protection under the law.

“It’s as if you could double your Social Security check by moving from Minnesota to Miami. Nobody would think that was fair,” says Megan McAndrew Cooper, editor of the Dartmouth Atlas of Health Care, which tracks local coverage differences. “Everyone pays into Medicare at the same rate, but some people are getting twice as much out of it.”

Seventy-two-year-old Mary Sarno would probably agree. Sarno, who lives in Florida, wants to be near her daughter but in court filings says she simply can’t afford to move to Minnesota, where her daughter lives. Sarno and her husband claim that they can’t afford to pay the $800-a-month increase in drug costs. The suit claims unfair Medicare subsidies not only violate Sarno’s equal-protection rights, but her constitutional “right to travel.”
(This argument was used recently to overturn state welfare laws that gave smaller payments to newcomers.) Courts have decreed that the government cannot create barriers to people moving freely between states.

Although Sarno is effectively a stand-in for millions of Americans allegedly hurt by Medicare rules, she won’t talk about her situation to maintain her privacy, according to her attorney.

And the defendants aren’t saying much either. Although formally, the defendant in this case is Health and Human Services (HHS) Secretary Donna Shalala, supporters of the suit say their true gripe is with Congress. Dr. Robert Berenson of HHS issued a short statement after the suit was filed, shifting blame to legislators. “The law typically sets the methodology Medicare uses,” Berenson wrote. “We consistently work within those laws and with Congress to ensure that Medicare beneficiaries can receive quality care in all regions of the country.”

The reimbursement saga seems to be a textbook case of unintended consequences becoming politically ossified. In 1965, Congress created Medicare to ensure coverage for all Americans over 65 and the disabled. The program did this on a “fee-for-service” basis — paying more when
seniors use more services.

But in the ’80s came managed care, which promised rigorous cost-containment so patients could get “more efficient” coverage for less. Subsequently, seniors flocked to these managed care programs, enticed by small co-payments and prescription drug coverage not covered by traditional Medicare.

Congress paid each HMO based on the average cost to treat patients in each U.S. county. Areas like Minnesota and upstate New York, which adopted aggressive managed care early and bled costs out of their systems, got smaller reimbursement checks. Paradoxically, other places that didn’t clamp down on total medical spending were rewarded. These included areas with hospital building booms, such as south Florida and parts of Arizona, or areas that couldn’t politically close down hospitals with excess beds, such as New York.

“It wasn’t obvious what was going on,” says Cooper of the Dartmouth Atlas of Health Care. “But a hospital buys an MRI and doctors use it; an area’s total costs go up. You build a hospital, and doctors tend to fill those beds.”

In the low-cost areas, Medicare reimbursements to HMOs were often too small to cover the basics. As a result, HMOs simply left those areas because they couldn’t offer a plan better than Medicare’s traditional fee-for-service plan. In Minnesota, for example, Grigsby has just two HMOs to choose from. The Minnesota Department of Health reports that at peak enrollment 12 years
ago, 160,000 state seniors were in Medicare HMOs. Now, just 38,000 remain.

Patients who leave HMOs have little choice but to go back to traditional Medicare, with its larger co-payments and no prescription drug coverage.

Although there has been some legislative reform, drafted to fix the price discrepancies, critics say it doesn’t go far enough. That’s why they say the suit was filed — to achieve in court what they couldn’t through normal legislative channels. “Politics simply hasn’t worked,” says Wyckoff of the Minnesota Senior Federation, a consumers group.

So an orchestrated effort — by two groups normally at odds with each other, the Minnesota Senior Federation and local HMOs — was launched to find plaintiffs, organize support and communicate the issues to the public.

“Here’s how [the plans] got our attention,” Wyckoff says. “They told us 50,000 seniors would lose their [HMO] coverage in the metro area by the end of 1999 because we weren’t doing anything.”

Managed care helped fund the suit; the Minnesota Senior Federation, a consumer group, would find the disgruntled senior. And that’s how Sarno became the face of this problem.

Supporters of the suit claim that Minnesotans and similar locales have little to lose; a successful suit would simply help them. Local HMOs would get more business; seniors such as Grigsby and Van Guilder would get more choice (and presumably better coverage); and local hospitals would get more traffic if seniors have more Medicare dollars to spend.

But it’s not clear what kind of ramifications a successful suit would have for parts of the country now benefiting from higher reimbursements.

One possibility is that Congress would be pressured into balancing the disparities: High-reimbursement places such as South Florida and Arizona would get less, while Minnesota and Northern California would receive more. But Wyckoff warns that this “solution” could backfire and end up just penalizing seniors in other parts of the country.

At the very least, this lawsuit has raised awareness of the discrepancies in senior health care. If the pressure mounts, then maybe, advocates say, Congress will draft a more equal system — so you couldn’t know what city you were in just by looking at your health coverage plan.

David Brauer is a free-lance writer. H

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