MEDICARE DEADLINE NEARING; FEW IN AREA TO FEEL EFFECTS OF DECISIONS BY HMOS TO KEEP, ABANDON COVERAGE.

Byline: Ben Sullivan Daily News Staff Writer

Few local seniors will be affected by this week's deadline for HMOs to commit to or pull out of Medicare coverage, managed-care officials said Friday.

Of the big local players, only Prudential HealthCare is exiting the Southern California market, where it covers an estimated 6,500 Medicare patients scattered from San Diego to Ventura counties.

``We have not been successful at growing our (Medicare) membership in California and thought the prospect for that was limited moving forward,'' said Prudential spokesman Kevin Heine.

But other managed-care giants such as Aetna, Blue Shield, Cigna, Foundation Health Systems and PacifiCare are staying put, even as some of them exit other markets in California and nationally.

That's in part because managed-care companies are still reimbursed at a disproportionately high level for their urban patients, compared with what they're paid for Medicare patients in rural counties. The Health Care Financing Administration, which funds Medicare, will for example pay $500 a month or more for the care of elderly patients in a city like Los Angeles, while paying as little as $200 a month for patients in some isolated California towns.

``We cannot tolerate unprofitable Medicare business,'' Foundation Health Systems Chief Executive Jay Gellert said in August, explaining the company's withdrawal from five counties in the Northeast and 10 rural Northern California counties.

Many managed-care companies had originally been drawn to Medicare in the mid-1980s for the then-generous payments they received from the federal government. The plans often saw annual pay increases of up to 10 percent, making it a largely inflation-free line of business. But subsequent belt-tightening under the Clinton administration cut those increases in most parts of the country to about 2 percent annually, a level some HMOs say makes it unattractive to provide care.

The managed-care industry had lobbied the HCFA for either rate increases or permission to charge seniors more for the benefits they receive, but those requests fell on deaf ears. Nancy-Ann Min DeParle, who runs Medicare, said this week she is confident that current reimbursement rates are adequate, and noted that even as some HMOs pull out of markets, others are moving in.