Medicare changes threaten SCAN's in-home care service.

It's a sunny Friday morning in Culver City and Sherry Stanislaw stands before 100 seniors in a hotel ballroom doing what she does best: translating into English the latest batch of arcane Medicare changes and then explaining how the health plan she works for can ease their anxiety.

Given the extent that many older Americans were rattled by the rocky launch of Medicare's Plan D drug coverage this year, Stanislaw's message to current and prospective members of SCAN Health Plan Inc. falls on receptive ears.

"You get these books from the government and with all talk of gaps and doughnuts holes it's Greek to me," said Precious Trigg, a 64-year-old Inglewood resident who's considering SCAN because Of cost hikes and service problems at her current plan.

Though disabled and retired for several years, she still gets around easily but is looking down the road to when she'll need help to continue living safely and comfortably at home. That's where SCAN comes in.

The fourth largest Medicare Advantage plan in California and the 10th largest in the United States is one of four "social HMOs" in the nation that are part of a 17-year-old federal demonstration project to determine the value and potential cost-savings of providing currently uncovered in-home care services.

The coordinated care plan is noted for its high-touch customer service, including 24-hour phone access to a nurse and a requirement that all employees undergo senior sensitivity training to better understand their members' point of view. For less than what other seniors might pay for regular, supplemental and drug coverage, social HMOs arrange for personal care and in-home care services by outside contractors, such as cooking or light housekeeping, that a frail senior can't perform.

"We have unique benefits that are designed to keep people at home, not in a nursing home," said Stanislaw, senior vice president for operations and marketing at Long Beach-based SCAN. "When we meet as a team, we're not talking about our shareholder's earnings needs for the next quarter; we're focused on our members' needs."

Still, the nearly three-decade-old, not-for-profit company is a business, one that is expected next month to report 2005 revenues just shy of $1 billion. And a variety of changes in Medicare reimbursement set to take effect over the next two years are poised to significantly affect SCAN's ability to be a one-stop shop for the health care needs of 80,000 seniors in a five-county region that includes Los Angeles County.

"Caring for seniors, it's the only thing we do and we have to do it well," said Chief Executive Dave Schmidt, who was hired in 2002 after a change in Medicare reimbursement rates contributed to a significant loss and the first layoffs in the company's history. "We have essentially one product, and, unlike other plans, our risk is less diverse because we tend to skew older than other plans in this space."

SCAN only pays for short-term nursing care, with their in-home services designed to get patients back home as soon as possible. However, social HMO spending on average spend $378 per month in extended benefits on a long-term basis to keep their members out of nursing homes, according to a national study.

But starting in 2008, Medicare is dropping the additional in-home care funding and will start reimbursing social HMOs like any other plan. Medi-Cal, California's Medicaid program for low-income residents, will still offer additional funding for 6,000 of SCAN's members that are both Medi-Cal and nursing home-eligible, but the Long Beach plan will have come up with a new way to provide the same services for its regular population from a smaller revenue stream.

"We've been discussing this for over a year, but there's a lot of work to be done," said Schmidt, noting that while the region's congressional delegation has been supportive of SCAN's mission, there is no legislation under serious consideration to preserve the supplemental funding. "There are a number of reasons why the things we do are things you need to continue for (the government) to save money."

SCAN officials have disputed a federal study that questions whether the premium paid to social HMOs actually reduces overall Medicare costs.

In the meantime, SCAN must still deal with other potentially costly Medicare-related changes this year. The plan offered drug coverage prior to Part D, and now must make sure its members sign up for its Part D plan instead of a competitor's. Doing that could kick them out of SCAN because the way the federal regulations are written.

In addition, starting in June, seniors also will no longer be able to play musical chairs with their health plans, which provided SCAN with a continuous marketing opportunity.

Unlike workplace group coverage where workers change plans only once a year, Medicare recipients now can change monthly. But as of June, seniors will be able change their plan one more time this year, switch again in January and then be locked into that plan until the following year.

That means SCAN's year-round sales and marketing efforts won't be needed except to reach potential members who become Medicare eligible during the year. Schmidt said a team is still working on whether they'll have to downsize those departments or find other work for affected employees to do outside of enrollment season.