Medicare's Two Plans, An Overview

Medicare is the federal health insurance program for people aged 65 or older and certain persons with disabilities of all ages.

In general, there are now two different types of Medicare plans available to beneficiaries: fee-for-service and managed care. Both pay for hospital and medical care, but there are differences in the way you receive services, when payment is made and how much you might have to pay out of pocket.

How Medicare Fee-For-Service Works

The traditional Medicare fee-for-service program, which continues to be administered by the federal Health Care Financing Administration (HCFA), has two separate parts for hospital (Part A) and medical insurance (Part B). Under this system, you can use the services of any hospital and choose any licensed physician, health care provider or facility certified by Medicare. Medicare pays a fee each time a service is used.

While Medicare pays a share of your hospital bill and helps with physician's expenses, it will not pay 100 percent of your health care costs. There is cost sharing under both parts in the form of deductibles and copayments. A deductible is how much you pay before benefits begin. A copayment is the amount you need to pay at the time of a visit. Also, other expenses such as prescription drugs and dental care aren't covered at all and you must pay for charges in excess of Medicare's approved contract.

To help pay for out-of-pocket expenses, most Medicare beneficiaries carry additional insurance through private insurance companies. This type of insurance is called Medicare supplement or Medigap. If you qualify as low income you may be eligible for assistance with the costs of premiums, copayments and deductibles from the Medicaid program in your state.

What Is Managed Care For Medicare Beneficiaries?

While there is no standard definition of managed care, it can best be described as a combination of insurance and a health care delivery system. The basic goal of managed care is to coordinate all health care services you receive in order to maximize benefits and minimize costs.

Managed care plans use their own network of health care providers and a system of prior approval from a primary care doctor in order to achieve this goal. Providers include: specialists, hospitals, skilled nursing facilities, therapists and home health care agencies. Under Medicare HMOs that have risk contracts with the federal, government, you must obtain covered health care services only from professionals and facilities that are part of the plan unless the HMO refers you elsewhere. This is sometimes referred to as the 'lock-in' provision.

While there are several forms of managed care in use by insurance companies and others, the health maintenance organization (HMO) model is normally the only one available to Medicare beneficiaries. An HMO is an organized system for providing comprehensive health care in a specific geographical area to a voluntarily enrolled group of members. Medicare HMOs are required by law to provide all the services you would be entitled to under fee-for-service Medicare coverage. However, Medicare pays the HMO in advance for your care and the fee they pay is the same no matter how many services you use or how ill you are.

Most Medicare HMOs commonly charge a small copayment for some services. You must also continue to pay the Medicare Part B premium. In addition, some Medicare HMOs, which are called cost plans, allow you to use providers outside their network if you pay the usual cost sharing amounts under Medicare fee-for-service.

Because the Medicare HMO pays for all Medicare services under both Part A and Part B, there is no need for you to purchase additional or supplemental insurance. In fact, many HMOs currently provide more preventive services than Medicare and most Medigap plans for either no charge or for only a nominal charge. Such services may include: periodic checkups, health screenings, vision services, prescription drugs and dental visits. With a Medicare HMO, you will also find that there is little or no paperwork.

How Does A Medicare HMO Work?

When you enroll in a Medicare HMO, you're signing up to receive all your Medicare services through the HMO. This means you no longer have fee-for-service and you must now use your HMO's network of hospitals, physicians or other providers such as nursing homes or home health care agencies to receive covered benefits.

To receive covered care in an HMO, you must get prior approval by your Primary care physician for most services. This physician, who is sometimes called a gatekeeper, will decide what tests you should have, which specialists you should see, whether or not you should be admitted to a hospital and what other providers you can use.

If you don't get prior approval from your primary care physician-sometimes called precertification-neither Medicare nor the HMO will pay for the services. You are also responsible for payment for any services you receive outside the HMO's own network.

The only exceptions to prior approval are for emergency or urgently needed care you may need outside the HMO's service area. You must, however, follow the HMO's rules to guarantee payment for out-of-area services.

How to Enroll In A Medicare HMO

You may enroll in a Medicare HMO without health screening if you are eligible for Medicare and live in an area served by one. However, you cannot have either end-stage renal disease or be receiving Medicare-certified hospice benefits. You cannot be denied membership because of poor health or disability. You may enroll during an advertised 30-day open enrollment period that Medicare HMOs must have at least once a year. You can choose for your coverage to begin the first day of the month (or up to three months) after your enrollment application has been received. The Medicare HMO cannot ask you about health problems or require you to take a physical. Also, you have the right to back out of enrollment after your application within 30 days of policy delivery, if you choose.

Once you enroll, you must choose a primary care physician or one will be assigned to you. Usually, you may change your primary care physician for any reason, but you must pick one in the plan's network.

HMOs normally serve a specific geographical area in which you can get covered services. This is called its service area. If you enroll in a plan and later move out of its service area, you'll have two choices. You will either need to disenroll and return to a regular fee-for-service Medicare or enroll in another Medicare HMO that serves your new location.

How To Disenroll

You can disenroll from an HMO at any time and return to traditional Medicare fee-for-service coverage by filling out a disenrollment form available at any Social Security office. You can also drop your enrollment through a Railroad Retirement Board or through the HMO itself in writing. Most people use certified mail to notify the HMO of disenrollment. The change will be effective the first day of the following month.

If you decide to return to Medicare fee-for-service, your choice of Medigap policies may now be limited. You also may need to wait six months for coverage of a preexisting health condition under a new policy.

Considerations for Residents of Senior Housing or Nursing Homes

Neither Medicare fee-for-service or a Medicare HMO cover long-term care or housing expenses. However, many nursing homes provide services covered by both types of plans such as: skilled nursing, outpatient rehabilitation, home health care, pharmacy services and transportation. Some of these services and others are called subacute care by health care professionals.

If you are now in a Medicare HMO or considering enrolling in one, and you live in a continuing care retirement community, senior housing or long-term care facility, then you should review the following questions and take action on them as appropriate:

Have the staff of your housing facility, personal care or nursing home been advised of the change in your insurance coverage? Do they know whom to call when you need care or to get authorization for emergency help or hospitalization?

Does the staff know whom to call for laboratory, pharmacy or other services or whom to bill?

Will your HMO primary care physicians conduct visits and exams at the facility? How often? If you have to go to see the physician, is transportation provided by the facility or the HMO?

If you or a family member live in a continuing care retirement community, there are some unique considerations for those considering joining a Medicare HMO. For example, after a hospital stay some CCRC residents enrolled in Medicare HMOs have been discharged to nursing homes that are not part of the CCRC. Is the CCRC part of the HMO service network? If not, will you be able to return to the nursing home on the CCRC campus or have to use some other facility?

There may be other areas of care affected. You should review the HMO plan with your facility's health care services office or designated staff identify and resolve all potential problems.

Who Monitors Medicare HMOs?

The federal government (HCFA) and state licensing departments (usually the department of health or insurance) monitor both quality and cost effectiveness. They also monitor performance through patient satisfaction surveys, information from complaints as well as independent reviews or "report cards."

page 27