People with Medicare can obtain their medical care through original Medicare or the Medicare Advantage Program (Part C). Medicare Advantage Plans consist of HMO, PPO, Private Fee for Service Plans and Special Needs Plans. Of the more than 10 million individuals enrolled in Medicare Advantage Plans, the majority are enrolled in HMO’s (Health Maintenance Organizations) which have been available since the 1980′s.
To help your parents (or you) make an informed decision, they need to understand how these plans work, and then decide which plan is right for them. The following is a brief description of each of the plan types.
If an individual elects to go with traditional fee for service Medicare, they can generally use any doctor or hospital that accepts Medicare assignment anywhere within the United States. However, Medicare does have deductibles, copays and cost sharing requirements that can play havoc with budgets. To help pay these additional out of pocket expenses, many individuals purchase Medigap or Medicare supplement policies.
Medicare Advantage Plans (Part C)
If you opt to go with a Medicare Advantage Plan, you actually trade your traditional Medicare benefits for these plans. Many of the Medicare Advantage Plans are offered to eligible individuals at little or no cost other than continued payment of their Part B monthly premiums.
Medicare HMO’s (Health Maintenance Organizations)
These plans cover the same physician and hospital costs as traditional Medicare, but usually with lower out of pocket costs. HMO’s are attractive to Medicare eligible individuals because they often provide extra benefits like eyeglasses, hearing aids, and dental benefits which are not covered by traditional Medicare.
Individuals considering a Medicare HMO should be aware that they can only receive medical services from providers who are part of the HMO’s network of contracted providers. The HMO usually requires that an individual joining their plan select a primary care physician from those who participate in their network. This primary care physician would then be responsible for all medical care including referrals to a specialist and admittance to a hospital. The HMO will not pay for unauthorized visits to specialists nor non-emergency care received outside the HMO’s service area or visits to non-network physicians.
Medicare PPO’s (Preferred Provider Organizations)
These plans are private healthcare plans like HMO’s. However, PPO’s and HMO’s do differ into two very important areas. First, Medicare PPO’s do cover eligible medical care services obtained from doctors and hospitals outside the PPO network. And, second, Medicare PPO’s do not usually require that you obtain an authorization before seeking care from a specialist.
Regional PPO’s are available in many areas of the country. These plans serve large geographic areas and must offer the same premium costs and plan benefits to all individuals residing in these areas. Medicare PPO’s cover the same types of medical expenses that traditional Medicare does. In addition, Medicare PPO’s commonly include a prescription drug benefit. Unlike traditional Medicare, Medicare PPO’s have an annual out of pocket limit for benefits covered under Parts A and B of Medicare. The out of pocket limit caps the amount an individual can spend on covered medical expenses in a calendar year. As with any PPO program, when an individual uses a non-contracted provider for covered services, they will pay more out of their pocket.
Private Fee for Service (PFFS) plans
These plans are available to Medicare beneficiaries in exchange for their traditional Medicare Benefits. PFFS don’t have a formal network of doctors and hospitals to choose from and not all doctors or hospitals are willing to provide medical services to participants in these types of plans. If an individual is considering enrollment, it is wise to check with their doctor and local hospitals to make sure that they will accept the plan’s payment for services before enrolling. Also, the enrollee should thoroughly understand the benefits of a fee for service plan because the fee for service plans decide how much they will pay for Medicare covered services and may charge a higher cost sharing percentage than traditional Medicare. Private fee for service plans may include a prescription drug benefit. If they do not, the enrollee is free to join a Medicare stand alone prescription drug plan.
Special Needs Plans (SNP)
These plans are private plans that provide benefits to Medicare beneficiaries, including prescription drug coverage, who need additional help paying for their medical benefits. These would include individuals who qualify for both Medicare and Medicaid (MediCal in California), those residing in long term care facilities, and those with chronic or disabling medical conditions.
Medicare Prescription Drug Plans (Part D)
Prescription drug plans are available to all Medicare eligible persons regardless of medical history or income levels. When a person first qualifies for Medicare, their initial enrollment period begins three months before their 65th birthday, includes their birth month, and ends three months after their birth month. Otherwise, the annual open enrollment period for prescription drug plans runs from November 15th thru December 31st, with the coverage commencing on the following January 1st.
Medicare drug plans are designed to reduce drug costs for enrollees and protect against catastrophic drug costs. However, there is a monthly cost for these plans. In addition to a monthly premium, the covered individual is required to pay a percentage of the cost of the medications (or a copay) and Medicare pays part of the cost. Costs for a plan will vary depending on the medications taken and the type of plan selected. At a minimum, the plans available must provide a “standard” level of coverage.
For 2010, a standard prescription drug plan will have the following costs:
• A monthly premium which varies from approximately $24 per month to in excess of $100 depending upon the plan selected and medications taken.
• An annual deductible equal to the first $310 worth of prescription drugs.
After the annual deductible has been satisfied, the insured will pay the following amounts for the remainder of 2010:
• 25% of the cost for covered medications from $310 up to $2830 in charges, (the plan pays the other 75% of these costs); then
• 100% of the next $3842.50 in total drug charges (often called the donut hole or coverage gap); then
• After exceeding the annual of pocket limit of $4550, 5% of your drug costs or a copay of $2.50 or $6.30, whichever is greater for the rest of the current calendar year.
This describes a “Standard Plan.” Many of the prescription drug vendors do offer better benefit plans which forego the plan deductible and substitute copays instead of the 25% coinsurance. Generic medications are available for substantially less than brand names with these plans.
There is a penalty of 1% per month, using the average national premium, for non-enrollment/late enrollment, which is assessed for as long as they remain enrolled in the plan.
This has been just a brief overview of the benefits available to Medicare eligible individuals. For more detailed information, please consult the Medicare handbook, Medicare & You. The handbook is available by contacting Medicare at 1-800-MEDICARE1-800-MEDICARE or visiting the Medicare website at http://www.medicare.gov.