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Medicare Supplemental Insurance
Medicare vs. HMOs

In addition to looking at traditional Medicare and supplemental insurance, some consider enrolling in managed care, under which all medical services must be obtained though the plan. Which of these choices is best for you?

Managed care plans are sometimes referred to as coordinated care, prepaid plans, or HMOs (health maintenance organizations). Because managed care is generally provided through an HMO, we will refer to the plans as HMOs in the following information.

"The bottom line is that the HMO can make a profit only if it sees you as little as possible, since Medicare pays the plan a flat fee each month for your care."

HMOs have contracts with Medicare to provide complete health care services through a network of providers (physicians, hospitals, etc.). Medicare pays the plan a flat fee for each member (95% of Medicare's average expenses). This may range from $450 - $850 per month depending on your area.

Plan members pay the HMO a monthly premium (although some plans have a $0 premium) and co-payments for service. Members must continue to pay the Medicare Part B premium to Medicare ($45.50 in 2000, usually deducted from your Social Security check).


Before deciding on a plan, please consider the following points to help you choose the best care for your needs:

How do the contracts that an HMO has with Medicare affect my coverage?

Are HMO's more convenient than Medigap Insurance?

Can I choose my Health Care Provider?

What if I am not satisfied with the services I receive?

What portion of my care do I pay for?

Which type of insurance provides the most complete prescription drug coverage?

How will my coverage be affected if I travel?

How much paperwork is involved?

How do the contracts an HMO has with Medicare affect my coverage?
It is important to determine the specific kind of contract an HMO has with Medicare, because this will affect the coverage. Most HMOs (for example, Anthem Blue Cross, Oxford, Physicians Health Care, MD Health Care, US Healthcare) are risk contracts.

If the plan has a "risk" contract, it has "lock-in" requirements. This means that plan members are "locked-in" to receiving care from the plan's providers. With few exceptions, if you go outside the plan for services, neither the plan nor Medicare will pay for those services. Medicare does not cover plan Members; they are covered solely by the HMO. For plans without "lock-in" requirements (such as those with a "cost" contract), if the member uses a non-plan provider, Medicare would pay its share for covered services. The member, however, would be responsible for all the deductibles, co-payments, and other charges that a traditional Medigap plan would cover.

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Are HMO's more convenient than Medigap Coverage?
HMO Plans can appear very attractive, since they sometimes include benefits not provided by Medicare supplemental insurance, such as preventive care, dental, prescription lens discounts, and wellness programs. Although these look attractive, check the actual amount of the benefit, what is covered, and how often you can use that benefit. For instance, dental care is usually limited to cleaning and check-ups, and you must use one of the plan's dentists.

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Can I choose my Health Care Provider?
HMO: Most HMOs have a "gatekeeper" system. You must choose a primary physician to coordinate your care, generally using only those associated with the plan. Check the HMO's list of participating physicians, specialists, and hospitals in your area. Is there a good selection of quality health care providers? Even if your doctors are on their list they may not be able to order all the extra tests they would if you were on Medicare and had a supplement. Additionally, the service providers they use must be on contract with the HMO to provide services at a reduced fee. If you have a pre-existing condition, are there qualified providers available to care for your special needs? Are they convenient for you to visit? If you must go to the HMO's facility for care, how far away from your home is it located?

If you want to consult a specialist, your primary physician must agree to refer you and there may be limitations on the number of referrals they are allowed to give you. Specialists usually are limited to those associated with the HMO. If a member should be diagnosed with cancer or heart disease, or need an organ transplant, the HMO decides where the member will receive care and from whom.

The bottom line is that the HMO can make a profit only if it sees you as little as possible, since Medicare pays the plan a flat fee each month for your care. Whether you see a doctor once a year or once a week, the plan receives the same fee from Medicare. The primary physician, therefore, is given no incentive to see you for numerous visits and you may find it difficult to receive a referral to a specialist.

Medigap: You can use any licensed physician and the services or any hospital, health care provider, or facility certified by Medicare. The doctor, specialist, or health care facilities are paid each time you receive medically necessary care. There is no inducement to limit necessary care or referrals.

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What if I am not satisfied with the services I receive?
HMO: You can change your primary physician, but if you are not happy with the quality of your care, or if you feel you need more services than the HMO wants to provide, you must go through an appeals process. If you use services outside the HMO, you are responsible for all the Medicare deductibles and co-payments. (If the HMO has a risk contract, you would have to pay the entire bill, including the part Medicare would normally pay.)

Medigap: If you are unhappy with your care, you may simply choose another physician, facility, or health care provider. Medicare and the Medigap plan pay for all medically necessary health care.

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What portion of my care do I pay for?
HMO: Premiums for the HMO range from $0 to over $150 per month. In addition, you usually pay a co-pay for each office visit, lab test, emergency room visit, and for other services ($2 to $35, or more). The co-payments for one plan doubled each year during the last three years.

Medigap: Your office visits are covered in full if your doctor is a participating physician or if the doctor accepts assignment on your case. Medicare pays 80% of the Medicare-approved charges, and all Medigap plans pay the remaining 20%. Nonparticipating doctors may charge, by federal law, no more than 15% over the Medicare-approved amount. (Some Medigap plans cover those excess charges, as well.)

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Which type of insurance provides the most complete prescription drug coverage?
HMO:If the HMO offers prescription drug coverage, look at the deductible (amount you pay before the plan pays), the co-pay (portion of the bill you pay) and the maximum amount the plan pays for the calendar year, which may be as low as $500. Additionally, if your prescription can be substituted with a less expensive drug, the HMO pharmacy will make the substitution.

Medigap: Medicare pays for all prescription drugs furnished by a hospital durring the patient's stay, as well as certain drugs for cancer vaccinations. (Chemotherapy and radiation therapies are covered under your Part B of Medicare.) Medigap plans may have prescription benefits of up to $1,250 (Plans H and I) or $3,000 (Plan J) annually.

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How will my coverage be affected if I travel?
HMO
: Most HMOs will not enroll you if you plan to leave the service area for more than 90 days at a time. After you enroll, if you do leave for more than 90 days, the plan can disenroll you.

If you travel outside the HMO's service area, you most likely wouldn't be covered, except for emergency care. (HMO's guidelines on what constitutes emergency care are very strict.) If your HMO had a risk contract and you received non-emergency care while traveling, you would have to pay the entire bill, even the part Medicare normally pays.

Medigap: You are covered when traveling, not only in an emergency, but also for routine medical care anywhere in the United States. If you travel outside the United States, Medigap plans C & J cover emergency care. Additionally, if you move to another state, you can usually take your policy with you.

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How much paperwork is involved?
HMO
: HMOs promote lack of paperwork as an advantage of membership. There are no claims filing procedures for plan members. Recent newspaper articles confirm HMOs generally are much slower to pay claims, resulting in disturbing phone calls and letters to plan members demanding payment.

Medigap: Paperwork is very rare with Medigap plans. Federal law requires physicians and hospitals to file all Medicare claims. After Medicare processes those claims, it forwards them, as required by state law, directly to the appropriate Medicare supplemental insurance company for payment. Most claims are resolved within three to six weeks.

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