When Medicare was created, in July of 1965, it was intended to be managed by the federal government. It was not until the 1990’s and the development of Medicare Advantage plans and other types of Medicare health plans, that it became possible for a Medicare recipient to be covered by health plans that are administered by private organizations. Unless he chooses one of those alternative plans, a Medicare recipient will have Original Medicare, which consists of Medicare Parts A and B. Part A, it will be recalled, covers hospital stays and Part B covers doctor visits and similar out-patient services.
There are certain general rules governing the way in which Original Medicare works. While there will always be some exceptions, the following summarizes the basic guidelines for a patient enrolled under Parts A and B:
- The patient may freely choose health care providers and facilities from among those that are enrolled in Medicare and that are currently accepting Medicare patients.
- Most prescription drugs are NOT covered. Drug coverage can be added by joining a Medicare Prescription Drug Plan under Medicare Part D.
- The patient does not have to choose a primary care doctor
- A referral is typically NOT required to see a specialist, but the specialist must also be enrolled as a Medicare provider.
- Costs that Original Medicare does not cover may be paid by employer or Union coverage or an individually purchased Medicare Supplement Insurance (or “Medigap”) policy, if the patient is eligible. We will discuss these policies later.
- The recipient pays a set amount (a “deductible”) for health care before Medicare pays its share. Once the deductible for a given period is paid, Medicare will pay its share of subsequent covered claims and the patient pays his share (referred to as coinsurance or copayment). There is no annual out-of-pocket payment limit for the patient.
- The patient pays a monthly premium for claims under Part B (doctors and similar healthcare providers,) but not for Part A (hopsitalizations).
- The providers and suppliers are responsible for filing the claims to Medicare, and the patient is not responsible to do so.
The patient is required to pay for certain charges out-of-pocket or through a supplemental insurance plan, Medicaid, or other type of health insurance that works with Medicare. These may include services or supplies that Medicare does not cover, or for which the patient and a health care provider have signed a private contract. Some providers may chose to accept “assignment,” which means that he will only charge the amount that Medicare approves for the service, with only the Medicare deductible and coinsurance to be collected from the patient. This means that the patient will not be responsible for other out-of-pocket costs,
Patients enrolled under Original Medicare get a “Medicare Summary Notice” in the mail every 3 months that lists all the services billed to Medicare. It itemizes Medicare payments and what the patient may still owe to the provider. The Notice is an important document to support a patient’s appeal of a disputed claim. It also notifies the recipient if she is in the Qualified Medicare Beneficiary Program, which means that Medicare providers are not allowed to bill her for Part A and/or Part B deductibles, coinsurance, or copayments.
Medicare Advantage (Part C)
A Medicare beneficiary may choose to get Part A (Hospital Insurance) and Part B (Medical Insurance) coverage through a Medicare Advantage Plan, also known as Medicare Part C. These plans are issued by private companies that agree to follow rules set by Medicare for emergency and urgent care. Some guidelines, such as requirements for referrals to specialists and out of pocket costs, may vary between Medicare Advantage Plans. Patients must be advised of any changes to the plan rules before the start of each enrollment year. The participant has the option, each year, to keep the current plan, choose a different plan, or switch to Original Medicare.
Medicare Advantage plans must cover all the services that Original Medicare covers. Some costs for a patient opting for Part C coverage, such as hospice care and some new Medicare benefits, are still covered by Original Medicare. Extra services, such as dental, hearing, vision, and other programs may be covered by Medicare Advantage plans, and most include Medicare prescription drug coverage under Part D. In addition to their Part B premiums, an additional monthly payment may be required for Part C coverage.
It is important for subscribers to Medicare Advantage plans to note that, while they are always entitled to the rights afforded to all Medicare recipients, their individually selected Advantage plan will have its own rules regarding such things as coverage for services by out-of-network providers for non-emergency services. The plans may also change the provider networks at any time, and the patient needs to be aware as to whether her chosen health care providers are still going to be covered by her plan.
Medicare Advantage plans cannot charge more than Original Medicare for certain services, like chemotherapy, dialysis, and skilled nursing facility care. Unlike Original Medicare, Advantage plans have a yearly limit on a patient’s out-of-pocket costs for medical services. Once this limit is reached, the patient pays nothing for covered services. However, each plan can have a different limit and this limit may change from year to year.
Some Medicare Advantage plans include fitness and wellness benefits. An Advantage plan may charge monthly premiums in addition to the Part B premium (although some plans may pay for part of the monthly Medicare premium), and these may vary significantly. Costs like yearly deductibles and copayments or coinsurance will also differ among plans. These factors should be considered when a patient is deciding whether to enroll in a Medicare Advantage plan and in selecting a plan that is right for her.
Types of Advantage Plans
There are several types of Medicare Advantage plans. Understanding the key differences among them will help in selecting a plan. It must be remembered, however, that there may be significant differences even between plans within a single type. We will now look at some of the main features of the types of plans that are available.
Health Maintenance Organization (HMO)
In an HMO, care and services generally must be obtained from doctors, health care providers, or hospitals that are in the plan’s network (except for some types of emergency care). In some plans, there is an “HMO Point-of-Service” option that will allow going out-of-network for certain services for a higher copayment or coinsurance. Prescription drug coverage is included in most, but not all HMO plans.
The patient must select a primary care doctor. For most specialist services, a referral will be required (except for certain services such as yearly screening mammograms). The patient may be responsible for the full cost of services from out-of-network providers.
Preferred Provider Organization (PPO)
With a PPO, services may be obtained from out-of-network providers, although usually at a higher cost. Prescription drug coverage is included in most, but not all, PPO plans. It is not necessary to select a Primary Care doctor, and, in most cases, no referrals are necessary to see a specialist. Medicare Advantage PPO plans usually offer more benefits than Original Medicare, but at higher premiums.
Private Fee for Service
Private Fee for Service plans also typically have a network, though services may be obtained from in- or out-of-network providers. Out-of-network services are usually provided at a higher cost. For those that do not have a network, the patient may go to any Medicare-approved provider that accepts the plans’ payment terms and agrees to provide the service.
Some PFFS plans offer drug coverage. Otherwise, the patient may join a Medicare Prescription Drug Plan (Part D).
A Primary Care doctor need not be chosen, and a referral is not required to see a specialist.
It is important to confirm that a doctor or other provider will agree to treat the patient under this type of plan and accept its payment, although, as with all Medicare plans, all providers must provide treatment in a medical emergency.
Special Needs Plans
Medicare Special Needs Plans limit membership to people with specific diseases or characteristics. They tailor their benefits, provider choices, and drug formularies to best meet the specific needs of the groups they serve.
Membership in SNPs is limited to people who:
- live in certain institutions (like nursing homes) or who require nursing care at home
- are eligible for both Medicare and Medicaid; or
- have specific chronic or disabling conditions, such as diabetes, End-Stage Renal Disease, HIV/AIDS, chronic heart failure, or dementia.
Except for emergency care, out-of-area urgent care and out-of-area dialysis, only-in-network providers may be used. All Special Needs Plans must provide Medicare prescriptions drug coverage. Generally, a Primary Care doctor must be chosen, and, in most cases, a referral is required to see a specialist (except for certain services such as yearly screening mammograms).
Medical Savings Accounts plans
Medical Savings Accounts are like Health Savings Accounts that everyone (not just Medicare recipients) is eligible for. The patient sets up an MSA account and the plan deposits tax-deductible money into the bank account. This money can be used to pay for health care services during the year.
These are high deductible plans that are typically used to cover services not covered by Medicare. In addition, drug coverage is not included, and must be obtained through a Medicare Prescription Drug Plan (Part D). An MSA is often used in conjunction with (not instead of) Original Medicare or another Advantage Plan.
Joining and Leaving Medicare Advantage Plans
Anyone eligible for Medicare may join an Advantage Plan and plans cannot deny entry to patients based on pre-existing conditions, which the exception of end-stage renal disease (for which there are special rules).
There are, however limitations on the times that a person may join or leave a Medicare Advantage Plan. A person may first join when she becomes eligible for Medicare during her Initial Enrollment Period. A participant with Part A coverage who gets Part B for the first time during the General Enrollment Period can also join a Medicare Advantage Plan at that time.
Between October 15 and December 7, anyone with Medicare can join, switch, or drop a Medicare Advantage plan. If the request is received by December 7, coverage will begin on January 1. Between January 1 and February 14, a member of a Medicare Advantage Plan may leave that plan and switch to Original Medicare and may also join a Medicare Prescription Drug Plan. Coverage will begin the first day of the month after the plan gets the request. However, during that period (January 1-February 14), the enrollee may not
- switch from Original Medicare to a Medicare Advantage Plan
- switch from one Medicare Advantage Plan to another
- switch from one Medicare Prescription Drug Plan to another; or
- join, switch, or drop a Medicare Medical Savings Account Plan.
Prescription drugs under Part C plans
Participants usually get prescription drug coverage (Part D) through their Medicare Advantage Plans. For certain types of plans that can’t or choose not to offer drug coverage, one can join a separate Medicare Prescription Drug Plan. It should be noted, however, that a member of a Medicare Advantage HMO or PPO plan who joins a separate Medicare Prescription Drug Plan will be dis-enrolled from the Medicare Advantage Plan and returned to Original Medicare.
Having Medicare with Other or Supplemental Insurance
Many people eligible for Medicare may have other health insurance coverage from employers, unions or other organizations that might be lost if they join Medicare Advantage Plans. Anyone in such a position should confer with their benefits administrator before joining an Advantage Plan. Examples of such supplemental insurance include the following:
Medicare Supplement Insurance (Medigap)
A Medigap policy can help to pay out-of-pocket costs in Original Medicare, like deductibles and coinsurance. A patient may not use and may not be sold a Medigap policy while she is enrolled in a Medicare Advantage Plan. A patient who has a Medigap policy and then joins a Medicare Advantage Plan is advised to drop the Medigap policy but should bear in mind that she might not be able to get it back.
Medicare cost plans
Medicare cost plans, available only in certain parts of the country, allow members to go out of network to receive Medicare-covered services. Essentially, these plans allow the patient a similar structure to Original Medicare (in terms of deductibles and copays) while allowing them to see an expanded pool of providers.
A patient may join anytime that the plan is accepting new members and can leave at any time and return to Original Medicare. Prescription drugs may be obtained from the Cost Plan or from Medicare Part D.
Programs of All-Inclusive Care for the Elderly (PACE)
PACE is a Medicare and Medicaid program offered in many states that allows people who otherwise need a nursing home-level of care to remain in the community. To qualify, a person must:
o be 55 or older
o live in the service area of a PACE organization
o be certified by the state as needing a nursing home-level of care, and
o be able to live safely in the community with the help of PACE services.
PACE provides coverage for many services, including prescription drugs, doctor or other health care practitioner visits, transportation, home care, hospital visits, and nursing home stays when necessary. Premiums depend on whether the patient is enrolled in Medicaid as well or just Medicare. There is no deductible or copayment for any drug, service, or care approved by PACE.
Medicare and other insurance-who pays for what?
When a patient has other insurance in addition to Medicare, there are rules for which insurance pays first. Medicare will pay first if the participant:
– has retiree insurance from former employment (or spouse’s employment), or
– is 65 or older, has group health plan coverage based on current employment and the employer has fewer than 20 employees; or
– is under 65 and disabled, has group health plan coverage based on her or a family member’s current employment, and the employer has fewer than 100 employees.
Other insurance pays first if the participant:
– is 65 or older, has group health plan coverage based on current employment and the employer has 20 or more employees, or
– is under 65 and disabled, has group health plan coverage based on her or a family member’s current employment, and the employer has 100 or more employees.