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Medicare Advantage: Is it Time for an HMO or PPO in Your Future?

Prescription drug program is causing many senior citizens to look again at managed health plans

Medicare Advantage plans (formally Medicare+Choice) provide senior citizens with options other than original Medicare. Many seniors are taking a closer look at these plans, since many have enhanced their prescription drug coverage benefits. The major advantage is cost, since obtaining health care through one of these plans – like an HMO or PPO – is usually substantially less expensive than original Medicare.

Editor’s Note: Most of this information was provided by the Texas Department of Insurance but has been edited to apply to all states.

Beginning in 2006, Medicare Advantage plan sponsors must offer at least one plan with the Medicare prescription drug benefit. These plans will be called Medicare Advantage with Prescription Drugs (MA-PD). Because you must enroll in a drug plan for one year, if you enroll in an MA-PD you must remain in the plan until the next annual enrollment period.

Original Medicare allows you to go to any doctor, hospital, or health provider that accepts Medicare. Medicare pays its share of a Medicare-approved amount; you (or your Medigap insurance) also pay a share for each service received. Seniors who choose original Medicare are most likely to also choose a basic Medicare drug plan. Most, too, will probably buy Medigap insurance.

Seniors who choose all these options – original Medicare (Parts A and B), Medigap insurance and the basic Medicare prescription drug plan – can quickly see their out-of-pocket cost of health insurance climbing. That is the primary reason many are taking a new look at Medicare Advantage plans.

Medicare Advantage plans are offered by private companies that enter into contracts with the Center for Medicare and Medicaid Services (CMS). The plans have at least the same benefits as Medicare Part A and Part B coverage. And, in 2006, they will have prescription drug coverage at least as good as the basic Medicare Part D plan. Then, too, these plans often offer the benefits of Medigap insurance and additional benefits

To be eligible to join a Medicare Advantage plan, you must live in the plan service area, be enrolled in Medicare Part A and Part B, and not have end-stage renal (kidney) disease.

If you enroll in a Medicare Advantage plan, you are still part of the Medicare program. You continue to pay your Medicare Part B premium.

Medicare then pays a set amount each month to the Medicare Advantage plan to provide your health care. Some Medicare Advantage plans may charge you an additional monthly premium.

Each year, these plans can decide to join or leave Medicare. If your plan leaves Medicare, you may join another Medicare Advantage plan in your area, if there is one, or return to original Medicare.

If you return to original Medicare, you may want to buy a Medicare supplement insurance policy, sometimes called Medigap, to pay some of the expenses that Medicare does not cover.

If you apply within 63 days of the date your Medicare Advantage coverage ends, an insurance company must sell you a Medigap policy regardless of your medical history or pre-existing conditions. This protection is called a "guaranteed issue right." The departing plan will provide you information about this and other rights and options available.

Medicare Advantage options

The Medicare Advantage options available include managed health care plans, such as health maintenance organizations (HMOs) and preferred provider organizations (PPOs); private fee-for-service plans; and medical specialty plans known as Medicare Specialty plans. These options are not available in all areas of the country, however.

Health Maintenance Organizations (HMO)

Members of a Medicare HMO generally must use doctors, hospitals, and health care providers under contract with the HMO. These providers are in the HMO’s "network." Some HMOs have an option called "point of service." The point of service (POS) option allows members to go to doctors and other providers who aren’t in the HMO’s network if they are willing to pay extra. Each HMO member has a primary care physician who provides or oversees all of the member’s health care. Therefore, the primary care physician is often called a "gatekeeper."

With an HMO, you pay in advance for your care through a monthly fee. As a result there are low or no deductibles or co-payments. The idea is to make services easily available, often in a clinic-like setting, and to encourage you to come in soon enough to prevent a minor condition from becoming serious.

Preferred Provider Organizations (PPO)

PPOs are similar to HMOs in that they offer a network of doctors, hospitals, and health care providers under contract with the PPO, but they do not require referrals from the primary care physician to see specialists or out-of-network providers. Some services may require prior approval, however. In addition, members will have to pay more to visit out-of-network providers.

Private fee-for-service plans

Private-fee-for service plans are offered by private insurance companies under contract with Medicare. They differ from managed care plans because they allow you to go to any doctor, hospital, or other provider that agrees to accept the private fee-for-service plan’s terms of payment. You don’t have a primary care physician to oversee your care, so you don’t need a referral to go to a specialist. Although you must live in the plan’s service area to be eligible, you can receive treatment anywhere in the United States, as long as the provider is willing to treat you. As with Medicare HMOs and PPOs, you must have both Medicare Part A and Part B and not have end-stage renal disease to join a plan.

Medicare specialty plans

Medicare specialty plans provide focused health care for persons with specific diseases. To be eligible for a plan, you must have the health conditions covered by the specific plan. In some cases, you may have to change your health care provider, or your provider must be willing to work with the plan. Some plans are for persons in certain long-term care facilities or people eligible for Medicare and Medicaid.

Medicare Advantage service areas

Medicare HMOs and PPOs are primarily available in urban areas. Private fee-for-service plans should be available in many areas of the state, including rural areas where it is less likely that you will find a Medicare HMO. The Medicare Specialty plans are sometimes demonstration plans and, similar to the other Advantage plans, may not continue after one year.

Medicare Advantage plan costs

With Medicare HMOs, PPOs and private fee-for-service plans, you continue paying your Medicare Part B premium, which is usually deducted from your Social Security check.

Most Medicare Advantage plans charge an additional monthly premium. Some Medicare Advantage plans offer more than one plan and may include a plan option without an additional premium. Private fee-for-service plans may also charge an additional premium for extra benefits not covered by original Medicare, such as prescription drug coverage.

You also normally pay a copayment each time you receive medical care. For instance, each time you visit your doctor, you’ll pay a copayment, usually ranging from $5 to $20. The copayment may be higher for services such as an emergency room visit.

With the addition of prescription drugs, there will also usually be a copayment for each prescription.

You may have to pay a deductible before the plan pays any of your health care costs, and you will generally pay coinsurance for the services you receive. Your coinsurance payment will be a percentage of the cost of the services.

It is important to note that a private fee-for-service plan may allow providers to charge you up to 15 percent more than what the plan pays for the services you receive. This cost is in addition to the amount you pay in copayments and coinsurance. If you are considering a private fee-for-service plan, be sure to find out whether the plan allows providers to charge you more than the amount paid by the plan for your health care services.

Key points to consider about Medicare HMOs and PPOs

  ● To control costs, plans negotiate agreements with health care providers to provide all necessary services to their members. These providers make up a plan’s network. Except for emergency treatment or if you are a member of an HMO with a POS option, the HMO will pay only if you go to doctors and providers in its network.

  ● You choose a primary care physician from your HMO’s network of doctors. The physician you choose either delivers or authorizes all of your health care. This means you must have a referral from your primary care physician to see a specialist. The PPO allows you to see a specialist without a referral, but certain services may require prior approval.

  ● HMOs are required to have a network of providers within a specific travel distance for their members. PPOs don’t have those same restrictions. Therefore, if transportation is a problem, find out where the PPO’s preferred providers are located.

  ● You will receive at least the same benefits as Medicare Part A and Part B. Medicare HMOs and PPOs will also pay for preventive care services approved by Medicare. They may also offer additional benefits, such as prescription drug coverage and an annual physical exam.

Key points to consider about private fee-for-service plans

  ● You can go to any doctor or provider you want, including specialists. The provider must agree to accept your private fee-for-service plan’s payment terms, however.

  ● You do not have a primary care physician who oversees your health care, and you do not need a referral to see a specialist. Certain services, however, require prior approval.

  ● You can receive treatment anywhere in the United States, but you must live in the private fee-for-service plan’s service area to join the plan.

  ● You will receive at least the same benefits as Medicare Part A and Part B. Some private fee-for-service plans may offer additional benefits, but you may have to pay extra to get them. You’ll need to check the private fee-for-service plan’s outline of benefits to know which additional services your plan will cover.

Medicare Advantage pros and cons

Medicare Advantage plans have advantages and disadvantages. Consider these carefully before deciding whether a Medicare Advantage plan is right for you, and which type of plan better suits your needs.

Advantages of Medicare HMOs and PPOs

  ● Generally, your out-of-pocket costs maybe less than if you enroll in original Medicare and buy a Medigap policy. Some Medicare HMOs and PPOs don’t charge a premium (in addition to the Medicare Part B premium). Those that do charge a premium usually offer more benefits, and their premiums may still be less than the premium for a Medigap policy.

  ● Medicare HMOs and PPOs may provide more benefits than original Medicare, such as free or low-cost preventive care, prescriptions, and other related services. It’s important to compare the benefits among HMOs and PPOs in your area. Be sure that the benefit is a true benefit and not merely a discount off the full price.

  ● You generally can enroll in an HMO or PPO regardless of your health history, unless you have end-stage renal disease. An HMO cannot drop you if you are diagnosed with end-stage renal disease after you’ve joined the HMO. This option may offer more services, and at lower cost, for persons who are not yet age 65 since this age group is limited to getting only Medicare supplement plan A in Texas.

  ● Copayments generally range from $5 to $20, although they are higher for services such as emergency room care and inpatient care.

  ● You do not need a referral to see specialists in a PPO.

Disadvantages of Medicare HMOs and PPOs

  ● You generally must use only the doctors and providers in your HMO’s network. There are exceptions for emergency care, urgent care while you’re outside your HMO’s service area, or if you have a point of service option.

  ● You may have to select a new primary care physician and specialists if your current doctors are not in the HMO’s network. You also may have to choose a new primary care physician or specialists if any of your doctors leave the HMO.

  ● Your health care must be provided by your primary care physician or authorized by your HMO. This means you cannot go to a specialist without a referral from your primary care physician.

  ● When you are outside the HMO’s service area, the HMO will pay only for emergency care and urgently needed care. This could be a problem if you travel frequently or if you spend much time outside the area. Federal law requires Medicare HMOs to pay for out-of-network emergency and urgently needed care under specific guidelines.

  ● If you permanently leave the service area, the HMO or PPO can drop you as a member.

  ● Medicare and your HMO or PPO negotiate contracts on a yearly basis. Your plan could decide to leave Medicare or change its benefits, premiums, and copayments at the end of each year.

  ● Medicare PPOs allow you to see providers outside of their preferred network, but you will pay more each time you use a non-network provider.

Advantages of private fee-for-service plans

  ● Private fee-for-service plans may offer more benefits than original Medicare. If they do, you’ll generally pay an additional premium. It’s important that you understand the benefits offered and whether there’s an additional cost.

  ● You generally can enroll in a private fee-for-service plan regardless of your health history, unless you have end-stage renal disease.

  ● You can go to any doctor or provider you want if the provider agrees to accept the private fee-for-service plan’s payment terms.

  ● You do not need a referral to see a specialist.

  ● You can receive care anywhere in the United States. This could be important if you travel frequently or spend a considerable amount of time away from home.

Disadvantages of private fee-for-service plans

  ● A private fee-for-service plan may be costly. Private fee-for service plans may charge you a premium in addition to the Part B premium you have to pay to Medicare. The plan also may charge you an additional premium (above the basic premium) for extra benefits such as prescription drug coverage.

  ● Your out-of-pocket expenses may be high. Some plans may allow providers to charge you up to 15 percent more than the amount the plan pays for health care services. You must pay this amount yourself, and it is in addition to your copayment and coinsurance. Make sure you know whether your plan allows providers to bill you more than the amount the plan pays for services.

  ● Although you can choose your own doctors and providers, they must agree to accept the plan’s payment terms. Providers are not required to treat members of a private fee-for-service plan. If your provider will not accept the plan’s payments, you will have to seek care from a provider who does.

  ● Medicare and private fee-for-service plans negotiate contracts on a yearly basis. Your plan could decide to leave Medicare or change its benefits, premiums, and copayments each year.

How to decide if a Medicare Advantage plan is right for you

  ● First, find out if any Medicare Advantage plans are available in your area. You must live in a plan’s service area to join.

  ● If you have other insurance, such as a group retirement plan, Medicaid, or a Medicare Savings program, find out how and if the Medicare Advantage plan coordinates well with what you have.

  ● If you’re thinking about joining a Medicare HMO, consider how you would feel about giving up your current doctors, including specialists, if they are not in the HMO’s network. If you want to keep your doctors, find out if the HMO has a point of service option that allows you to go to providers outside the HMO’s network if you pay extra. You may be able to keep your current doctors in a private fee-for-service plan if they are willing to accept the plan’s payment terms.

  ● If you travel a great deal, make sure you understand how to get health care when you are out of an HMO’s service area or if you need emergency care. With a private fee-for-service plan, you can receive care anywhere in the United States as long as the provider is willing to accept your plan’s payment terms.

  ● Consider other lifestyle and health factors that could affect your choice. For instance, if you have high prescription drug costs, finding a plan with a prescription drug benefit could be important. You should also find out about other options for getting your prescriptions covered.

  ● Compare the costs and benefits of Medicare Advantage plans with your other coverage options. You have several. You can choose original Medicare alone or original Medicare with a Medicare supplement insurance policy. If you or your spouse is still working, you should be able to keep your coverage through the employer. Some employers extend this coverage to retirees as well. Employer-sponsored group coverage is usually your best and least costly option. You also may be able to get coverage through a union or association you belong to. The biggest advantage of maintaining group coverage is that your pre-existing health conditions will be covered. With some of your other options, you may have to wait before the plan will pay for treating your pre-existing conditions.

  ● If you need help comparing a Medicare Advantage plan with original Medicare or other options, call the Health Information, Counseling, and Advocacy Program (HICAP). HICAP provides free one-on-one counseling to seniors about insurance and related issues.

How to select a Medicare Advantage plan

  ● If you have more than one plan to choose from, compare their costs and benefits. Your local HICAP office may have comparison charts or information to help you. If you have access to the Internet, you can view comparison charts with prices, benefits, and copayment amounts for the plans in your ZIP code at Medicare’s web site.

  ● If a prescription benefit is important to you, look at plans that offer prescription coverage. Find out whether there’s an additional premium and whether the medications you take are covered in the "formulary."

  ● If you’re considering an HMO, call the network doctors you are interested in and ask if they are accepting new patients. For a PPO, find out if your doctors are in their network. If you are considering a private fee-for-service plan, ask your doctors if they are willing to accept private fee-for-service patients.

  ● If you’re considering an HMO, ask whether the HMO has conducted physician or member satisfaction surveys and ask to see the results. Medicare has HMO comparison information based on patient satisfaction surveys and health performance measures. The Medicare & You booklet includes the survey results for Medicare HMOs in your area. You can view this information on the Medicare website or you may call the Medicare Hot Line.

  ● Ask the plan how many physicians left the plan during the previous year.

  ● Ask how many members dropped out during the previous year.

  ● Find out how the plan handles complaints or denials of medical services.

  ● Find out about the plan’s customer service record and financial strength. The Texas Department of Insurance (TDI) has information on complaints against HMOs and insurance companies and financial rating information from an independent rating organization. Call TDI’s Consumer Help Line.

  ● Discuss the pros and cons of each plan with friends, relatives, or your doctor. They may have experiences that will help you make a decision.

Getting the most from your Medicare Advantage plan

  ● Read your member booklet. It’s called the evidence of coverage. Make sure you know what services are covered and what out-of-pocket costs you will have to pay. Not all Medicare Advantage plans are offered by insurance companies, and therefore some do not fall under the regulation of TDI. This means that we may not be able to assist you if you have a complaint. You must follow the complaint process of the Medicare Advantage plan you select.

  ● Keep the plan’s telephone numbers handy. Your plan should have customer service representatives who can help you. Call if you have questions. Make sure you understand how the HMO or PPO handles regular appointments and how to see specialists.

  ● Know how your plan covers emergency care. An HMO must pay for emergency care wherever you receive it. You’re the judge of whether you’re having a medical emergency. Notify the HMO as soon as possible if you receive emergency care in a facility outside the HMO’s network. All HMOs cover care outside the service area for life-threatening conditions and other urgently needed treatment. "Urgently needed care" will be defined in your contract. Also find out how the plan handles ambulance charges if the condition was not an emergency.

  ● Know how a private fee-for service plan handles billing. Make sure you know whether the plan allows providers to bill you directly for services.

  ● Request an advance coverage decision from your plan. Medicare Advantage plans must pay for any health care service that Medicare would pay for. This means that if a service is medically necessary under Medicare’s coverage rules, a Medicare Advantage plan must pay for it. You can ask the plan for an advance coverage decision to make sure a service is medically necessary and will be covered. If the plan decides a service is not medically necessary, you have the right to appeal the decision.

  ● Know how to file a complaint. If you are not satisfied with the care you received, first try to resolve the problem with your doctor or with the plan. If you have a question about a particular treatment you did or did not receive, ask your doctor for an explanation. If the plan denied payment for a treatment you received that you believe should be covered, look for statements in your plan’s evidence of coverage booklet that you believe support your position. If you are still not satisfied, contact your plan’s customer service representative and file a complaint. If you feel the plan did not resolve your problem, call the HICAP program for assistance.

  ● Know how to file an appeal. Federal regulations require that Medicare Advantage plans provide an appeal procedure for members. If you are denied medical services, or if a service is stopped, you have the same appeal rights as you do with original Medicare. Read your member booklet for details about the appeal process.

  ● Know how to leave a plan. You may withdraw from a Medicare Advantage plan by notifying the plan or your local Social Security office in writing. If you withdraw from a Medicare Advantage plan, you are automatically re-enrolled in original Medicare. You will be notified in writing that you are officially back on original Medicare without any lapse in your Medicare benefits. You may also choose another Medicare Advantage plan instead of returning to original Medicare, if another plan is available in your area.

  ● If you leave a Medicare Advantage plan and go back to original Medicare, you might want a Medicare supplement policy to cover the gaps that Medicare won’t cover. You may not be able to obtain the Medicare supplement policy you want, however, particularly if you have health problems. Some insurance companies sell Medicare supplement policies on a "guaranteed issue" basis. This means they will sell you a policy even if you have health problems.

  ● Know what to do if your plan ends its Medicare contract. Your plan must give you notice if it plans to leave Medicare. If your plan leaves Medicare and you return to original Medicare, you have the right to buy Medicare supplement insurance regardless of your health. You must buy a policy within 63 days of the date your plan’s coverage ends, however. Your Medicare Advantage plan and Medicare will inform you of your options. Be sure to keep your final notification letter from the Medicare Advantage plan as proof that you are entitled to buy a Medicare supplement policy despite any health problems you might have.

Getting more help with the decision

The National Committee for Quality Assurance is an independent health-care monitoring organization that accredits HMOs and PPOs, and issues annual report cards for managed care plans. To learn more about a plan, call the NCQA or visit its website, where you can search plans by zip code and see their rating in several criteria.

1-888-275-7585
www.ncqa.org

To read the original report by the Texas Department of Insurance – Click for complete report.

• Go to our main page on "About Medicare Drug Program" - click here

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