When you are eligible for Medicare, you have a different range of health insurance choices than other consumers have. In this chapter, which draws heavily on Federal government publications, we describe your Medicare benefits, identify gaps in your Medicare coverage, and give tips on choosing private health insurance to fill those gaps.

Various potential health care costs are not covered by Medicare. For example, you are responsible to pay a “deductible” amount before Medicare pays anything for a hospital stay, and Medicare does not pay at all for most prescription drugs.

If you have a serious disease or illness requiring extensive medical services, just covering the gaps in Medicare out of your own pocket can be financially ruinous. So many consumers rely on private insurance to cover some of the potential costs. There are several ways of extending your own coverage to fill in some of Medicare’s gaps:

·         Purchase Medicare supplemental insurance, also called “Medigap” or “MedSup” insurance. This can be traditional fee-for-service coverage, which provides the same level of coverage regardless of which doctors and other health care providers you use to deliver covered services. Or it can be a “SELECT” plan, which will cover a larger portion of your bill if you use the plan’s pre-selected network of providers. If you have a Medigap policy, Medicare makes its usual payment for services and the Medigap plan pays all or part of what Medicare doesn’t pay.

·         Enroll in a managed care plan—a health maintenance organization (HMO), provider-sponsored organization (PSO), or preferred provider organization (PPO)—that has a contract to serve Medicare beneficiaries. With an HMO or PSO, your care may be covered only if you use providers in the plan’s network; most specialist, laboratory, hospital, and other services are covered only if you are referred to them by your primary care doctor. Some HMO and PSO plans may have a point-of-service (POS) option, which allows you to use non-network providers if you are willing to pay higher out-of-pocket costs. With a PPO, you can use any provider without a referral, but you will have lower copayments or deductibles if you use a provider in the plan’s network. (As of this writing, there were only two Medicare PPO plans, each serving only a limited geographic area.)

·         Continue coverage under an employer-provided health insurance policy, if your pre-retirement employer offers one. Fewer and fewer employers offer such coverage to retirees. Those that do may offer fee-for-service options and various options that encourage or require you to use providers within an established network.

·         Select one of the options authorized under 1997 revisions to Medicare. The revisions opened the market for fee-for-service plans. As of this writing, this option is available in limited areas of the U.S.

In addition to the information provided in this article on your options under Medicare, you can get information and advice from various senior citizen advocacy organizations and government agencies. All states now offer insurance counseling, at no charge to you, in one-on-one confidential sessions with trained counselors. In these sessions, you will be able to talk about insurance issues that you find confusing and get advice on your insurance needs. Telephone numbers and web addresses for the insurance counseling services in your area are listed in Appendix B.

The Centers for Medicare and Medicaid Services (CMS), the Federal agency that administers the Medicare program, has many publications and an increasingly useful website (www.medicare.gov) that will help you understand your Medicare options. A good starting point is the CMS publication, Medicare & You 2002, which is available from local Social Security offices or can be downloaded from the www.medicare.gov website.

Medicare Coverage and Gaps

Before considering Medigap coverage and the other types of private insurance available to supplement Medicare, it is helpful to review your Medicare benefits and identify the coverage gaps.

Medicare is a Federal health insurance program for persons 65 or older, persons of any age with permanent kidney failure, and certain disabled persons under 65. (In this article, we focus on the 65-and-over group; if you are in one of the other eligible categories, be sure to get advice from the Medicare insurance counseling service in your state.) CMS, which administers Medicare, is part of the U. S. Department of Health and Human Services (HHS). The Social Security Administration provides information about the program and handles enrollment.

Medicare has two parts—Hospital Insurance (Part A) and Medical Insurance (Part B). Part A is financed through part of the Social Security (FICA) tax paid by workers and their employers. You do not have to pay a monthly premium for Medicare Part A if you or your spouse is entitled to benefits under either the Social Security or Railroad Retirement systems or worked a sufficient period of time in Federal, state, or local government employment to be insured.

If you do not qualify for premium-free Part A benefits, you may purchase the coverage (for $319 per month in 2002, in most cases) if you are at least age 65 and meet certain requirements. Check with any Social Security office for details.

Part B is optional and is offered to all beneficiaries when they become entitled to Part A. It also may be purchased by most persons age 65 or over who do not qualify for premium-free Part A coverage. The Part B premium, which most Medicare beneficiaries have deducted from their monthly Social Security check, is $54 per month in 2002.

You are automatically enrolled in Part B when you become entitled to Part A unless you state that you don’t want it. Although you do not have to purchase Part B, it is a good buy because the Federal government pays about 75 percent of the program costs. The Part B premium may be higher than $54 per month if you don’t sign up for Part B when you first become eligible, unless you continue coverage in an employment-related health insurance plan after you become Medicare-eligible; the premium goes up 10 percent per year for each year you defer signing up.

Your Medicare card will show whether you have Hospital Insurance (Part A), Medical Insurance (Part B), or both, and the date your coverage started. If you have only one part of Medicare, you can get information about getting the other part from any Social Security office.

Medicare Hospital Insurance Benefits (Part A)

Medicare Part A helps pay for medically necessary inpatient care in a hospital, skilled nursing facility, or psychiatric hospital; for hospice care; for medically necessary home health care; and for wheelchairs, hospital beds, and other durable medical equipment supplied under the home health care benefit.

Medicare Part A hospital and skilled nursing facility benefits are paid on the basis of “benefit periods.” A benefit period begins the first day you receive a Medicare-covered service in a qualified hospital. It ends when you have been out of a hospital or skilled nursing or rehabilitation facility for 60 days in a row. It also ends if you remain in a skilled nursing facility but do not receive any skilled care there for 60 days in a row.

If you enter a hospital again after 60 days, a new benefit period begins. With each new benefit period, all Part A hospital and skilled nursing facility benefits are renewed except for any “lifetime reserve days” or psychiatric hospital benefits that were used. There is no limit to the number of benefit periods you can have for hospital or skilled nursing facility care.

Inpatient Hospital Care

If you are hospitalized, as nearly 20 percent of Medicare beneficiaries are each year, Medicare will pay all charges for covered hospital services during the first 60 days of a benefit period except for the deductible. The Part A deductible in 2002 is $812 per benefit period. You are responsible for the deductible. In addition to the deductible, you are responsible for a share of the daily costs if your hospital stay lasts more than 60 days. For the 61st through the 90th day, Part A pays for all covered services except for coinsurance of $203 per day in 2002. You are responsible for the coinsurance.

Under Part A, you also have a lifetime reserve of 60 days for inpatient hospital care. These lifetime reserve days may be used whenever you are in the hospital for more than 90 consecutive days. When a reserve day is used, Part A pays for all covered services except for coinsurance of $406 in 2002. Again, the coinsurance is your responsibility. Once used, reserve days are not renewed.

Part A does not pay for—

·         The first three pints of whole blood or units of packed cells used in each year. (To the extent the three-pint blood deductible is met under Part B, it does not have to be met under Part A.)

·         A private hospital room, unless medically necessary, or a private duty nurse.

·         Personal convenience items, such as a telephone or television in a hospital room.

·         Care that is not medically necessary or for nonemergency care in a hospital not certified by Medicare.

·         Care received outside the U.S. and its territories, except under limited circumstances in Canada and Mexico.

Skilled Nursing Facility Care

A skilled nursing facility (SNF) is a special kind of facility that primarily furnishes skilled nursing and rehabilitation services. It may be a separate facility or a distinct part of another facility, such as a hospital. Medicare benefits are payable only if you require daily skilled care that, as a practical matter, can only be provided in a skilled nursing facility on an inpatient basis, and the care is provided in a facility certified by Medicare. Medicare will not pay for your stay if the services you receive are primarily personal care or custodial services, such as assistance in walking, getting in and out of bed, eating, dressing, bathing, and taking medicine.

To qualify for Medicare coverage for skilled nursing facility care, you must have been in a hospital at least three consecutive days (not counting the day of discharge) before entering a skilled nursing facility. You must be admitted to the facility for the same condition for which you were treated in the hospital and the admission generally must be within 30 days of your discharge from the hospital. Your physician must certify that you need, and receive, skilled nursing or skilled rehabilitation services on a daily basis.

Medicare can help pay for up to 100 days of skilled care in a skilled nursing facility during a benefit period. All covered services for the first 20 days of care are fully paid by Medicare. All covered services for the next 80 days are paid by Medicare except for a daily coinsurance amount. The daily coinsurance amount in 2002 is $101.50. You are responsible for the coinsurance. If you require more than 100 days of care in a benefit period, you are responsible for all charges beginning with the 101st day.

Home Health Care

Medicare fully covers medically necessary home health visits if you are homebound, including part-time or intermittent skilled nursing services. A Medicare-certified home health agency can also furnish the services of physical and speech therapists. If you require speech-language pathology, physical therapy, continuing occupational therapy, or intermittent skilled nursing services, and if you are confined to your home and are under the care of a physician, Medicare can also pay for medical supplies, necessary part-time or intermittent home health aide services, occupational therapy, and medical social services. Coverage is also provided for a portion of the cost of wheelchairs, hospital beds, and other durable medical equipment provided under a plan-of-care set up and periodically reviewed by a physician. To qualify for Part A home health care coverage, you must have been released within the previous 14 days from a hospital where you stayed for at least three days or from a nursing home in which you were getting post-hospital care after a three-day or longer hospital stay.

Part A does not pay for—

·         Full-time nursing care.

·         Drugs.

·         Meals delivered to your home.

·         Twenty percent of the Medicare-approved amount for durable medical equipment, plus charges in excess of the approved amount on claims that are not “assigned” 

·         Homemaker services that are primarily to assist you in meeting personal care or housekeeping needs.

Hospice Care

Medicare beneficiaries certified as terminally ill may choose to receive hospice care rather than regular Medicare benefits for their terminal illness. If you enroll in a Medicare-certified hospice program, you will receive medical and support services necessary for symptom management and pain relief. When these services—which are most often provided in your home—are furnished by a Medicare-certified hospice program, the coverage includes physician services, nursing care, medical appliances and supplies (including drugs for symptom management and pain relief), short-term inpatient care, counseling, therapies, home health aide, and homemaker services.

You do not have to pay Medicare’s deductibles and coinsurance for services and supplies furnished under the hospice benefit. You must pay only limited charges for outpatient drugs—up to $5 per prescription—and inpatient respite care (short-term care given to a hospice patient by another caregiver so that the usual caregiver can rest)—up to five percent of the Medicare-approved amount. In the event you require medical services for a condition unrelated to the terminal illness, regular Medicare benefits are available. When regular benefits are used, you are responsible for the applicable Medicare deductible and coinsurance amounts.

Psychiatric Hospital Care

Part A helps pay for up to 190 days of inpatient care in a Medicare-

participating psychiatric hospital in your lifetime. Once you have used 190 days (or have used fewer than 190 days but have exhausted your inpatient hospital coverage), Part A doesn’t pay for any more inpatient care in a psychiatric hospital. However, psychiatric care in general hospitals, rather than in freestanding psychiatric hospitals, is not subject to this 190-day limit. Inpatient psychiatric care in a general hospital is treated the same as other Medicare inpatient hospital care. If you are a patient in a psychiatric hospital on the first day of your entitlement to Medicare, there are additional limitations on the number of hospital days that Medicare will pay for.

Medicare Medical Insurance Benefits (Part B)

Part B helps pay for medically necessary physician services no matter where you receive them—at home, in the doctor’s office, in a clinic, in a nursing home, or in a hospital. It also covers related medical services and supplies, medically necessary outpatient hospital services, X-rays, and laboratory tests. Coverage is also provided for certain ambulance services and the use at home of durable medical equipment, such as wheelchairs and hospital beds.

In addition, Part B covers you for medically necessary physical therapy, occupational therapy, and speech-language pathology services in a doctor’s office, as an outpatient, or in your home. Various preventive and screening services are covered, including mammograms, Pap smears, colorectal cancer screening, diabetes monitoring, bone mass measurements, and flu, pneumococcal, and hepatitis B shots. Mental health services are covered. And if you qualify for home health care but do not have Part A, then Part B pays for all covered home health visits.

Outpatient prescription drugs generally are not covered by Part B. The exceptions include certain drugs furnished to hospice enrollees, non-self-administrable drugs provided as part of a physician’s services, and special drugs, such as drugs furnished during the first year after an organ transplantation, crythropoctin for home dialysis patients, and certain oral cancer drugs.

When you use your Part B benefits, you will be required to pay the first $100 (the annual deductible) each calendar year before Medicare begins to pay for most covered services. The deductible must represent charges for services and supplies covered by Medicare. It also must be based on Medicare-approved amounts, not the actual charges billed by your physician or medical supplier.

After you meet the deductible, Part B generally pays 80 percent of the Medicare-approved amount for covered services you receive the rest of the year. You are responsible for the other 20 percent. But the rules vary depending on the service. For example, if you require home health services, you do not have to pay a deductible or coinsurance for the services, and you pay nothing for clinical laboratory services; on the other hand, you have to pay 50 percent of the approved amount for outpatient mental health services. The table on the next page summarizes Part B benefits.

You may also have other out-of-pocket costs under Part B if your physician or medical supplier does not accept “assignment” of your Medicare claim and charges more than Medicare’s approved amount. The amount in excess of the approved amount is called the “excess charge” or “balance billing” and you are responsible for paying it. You should be aware, however, that there are certain charge limitations mandated by Federal law.

Medicare-Approved Amount

The Medicare-approved amount for physician services covered by 

Part B is based on a national fee schedule. The schedule assigns a dollar value to each physician service based on work, practice costs, and malpractice insurance costs. Under this payment system, each time you go to a physician for a service covered by Medicare, the amount Medicare will recognize for that service will be taken from the national fee schedule. Medicare generally pays 80 percent of that amount.

Because you can’t tell in advance whether the approved amount and the actual charge for covered services and supplies will be the same, always ask your physicians and medical suppliers whether they accept “assignment” of Medicare claims.

Accepting Assignment

Those who take “assignment” on a Medicare claim agree to accept the Medicare-approved amount as payment in full. They are paid directly by Medicare, except for the deductible and coinsurance amounts that you must pay.

For example, for your first annual visit, if your physician accepts assignment, and the Medicare-approved amount for the service you receive is $200, you will be billed $120: $100 for the annual deductible plus 20 percent of the remaining $100, or $20. Medicare will pay the other $80. Having met the deductible for the year, the next time you use Part B services furnished by a physician or medical supplier who accepts assignment, you will be responsible for only 20 percent of the Medicare-approved amount.

Physicians and suppliers who sign Medicare “participation” agreements accept assignment on all Medicare claims. Their names and addresses are listed in the “Medicare Participating Physician/Supplier Directory,” which is distributed to senior citizen organizations and should be available in all Social Security and Railroad Retirement Board offices, hospitals, and all state and area offices of the Administration on Aging. You can find a Medicare participating physician directory online at www.medicare.gov.

Even if your physician or supplier does not participate in Medicare, ask before receiving any services or supplies whether he or she will accept assignment of your Medicare claim. Many physicians and suppliers accept assignment on a case-by-case basis. If your physician or supplier will not accept assignment, you are responsible for paying all permissible charges. Medicare will then reimburse you its share of the approved amount for the services or supplies you received. Regardless of whether your physicians or other providers accept assignment, they are required to file your Medicare claim for you.

In certain situations, nonparticipating providers of services are required by law to accept assignment. For instance, all physicians and qualified laboratories must accept assignment for Medicare-covered clinical diagnostic laboratory tests. Physicians also must accept assignment for covered services provided to beneficiaries with incomes low enough to qualify for payment of their Medicare cost-sharing requirements through the Medicaid program.

Physician Charge Limits If a Physician Does Not Accept Assignment

While physicians who do not accept assignment of a Medicare claim can charge more than physicians who do, there is a limit on the amount they can charge you for services covered by Medicare. Under law, they are not permitted to charge more than 115 percent of the Medicare-approved amount for the service. Physicians who knowingly, willfully, and repeatedly charge more than the legal limit are subject to sanctions. If you think you have been overcharged, or you want to know what the limiting charge is for a particular service, contact the Medicare “carrier” for your area. You can find the name of the carrier by calling 1-800-633-4227 or checking www.medicare.gov. Limiting charge information also appears on the “Explanation of Medicare Benefits” form that you generally receive from the Medicare carrier when you go to a physician for a Medicare-covered service. You do not have to pay charges that exceed the legal limit.

If you think your physician has exceeded the charge limit, you should contact the physician and ask for a reduction in the charge, or a refund if you have paid more than the charge limit. If you cannot resolve the issue with the physician, you can call your Medicare carrier and ask for assistance.

More Charge Limits

Another Federal law requires physicians who do not accept assignment for elective surgery to give you a written estimate of your costs before the surgery if the total charge will be $500 or more. If the physician did not give you a written estimate, you are entitled to a refund of any amount you paid in excess of the Medicare-approved amount. Any nonparticipating physician who provides you with services that he or she knows or has reason to believe Medicare will determine to be medically unnecessary and thus will not pay for is required to so notify you in writing before performing the service. If written notice is not given, and you did not know that Medicare would not pay, you cannot be held liable to pay for that service. However, if you did receive written notice and signed an agreement to pay for the service, you will be held liable to pay.

More Doctors Taking Assignment

Until the last few years, “balance-billing” was a big problem for consumers. Many physicians did not take assignment and patients were left to pay a substantial portion of doctors’ bills, since the bills were often substantially higher than the Medicare-approved payment. But balance-billing is less of a problem today. Because the difference between the Medicare-approved fee and what the physician can bill you is now limited to 15 percent, the amounts at stake are smaller than they once were. Also, more and more physicians are accepting assignment because the financial benefit to them of balance-billing is small. Under a special provision designed to encourage providers to take assignment, Medicare pays nonparticipating doctors only 95 percent of the Medicare fee schedule. Since the doctors can only balance-bill you for an amount equal to 15 percent of the Medicare-approved fee, the net effect is that the most a doctor can gain by balance-billing is less than 10 percent above what he or she would get by accepting assignment. The result has been that today more than 90 percent of approved charges are taken on assignment.

Other Gaps in Medicare Coverage for Doctors and Medical Suppliers (Part B)

In addition to the $100 annual deductible, your requirement to pay 20 percent coinsurance, and legally permissible charges in excess of the Medicare-approved amount for unassigned claims, there are other items that Medicare doesn’t pay for—

·         50 percent of approved charges for most outpatient mental health treatment.

·         Most services that are not reasonable and necessary for the diagnosis or treatment of an illness or injury.

·         Most self-administrable prescription drugs or immunizations, except for pneumococcal, influenza, and hepatitis B vaccinations.

·         Routine physicals and other screening services—except for mammograms, Pap smears, colorectal screening, diabetes monitoring, prostate cancer screening, glaucoma screening, and bone mass measurements at Medicare-approved intervals for beneficiaries who fall into categories Medicare has defined as eligible for these services.

·         Dental care or dentures.

·         Acupuncture treatment.

·         Hearing aids or routine hearing loss examinations.

·         Care received outside the United States and its territories, except under limited circumstances in Canada and Mexico.

·         Routine foot care except when a medical condition affecting the lower limbs (such as diabetes) requires care by a medical professional.

·         Services of naturopaths, Christian Science practitioners, or immediate relatives, or charges imposed by members of your household.

·         The first three pints of whole blood or units of packed cells used in each year in connection with covered services. (To the extent the three-pint blood deductible is met under Part A, it does not have to be met under Part B.)

·         Routine eye examinations or eyeglasses, except prosthetic lenses, if needed, after cataract surgery.

To see a summary of Part B benefits, click here.

Types of Private Health Insurance

Several types of private health insurance arrangements are available to help consumers pay for services not covered by Medicare. You need to determine which type or types are available to you and meet your needs. We will discuss a number of options in the sections that follow. We do not recommend, and will not discuss here, the following two other options—

·         Hospital indemnity plans, which pay specified cash amounts for inpatient hospital services. It is difficult for you to be sure that these amounts have kept up with current hospital charges or that they fit with Medicare benefits.

·         Specified disease policies, which pay only when you need treatment for the insured disease. You can’t anticipate the diseases that you might experience.

Another type of policy—a nursing home or long-term care policy—might make sense for you but is beyond the scope of this article.

Medigap Policies

Medigap insurance is regulated by Federal and state law and must be clearly identified as Medicare supplemental insurance. Unlike other types of health insurance, it is designed specifically to supplement Medicare’s benefits by filling in some of the gaps in Medicare coverage.

To make it easier for consumers to comparison shop for Medigap insurance, nearly all states have adopted regulations that limit the number of different Medigap policies that can be sold to no more than 10 standard benefit plans, which have letter designations ranging from “A” through “J.” For descriptions and comparisons of the 10 plans, click here. Medigap insurers are also allowed to offer a high-deductible ($1,500) version of plans F and J.

Plan A of the 10 standard Medigap plans is the “basic” benefit package. Each of the other nine plans (B through J) includes the basic package plus a different combination of additional benefits. The plans cover specific expenses either not covered or not fully covered by Medicare. Insurers are not permitted to change the combination of benefits in any of the plans or to change the letter designations.

Each state must allow the sale of Plan A, and all Medigap insurers must make Plan A available. Insurers are not required to offer any of the other nine plans, but most offer several plans, and some offer all 10. Insurers can independently decide which of the nine optional plans they will sell as long as the plans they select have been approved for sale in the state in which they are to be offered.

To make it easier for consumers to compare plans and premiums, the same format, language, and definitions must be used in describing the benefits of each of the plans. A uniform chart and outline of coverage also must be used by the insurer to summarize those benefits for you.

As you shop for a Medigap policy, keep in mind that, for the same policy type, all companies coverages are alike, so they are competing on price, service, and reliability. Compare premiums and be satisfied that the insurer is reputable before buying.

Medigap policies pay most, if not all, Medicare coinsurance amounts and may provide coverage for Medicare’s deductibles. Some of the 10 standard plans pay for services not covered by Medicare and some pay for charges in excess of Medicare’s approved amount. Three cover half the cost of prescription drugs after a $250 deductible and up to $1,250 per year or $3,000 per year, depending on the plan. Look for the plan that best meets your needs. The plan features are summarized on page 74 and in the table on page 75.

Unlike some types of health coverage that restrict where and from whom you can receive care, Medigap policies are “fee-for-service” plans; they generally pay the same supplemental benefits regardless of your choice of health care provider. If Medicare pays for a service, wherever provided, the standard Medigap policy must pay its regular share of benefits. The only exception is Medicare SELECT insurance, discussed below.

How Your Health Condition and the Timing of Your Sign-up Affect the Medigap Coverage You Can Get

Medigap insurers are allowed to limit your coverage for “preexisting conditions.” Preexisting conditions are generally health problems you went to see a physician about within the six months before the policy went into effect. Don’t be misled by the phrase “no medical examination required”; you may still be required to report any preexisting conditions. If you have had a health problem, the insurer might not cover you immediately for expenses connected with that problem. Medigap policies, however, are required to cover preexisting conditions after the policy has been in effect for six months. Also, if you switch into a Medigap plan from another plan, the new plan can’t impose a preexisting conditions waiting period for benefits covered under the previous plan beyond a six-month period counting from the time the benefits were first covered under the previous plan.

Preexisting exclusion provisions are not the only concern. Medigap insurers can also refuse to issue you a policy altogether if they are concerned about possible health conditions. But there are several important limits on their right to refuse you. The broadest guarantee you have of being able to get a Medigap policy is a provision requiring all Medigap insurers in your state to accept you into any of the plan types they offer if you are 65 or older and sign up within a period of six months from the date you first enrolled in Medicare Part B.

Many individuals are enrolled automatically in Part B as soon as they turn 65, or they sign up during an initial seven-month enrollment period that begins three months before they turn 65. If you are in this group, your Part B coverage generally starts in the month you turn 65 or shortly thereafter, depending on when you applied for Part B.

Others may delay their enrollment in Part B. For example, if after turning 65, you continue to work and choose to be continuously covered by an employer insurance plan, or if you are continuously covered under a spouse’s employment-related insurance instead of Medicare Part B, you will have a special seven-month enrollment period for Part B. It begins with the month your or your spouse’s work ends or when you are no longer covered under the employer plan, whichever comes first. Your six-month Medigap open enrollment period starts when your Part B coverage begins.

If you are covered under an employer group health plan when you become eligible for Part B at age 65, carefully consider your options. Once you enroll in Part B, the six-month Medigap open enrollment period starts and cannot be extended or repeated.

If you are 65 or older and are eligible for Part B and never signed up for it, you may buy Part B during Medicare’s annual general enrollment period. It runs from January 1 through March 31. If you sign up during the annual Part B enrollment period, both your Part B coverage and Medigap open enrollment period begin the following July 1.

Your Medicare card shows the effective dates for your Part A and/or Part B coverage. To figure whether you are in your Medigap open enrollment period, add six months to the effective date of your Part B coverage. If the date is in the future and you are at least 65, you are eligible for open enrollment. If the date is in the past, you are not eligible.

There are certain other circumstances in which Medigap insurers are required to accept you:

·         All Medigap insurers are required by law to accept you into any of the plan types they offer if you enrolled in a managed care plan, Medicare private fee-for-service plan, or Medical Savings Account plan when you first became eligible at age 65 and disenrolled from that plan within one year.

·         All Medigap insurers are required by law to accept you in any of plan types A, B, C, or F that they offer if—

Ø      Your employer terminated a Medicare supplemental plan that covered you.

Ø      You lost coverage under a managed care plan, Medicare private fee-for-service plan, or Medical Savings Account plan because the plan was terminated, you moved out of the plan’s service area, or you disenrolled because the plan failed to meet contract provisions

Ø      Your previous Medigap insurer became insolvent, violated coverage provisions, or misrepresented its policy’s provisions.

·         Your previous Medigap insurer is required to take you back into a policy of the same coverage type you last had with it if (1) you left it to enroll in a managed care plan, Medicare private fee-for-service plan, Medical Savings Account plan, or Medicare SELECT plan; (2) you had not previously been enrolled in such a plan; and (3) you then disenrolled from the new plan within one year.

If a Medigap insurer is required to insure you under these rules, the insurer can’t deny or condition the issuance or effectiveness, or discriminate in the pricing, of a policy because of your medical history, health status, or claims experience. The company can, however, impose the same preexisting conditions restrictions that it applies to other Medigap policies, and you will have to enroll in the Medigap plan within 63 days of the time your other coverage terminates.

Although Medigap companies are not required to accept you unless you fall into the categories we’ve described, in many parts of the country at least a few companies offer “guaranteed-issue” policies. These policies are available to any consumer, regardless of health condition. They may impose preexisting conditions limits, however.

Among companies that are not guaranteed-issue, some turn down applicants for very minor medical problems, but others are more flexible. Try several companies. The fact that one turns you down doesn’t mean another won’t accept you.

Once you have been accepted for a Medigap policy, the company is required by law to renew your policy unless you choose to cancel or stop paying premiums. Although Medigap insurers must renew their policies, they can raise their premiums—so long as they treat all policyholders similarly—and higher premiums could make a policy unattractive or unaffordable for you.

Keep in mind that the rights to enroll and renew and the limits on preexisting conditions exclusions we’ve discussed here apply only to Medigap policies issued after Federal requirements went into effect in 1992 (Plans A through J). A policy you get through your employer or that you signed up for before age 65 or before 1992 might not have these protections.

Older Medigap Policies

Current Federal requirements generally do not apply to Medigap policies in force before 1992. You don’t have to switch to one of the 10 standard plans if you have an older policy that is guaranteed renewable. But you may want to consider switching to a standardized Medigap plan if its premiums, benefits, or services are superior and the insurer is willing to accept you.

If you do switch, you will not be allowed to go back to the old policy. Before switching, compare benefits and premiums, and determine if there are waiting periods for any of the benefits in the new policy. Some of the older policies may provide superior coverage, especially for prescription drugs and extended skilled nursing care.

If you had the old Medigap policy at least six months and you decide to switch, the new policy is not permitted to impose a waiting period for a preexisting condition if you satisfied a waiting period for a similar benefit under your old policy. If, however, a benefit is included in the new policy that was not in the old policy, a waiting period of up to six months may be applied to that particular benefit.

An important point: if you have a pre-1992 policy, it might not include a guaranteed right to renew. By switching to a Medigap policy—if you can get one—you get that right for the future.

Medicare SELECT

You may want to consider a Medicare SELECT policy. Medicare SELECT policies, which may be offered by insurance companies and HMOs, are the same as standard Medigap insurance in nearly all respects. If you buy a Medicare SELECT policy, you are buying one of the 10 standard Medigap plans.

The only difference between Medicare SELECT and standard Medigap insurance is that Medicare SELECT policies will pay or provide full supplemental benefits only if covered services are obtained through specified health care professionals and facilities. Medicare SELECT policies can be expected to have lower premiums because of this limitation. The specified health care professionals and facilities, called “preferred providers,” are selected by the insurance company or HMO. Each issuer of a Medicare SELECT policy makes arrangements with its own network of preferred providers.

If you have a Medicare SELECT policy, each time you receive covered services from a preferred provider, Medicare will pay its share of the approved charges and the insurer will pay or provide the full supplemental benefits provided for in the policy. Medicare SELECT insurers also must pay supplemental benefits for emergency health care furnished by providers outside the preferred provider network. In general, Medicare SELECT policies deny payment or pay less than the full benefit if you go outside the network for nonemergency services. Medicare, however, will still pay its share of approved charges if the services you receive outside the network are services covered by Medicare.

Managed Care Plans That Contract with Medicare

An alternative to purchasing a Medigap policy is enrolling in a managed care plan that participates in what Medicare calls the 

“Medicare + Choice” program. The managed care plan might be—

·         An HMO;

·         A provider-sponsored organization (PSO), which is much like an HMO except that it is organized around an affiliation of a hospital or hospitals and a group of doctors and other providers; or

·         A preferred provider organization (PPO).

Of these three types, currently only HMOs are available in most parts of the country, but the others might become more broadly available in the future.

About 15 percent of all Medicare beneficiaries have enrolled in managed care plans. As of 2002, about 60 percent of beneficiaries had access to at least one Medicare managed care plan serving their geographic area.

Medicare makes a monthly payment to each managed care plan to cover Medicare’s share of the cost of the services you receive. While you are in one of these plans, you have no Medicare coverage other than coverage through the plan; if the plan doesn’t cover a service or expense, you are on your own.

Many Medicare HMO plans charge enrollees a monthly premium, but as of 2002, about 30 percent of beneficiaries had access to a plan that charged no premium. (You do still have to pay your Medicare Part B premium.) Most plans require enrollees to share in the costs of covered services by paying deductibles, coinsurance, or copayments (for instance, $10 per office visit) as services are used. Studies indicate that this cost-sharing costs enrollees an average of about $27 per month in addition to any premium charges. Plans that don’t charge premiums tend to have higher cost-sharing requirements.

A managed care plan must arrange to provide you all Part A and Part B services (if you are covered by both parts of Medicare). And the cost to you of these plans’ copayments or other charges for these services must not exceed the cost of the copayments and deductibles for these services under traditional Medicare.

Medicare HMO plans provide some types of coverage that you might otherwise have to pay for out-of-pocket (or through a Medigap plan). For example, many of these HMOs provide coverage for prescription drugs, extra hospital days, routine physical exams, and hearing aids.

You can find out which, if any, Medicare managed care plans are available to you by calling Medicare at 1-800-633-4227 or by using the Medicare Health Plan Compare feature at www.medicare.gov. You can get details on the plans from the plans themselves or from Medicare Health Plan Compare.

Enrollment in a Medicare HMO can be a very good deal for many consumers. For zero premium or a relatively small premium in most HMOs, you can get coverage at least as full as you’d get with the Medigap “F” plan, which costs most policyholders a premium of more than $1,200 per year. For a couple, that means you might save more than $2,400 per year by being in an HMO.

If you enroll in an HMO, you will generally be covered only for services you receive through the HMO’s network of providers and only for services given by your primary care doctor or given based on a referral by your primary care doctor. There are limited exceptions to these rules—

·         Plans must pay for emergency services from non-participating providers if you get care in what a “prudent” person with an average knowledge of medical care would reasonably believe to be an emergency. The care is covered until the treating physician determines that you are stabilized for discharge or transfer.

·         Plans must pay for non-emergency “urgent” care if you need out-of-area care for an unforeseen illness, injury, or condition and it is not feasible to get services from the plan, if you travel outside the plan’s service area and need kidney dialysis, or if you need post-stabilization care after an out-of-area emergency.

·         Plans can’t require a primary care doctor’s referral for a woman who wants to go directly to a network doctor for routine or preventive women’s health care services.

·         Plans must have procedures to identify enrollees with complex or grave medical conditions and to set up treatment plans for these enrollees with an appropriate number of covered visits to specialists without the need for a referral before each visit.

Some HMO plans may offer a “point of service” (POS) provision. With a POS HMO plan, you will be able to go to providers outside the plan’s network, or to in-network providers without a referral, and still have the plan pay a portion of the bill. But if you go out of network, you will probably have higher out-of-pocket costs than if you stay within the plan. You will probably have to pay deductibles and coinsurance amounts—say, 20 percent of the non-network provider’s bill. But even if you go out of network in a POS plan, the plan will be required to put a cap on out-of-pocket costs, and non-network providers will not be allowed to bill for more than the fee that would be allowed under the traditional Medicare program.

PPO plans give members even more flexibility than a POS HMO plan. In a PPO, you are able to self-refer for any covered service. You are able to use any provider of your choice, but if you use a non-network provider, you can expect to pay a higher deductible amount and higher coinsurance amounts than if you stay within the plan’s provider network. As of this writing, Medicare managed care PPO plans are available only in parts of Pennsylvania and Ohio.

You are eligible to enroll in a Medicare managed care plan if you live in the plan’s service area, are enrolled in Medicare Part B, do not have permanent kidney failure, and have not elected the Medicare hospice benefit. The plan must enroll Medicare beneficiaries in the order of application, without health screening, during at least one open enrollment period each year.

A big advantage of these Medicare managed care plans for many Medicare recipients is that the plans must accept you regardless of your medical condition. If you can’t qualify for a Medigap policy because of a health problem, you can join a Medicare managed care plan.

Unfortunately, many HMOs available to consumers and businesses have not chosen to contract with Medicare, and some that have include only a portion of their entire service area under the contract.

Even the fact that Medicare HMOs restrict coverage to care authorized and delivered by their participating providers may not be as significant a limitation as it seems. If you join a Medicare-contracting HMO and you’re not satisfied with the care you’re receiving, you can quit. In the year 2002, you might be locked in for as much as six months, and starting in 2003, you might be locked in for a year, but you are never locked in permanently. By quitting, you resume your full regular fee-for-service Medicare coverage, and you can enroll in a traditional Medigap plan or you can try another HMO. If you quit and want to join a Medigap plan, of course, the Medigap plan might choose not to accept you if you have a medical problem (subject to the special rules on Medigap enrollment discussed above). But in most areas there is at least one Medigap plan that is “guaranteed issue”—meaning you can’t be turned down. What’s more, no Medicare HMO is permitted to turn you down.

This flexibility is reassuring, but you still will want to study your options carefully before joining a Medicare-contracting HMO. Be sure to read the plan’s membership materials carefully to learn your rights and the nature and extent of your coverage. Compare benefits, costs, provider choices, and other features to determine which plan best meets your needs.

Employer Group Insurance

For Retirees

About a third of all Medicare beneficiaries have insurance to supplement their basic Medicare coverage through the companies where they were employed prior to retirement. If you or your spouse is an active employee with employer-sponsored coverage, find out if coverage can be continued when you retire. Check the price and the benefits for you and your spouse.

Group health insurance that is continued after retirement usually has the advantage of having no waiting periods or exclusions for preexisting conditions, and the coverage is usually based on group premium rates, which may be lower than the premium rates for individually purchased policies.

But if a spouse under 65 was covered under the employer policy, make sure you know what effect continued coverage of the over-65 retired spouse will have on the under-65 retired spouse’s insurance protection. Also, since employer group insurance policies do not have to comply with the Federal minimum benefit standards for Medigap policies, it is important to determine what coverage your specific retirement policy provides. The policy might not provide the same benefits as a Medigap policy. On the other hand, it might offer other benefits such as prescription drug coverage and routine dental care.

For Working Persons Age 65 or Over

If you are 65 or over, you or your spouse works, and you have coverage through an employer group plan, that plan will be the primary payer of claims and Medicare will be secondary. This means that the employer plan pays first on your hospital and medical bills. If the employer plan does not pay all of your expenses, Medicare pays secondary benefits for Medicare-covered services to supplement the amount paid by the employer plan.

Employers who have 20 or more employees are required to offer the same health benefits, under the same conditions, to employees age 65 or over and to employees’ spouses who are 65 or over, that they offer to younger employees and spouses. Employers with fewer than 20 employees may or may not choose to offer health insurance to employees age 65 and over.

You may accept or reject coverage under an employer group health plan. If you accept the employer plan, it will be your primary payer. If you reject the plan, Medicare will be the primary payer for Medicare-covered health services that you receive. If you reject the employer plan, you can buy supplemental insurance but an employer cannot provide you with a plan that pays supplemental benefits for Medicare-covered services or subsidize such coverage. An employer may, however, offer a plan that pays for health care services not covered by Medicare, such as hearing aids, routine dental care, and physical checkups.

A New Type of Coverage

A new type of coverage was authorized by 1997 Federal legislation: private fee-for-service plans. In a plan of this type, Medicare makes a premium payment on your behalf to a private insurance company, you pay any additional premium the company requires, and you get whatever package of benefits the company offers (not less than the coverage you would get under traditional Medicare). During the time you are enrolled in a Medicare private fee-for-service plan, Medicare will make no payments for services you receive. Providers, including doctors, hospitals, and home health agencies, that contract with the plan are allowed to balance-bill you (make you pay out of your own pocket) up to 15 percent above the plan’s payment rate for services provided. Depending on how a private fee-for-service plan structures itself, it can function, from the consumer’s standpoint, much like basic Medicare combined with a Medigap plan.

As of this writing, private fee-for-service plan options were available only in certain regions of the country. The most widely available option, Sterling Option I, had a premium in Illinois, for example, of $78 per month (in addition to the $54 Medicare Part B premium). That is comparable to premiums in some Medigap plans. The plan’s benefit structure included paying: the full cost of unlimited hospital days after a $350 per stay deductible, the full cost of 100 skilled nursing home days after a $25 per day copayment, 65 percent of the cost of home health care visits, and the cost of doctor visits after a $20 per visit copayment. You can check on current availability and premiums and benefits of private fee-for-service plans by calling Medicare at 1-800-633-4227 or using the Medicare Health Plan Compare feature at www.medicare.gov.

The rules for disenrolling from private fee-for-service plans are the same as the rules for disenrolling from Medicare HMOs.

Shopping for Coverage

You must decide what type of plan you want— whether you want coverage through an employer plan (if one is available to you), through a Medigap policy, through an HMO that has a contract with Medicare, or through a private fee-for-service plan. Once you decide on a type of plan, you will have to decide which specific benefit package you want and choose a specific company. Naturally, it is important to shop for the best deal.

In choosing a type of plan, you will want to consider many factors, including—

·         The doctors and other providers who will be available to you. If you have providers you are happy with, will they be available through the plan?

·         The control you will have over the care you get. Will your care be limited to what your primary care doctor will recommend? How likely is it that even care your doctor recommends will be denied by the plan?

·         Your costs—both premiums and out-of-pocket costs (for deductibles and copayments and services and supplies not covered by the plan).

·         The quality of care you can expect. Will you be able to find a plan that screens out low-quality providers, assists its providers in providing the highest quality care, and does not obstruct your access to needed care?

·         Coverage when you are away from home. Will you be able to get care when traveling or if you are regularly in another part of the country for extended periods of time?

Shopping for a Medigap Policy

If you decide to consider Medigap policies, you will have to decide which plan you want. You can use the plan descriptions. Then compare premiums and other features offered by competing companies. You can get a listing of available companies in your area by calling Medicare at 1-800-633-4227 or using the Medicare Personal Plan Finder at www.medicare.gov. You’ll want to check several points on each policy.

One of the most important and confusing questions is how premiums are set. There are three main possibilities. “Community-rated” policies have the same rates for all policyholders in the same geographic area, regardless of how old they are when they sign up. For example, if the premium is $1,000, it will be $1,000 for a 65-year-old and an 80-year-old whether they signed up 10 years ago or today. This is the simplest rate structure and the one most in keeping with the pure insurance concept of broadly shared risk.

“Issue-age-rated” policies set your premium based on your age when you buy the policy. The rate doesn’t go up as a policyholder ages except to the extent that inflation, claims experience, or some other business reason causes the company to raise its prices across the board. If the rate for a 65-year-old just signing up is $900, it might be $1,100 for a 70-year-old just signing up, but the premium for someone who signs up at age 65 will remain $900 as he or she ages (except for across-the-board price increases). If two 70-year-olds have the same policy and one bought it at age 65 while the other bought it at age 70, the latter person’s premiums will be higher. But under most companies’ issue-age-rated plans, two persons who bought plans at the same age will pay the same premiums even if one is years older than the other.

“Attained-age-rated” policies charge escalating premiums for the same policyholder as the policyholder ages. If the rate for a 65-year-old just signing up is $800 and that policyholder holds the policy until age 75, the premium for him or her at age 75 might be $1,200. Most companies that offer attained-age-rated policies charge persons of the same age the same premium whether a person signed up today or signed up years earlier.

With community-rated policies, younger policyholders subsidize older policyholders, who tend to be sicker and more costly to insure. As a result, community-rated policies tend to be more attractive for older than for younger consumers. With an issue-age policy, you overpay for yourself when you are young in order to have relatively low rates as you grow older. As a result, policyholders with issue-age policies are not likely to benefit from switching policies after they’ve had a policy for five or 10 years. With attained-age policies, you pay at each age according to the insurance company’s expected costs for someone of your age. Persons with attained-age policies will benefit by continuing every few years to compare pricing of other policies they qualify for and consider switching.

After you know the method used to set premiums, you will need to find out actual premiums for any companies you want to consider. Attained-age policies are the most difficult to shop for because you need to check not only the premium at your age of purchase but also the built-in premium increases based on age.

You have to be very careful comparing premiums between issue-age policies and attained-age policies. An attained-age policy that looks very inexpensive for a 65-year-old at the age of purchase might not look so good when premium increases based on age are taken into account. A comparison of premiums recently offered by two different companies for plan F in Maryland illustrates the point. Company A sells attained-age policies; Company B sells issue-age policies. Company A’s premiums were $996 for a 65-year-old but were $1,809 for an 80-year-old; these premiums applied regardless of how old the policyholder was when the policy was purchased. In contrast, Company B’s premium for a policyholder who purchased the policy at age 65 was $1,068 regardless of that person’s current age. Company A’s $996 premium for a 65-year-old beats the $1,068 Company B premium. But Company A’s $1,809 premium for an 80-year-old is substantially higher than the $1,068 Company B figure.

In addition to checking on each policy’s way of calculating premiums and its actual premiums, you’ll want to consider—

·         Is there a waiting period before preexisting conditions are covered? If so, how long is it?

·         Is it a guaranteed-issue policy? In other words, can you sign up regardless of your medical condition?

In addition to checking cost, benefit, and service quality information, you might want to check how financially sound companies are. Even if a company goes out of business, you will probably be protected under state insurance provisions for claims you already have. But financial soundness is important for this reason: if your company were to go out of business when you had a medical condition that companies don’t want to cover, you might have a hard time finding new coverage. You can ask an insurance company or an agent for the company’s rating with A. M. Best, a service that rates financial soundness. A rating of “A+” or “A” is a good sign (but not a guarantee). You can also find financial soundness ratings on most plans by calling Weiss Research at 1-800-289-9222 or visiting www.weissratings.com. The Weiss fee per company is $15 by phone and $7.95 online.

Shopping for an HMO

In some respects, comparing HMOs is easier than comparing Medigap plans. You know that HMO coverage is guaranteed-issue (the HMO can’t refuse to accept you), that there can be no preexisting condition limitations, and that paperwork will be simple. Also, the rates are simple. Most HMOs offer only one or two packages of benefits and premiums under their Medicare contracts. A plan’s premiums apply to all ages and to all locations within the service area. But there are key respects in which comparing HMOs is more difficult than comparing Medigap policies.

One plan comparison challenge results from the fact that there are no standard benefit packages for Medicare HMOs. You will need to find out each HMO’s special benefit features. Consider, for example—

·         Prescription drug coverage

·         Limits on hospital days

·         Copayments required

·         Eye exam and lens coverage

·         Hearing exam and hearing aid coverage

·         Dental care coverage

·         Mental health service coverage

·         Coverage for extended nursing home stays

The most important impact on a substantial number of beneficiaries is likely to result from differences in prescription drug coverage. For example, someone who has a moderate need for prescription drugs is likely to have $700 more in out-of-pocket prescription drug expenses in some plans than in others serving the same area.

An even more important and difficult issue when comparing Medicare HMOs is the possibility of quality differences. As we have noted elsewhere in this book, HMOs have much more control over the quality of care their enrollees receive than fee-for-service Medigap plans have. With an HMO, you are limited in your choice of providers and you are covered only for services your primary care provider authorizes. In addition, some HMOs take a proactive role in assuring that you get preventive care and that your care is coordinated and managed effectively.

The information on the Plan Ratings table will help you judge the quality of health care and service in many HMOs.