Medicare

Introduction

Medicare is the federal government's principal health care insurance program for people 65 years of age and over. In addition, the program covers people of any age who are permanently disabled or who have end-stage renal disease (people with kidney ailments that require dialysis or a kidney transplant). The Medicare program insures 39 million Americans and spends $213 billion a year on their care.

For the most part, Medicare pays only for "acute" care — care that the program's administrators view as reasonable and necessary to diagnose or treat an illness or injury. In other words, the program does not pay for most preventive or chronic health care. Medicare consists of three major programs: Part A, which covers hospital stays; Part B, which covers physician fees; and the recently-added Part C, which permits Medicare beneficiaries to receive their medical care from among a number of delivery options.

Although Medicare was originally conceived as a program that would relieve older persons of the burden of paying for health care, Medicare beneficiaries now pay a greater percentage of their incomes for out-of-pocket health care expenses than they did before Medicare was enacted in 1965. In addition to paying a monthly premium, Medicare recipients are often required to pay a portion of the cost of the services they receive. This "cost-sharing" may take the form of a deductible or co-insurance amount. Deductibles, co-insurance amounts and premiums usually increase each January. In addition, there are many services and items, such as prescription drugs, and long-term nursing home or in-home care that Medicare does not cover. To help with this cost-sharing and the items that Medicare does not cover, Medicare beneficiaries often purchase private insurance policies called "Medigap" policies.

Eligibility

Medicare is an "entitlement" program, meaning you do not have to be poor to get Medicare. There are two parts of Medicare, each with their own eligibility requirements. Medicare Part A is available for anyone who is over age 65 or who is permanently disabled and who is eligible for Social Security.

You are eligible for Medicare Part A if you:

• are a United States resident who has reached age 65 and are either a U.S. citizen or a legally admitted alien who has resided in the U.S. continuously for at least five years;
• are a disabled person of any age who has been entitled to Social Security, widows, or Railroad Retirement disability benefits for 25 months;
• have end-stage renal disease that requires dialysis treatment or a kidney transplant.

Medicare Part B is available for anyone over age 65 regardless of Social Security eligibility.

Medicare Part A

Medicare Part A covers institutional care in hospitals and skilled nursing facilities, as well as certain care given by home health agencies and care provided in hospices.

Any person who has reached age 65 and who is entitled to Social Security benefits is eligible for Medicare Part A without charge. That is, there are no premiums for this part of the Medicare program.

Hospital Coverage

Medicare pays for 90 days of hospital care per "spell of illness," plus an additional lifetime reserve of 60 days. A single "spell of illness" begins when the patient is admitted to a hospital or other covered facility, and ends when the patient has gone 60 days without being readmitted to a hospital or other facility. There is no limit on the number of spells of illness. However, the patient must satisfy a deductible before Medicare begins paying for treatment. This deductible, which changes annually, is $912 in 2005.

After the deductible is satisfied, Medicare will pay for virtually all hospital charges during the first 60 days of a recipient's hospital stay, other than telephone and television expenses. What Medicare covers includes:

• a bed in a semiprivate room, meaning a room with at least one other patient. (Medicare will pay for a private room only if it is "medically necessary.")
• all meals
• regular nursing services
• operating room, intensive care unit, or coronary care unit charges
• medical supplies
• drugs furnished by the hospital
• laboratory tests
• x-rays
• the use of appliances
• medical social services
• physical and occupational therapy
• speech therapy
• blood transfusions after the first three pints of blood

However, Medicare will not pay for treatments or procedures that it considers medically unproven or experimental.

If the hospital stay extends beyond 60 days, the Medicare beneficiary begins shouldering more of the cost of his or her care. From day 61 through day 90, the patient pays coinsurance of $228 a day in 2005. Beyond the 90th day, the patient begins to tap into his or her 60-day lifetime reserve. During hospital stays covered by these reserve days, beneficiaries must pay coinsurance of $456 per day in 2005. This reserve is not reset after each "spell of illness." Once it has been exhausted, the beneficiary will receive coverage for only 90 days when the next spell of illness occurs. However, studies show that the average length of a hospital stay covered by Medicare is eight days.

Medicare Part A also pays for stays in psychiatric hospitals, but payment is limited to a total of 190 days of inpatient psychiatric hospital services during a beneficiary's lifetime.

Skilled Nursing Facility Coverage

Medicare Part A covers up to 100 days of "skilled nursing" care per spell of illness. However, the conditions for obtaining Medicare coverage of a nursing home stay are quite stringent. Here are the main requirements:

1. The Medicare recipient must enter the nursing home no more than 30 days after a hospital stay that itself lasted for at least three days (not counting the day of discharge);
2. The care provided in the nursing home must be for the same condition that caused the hospitalization (or a condition medically related to it); and
3. The patient must receive a "skilled" level of care in the nursing facility that cannot be provided at home or on an outpatient basis. In order to be considered "skilled," nursing care must be ordered by a physician and delivered by, or under the supervision of, a professional such as a physical therapist, registered nurse or licensed practical nurse. Moreover, such care must be delivered on a daily basis. (Few nursing home residents receive this level of care.)

As soon as the nursing facility determines that a patient is no longer receiving a skilled level of care, the Medicare coverage ends. And, beginning on day 21 of the nursing home stay, there is a significant copayment equal to one-eighth of the initial hospital deductible ($114 a day in 2005). This copayment will usually be covered by a Medigap insurance policy, provided the patient has one.

A new spell of illness can begin if the patient has not received skilled care, either in a skilled nursing facility (SNF) or in a hospital, for a period of 60 consecutive days. The patient can remain in the SNF and still qualify as long as he or she does not receive a skilled level of care during that 60 days.

Nursing homes often terminate Medicare coverage for SNF care before they should. Two misunderstandings most often result in inappropriate denial of Medicare coverage to SNF patients. First, many nursing homes assume in error that if a patient has stopped making progress towards recovery then Medicare coverage should end. In fact, if the patient needs continued skilled care simply to maintain his or her status (or to slow deterioration) then the care should be provided and is covered by Medicare.

Second, nursing homes may wrongly believe that care requiring only supervision (rather than direct administration) by a skilled nurse is excluded from Medicare's SNF benefit. In fact, patients often receive an array of treatments that don't need to be carried out by a skilled nurse but which may, in combination, require skilled supervision. In these instances, if the potential for adverse interactions among multiple treatments requires that a skilled nurse monitor the patient's care and status, then Medicare will continue to provide coverage.

When a patient leaves a hospital and moves to a nursing home that provides Medicare coverage, the nursing home must give the patient written notice of whether the nursing home believes that the patient requires a skilled level of care and thus merits Medicare coverage. Even in cases where the SNF initially treats the patient as a Medicare recipient, after two or more weeks, often, the SNF will determine that the patient no longer needs a skilled level of care and will issue a "Notice of Non-Coverage" terminating the Medicare coverage.

Whether the non-coverage determination is made on entering the SNF or after a period of treatment, the notice asks whether the patient would like the nursing home bill to be submitted to Medicare despite the nursing home's assessment of his or her care needs. The patient (or his or her representative) should always ask for the bill to be submitted. This requires the nursing home to submit the patient's medical records for review to the fiscal intermediary, an insurance company hired by the Health Care Financing Administration to administer the Medicare program.

The review costs the patient nothing and may result in more Medicare coverage. While the review is being conducted, the patient is not obligated to pay the nursing home. However, if the appeal is denied, the patient will owe the facility retroactively for the period under review. This should be addressed. If the fiscal intermediary agrees with the nursing home that the patient no longer requires a skilled level of care, the next level of appeal is to an Administrative Law Judge. This appeal can take a year and involves hiring a lawyer. It should be pursued only if, after reviewing the patient's medical records, the lawyer believes that the patient was receiving a skilled level of care that should have been covered by Medicare. If you are turned down at this appeal level, there are subsequent appeals to the Appeals Council in Washington, and then to federal court.

Hospice Care

If the Medicare beneficiary has no more than six months to live, Medicare will pay for unlimited hospice care. This can be at home or in a hospice facility, and includes services not generally covered by Medicare. These services include home health aide and homemaker services, physical therapy, counseling, as well as physician and nursing services. There is also a provision for "respite care" — up to five consecutive days of inpatient care to give the patient's primary at-home caregiver some relief. The patient must pay 5 percent of the cost of this respite care.

Hospice benefit recipients are responsible for up to a $5 copayment for each prescription drug, but otherwise there are no deductibles or other copayments for this benefit. Bear in mind, however, that in electing hospice care, the beneficiary is choosing to receive noncurative medical and support services rather than treatment toward a cure for the terminal illness.

Because Medicare's hospice home care benefit does not cover full-time care, it is not an option unless there is a full-time caretaker in the home.

Medicare Part B

Medicare Part B basically covers "outpatient" care: office visits to medical specialists, ambulance transportation, diagnostic tests performed in a doctor's office or in a hospital on an outpatient basis, physician visits while the patient is in the hospital, and various outpatient therapies that are prescribed by a physician. Part B also covers home health services if the beneficiary is not enrolled in Medicare Part A. (See The Medicare Home Health Benefit below.)

Medicare recipients who are eligible for Part A are automatically enrolled in Part B unless they opt out. Part B enrollees pay a monthly premium that is adjusted annually. This premium, which is $78.20 a month in 2005, pays for about one-quarter of Part B's actual costs; the federal government pays for the other 75 percent through general tax revenues. This cost-sharing makes Part B something of a bargain, and many Medicare recipients buy it unless their present or former employer provides comparable coverage.

Moreover, there is a financial incentive not to delay enrollment; those who wait to enroll in Part B after they become eligible for Medicare will pay a penalty. For each year that an individual puts off enrolling, his or her monthly premium increases by 10 percent — permanently. Thus, a person who waits five years to enroll in Part B will pay premiums 50 percent higher than she otherwise would. (This penalty does not apply if the individual is covered by an employer group plan that is available only to current employees.)

The specifics of what is covered and what is not covered under Part B are complex and change periodically in response to efforts to contain health care costs. Following are some of the items that are excluded from coverage:

• prescription drugs that are not administered by a physician
• routine physical checkups
• eye glasses or contact lenses (in most cases)
• hearing aids
• orthopedic shoes, except for diabetics
• custodial care
• cosmetic surgery
• immunizations except pneumococcal vaccines
• most dental services
• routine foot care

Medicare Part B recipients must satisfy an annual deductible of $110 (in 2005). Once the deductible has been met, Medicare pays 80 percent of what Medicare considers a "reasonable charge" for the item or service. The beneficiary is responsible for the other 20 percent.

However, in most cases what Medicare calls a "reasonable charge" is less than what a doctor or other medical provider normally charges for a service. Whether a Medicare beneficiary must pay part of the difference between the Medicare-approved charge and the provider's normal charge depends on whether or not the provider has agreed to participate in the Medicare program.

If the provider participates in Medicare, he or she "accepts assignment," which means that the provider agrees that the total charge for the covered service will be the amount approved by Medicare. Medicare then pays the provider 80 percent of its approved amount, after subtracting any part of the beneficiary's annual deductible that has not already been met. The provider then charges the beneficiary the remaining 20 percent of the approved "reasonable" charge, plus any part of the deductible that has not been satisfied.

Some states either require all licensed physicians to participate in the Medicare program or require even non-participating providers to accept the Medicare-approved rate as full payment.

But many states have no such requirements. If a Medicare beneficiary in one of these states is treated by a non-participating provider who is charging more than the Medicare-approved rate, the beneficiary must pay the usual 20 percent of the Medicare-approved charge plus an additional 15 percent of the Medicare-approved amount (called a "limiting charge").

It is against the law for providers in any state to charge Medicare patients more than an additional 15 percent of the Medicare-approved charge.

Example: Doctor Jones bills Mrs. Smith $150 for an office visit that Medicare says should cost only $100. Mrs. Smith must pay Dr. Jones $35 — 20 percent of the approved charge ($20) plus an additional 15 percent of the approved charge ($15).

In such "non-assignment" cases, Medicare pays the beneficiary 80 percent of the approved amount and the beneficiary must pay the provider the entire charge that is due. In the above example, however, not all of the charge is due: Doctor Jones is taking a loss of $35 in treating Mrs. Smith. Doctor Jones must accept this loss as the price of treating a Medicare patient. (However, beneficiaries may now enter private contractual arrangements with physicians under the new Medicare Part C — see below.

Other physician practices that violate Medicare Part B's rules include:

• requiring patients to waive their right to Medicare benefits and making them pay privately for Medicare-covered services;
• requiring beneficiaries to pay for services such as telephone conversations with the doctor, prescription refills, and medical conferences with other professionals for which they were never previously charged;
• requiring beneficiaries to sign a paper agreeing to pay privately for all services that Medicare will not cover and then using this waiver to make beneficiaries pay for a service that Medicare covers as part of a package of related procedures;
• suing beneficiaries in small claims court for amounts above the 15 percent "limiting charge";
• billing for services that do not have a set fee and claiming that no charge limits apply to these services.

Medicare patients do not have to share the cost of all services under Medicare Part B. Medicare pays for certain services in full, including diagnostic laboratory tests, home health services, second opinions on surgery (or third opinions if the two earlier opinions disagree), expenses for pneumococcal vaccine, and costs to kidney transplant donors. In all these cases, the $110 deductible does not apply and the 20 percent copayment is waived. On the other hand, Medicare will pay only 50 percent of the "approved" rate for the treatment of mental disorders on an outpatient basis.

Home Health Benefit

If you qualify, Medicare will cover your home health benefits entirely and with no limit on the length of time you are covered.

Medicare home health benefits can mean the difference between you or a family member continuing to stay at home, or your health deteriorating until hospital care or nursing home placement become necessary. But due to changes made as part of the Balanced Budget Act of 1997, home health benefits are being denied Medicare patients in more and more cases.

You are entitled to Medicare coverage of your home health care if you meet the following requirements:

• you are confined to your home (meaning that leaving it to receive services would be a "considerable and taxing effort"):
• your doctor has ordered home health services for you; and
• at least some element of the services you receive are "skilled" (intermittent skilled nursing care, physical therapy or speech therapy).

What you get: If you need an element of "skilled" care, then you will also be entitled to Medicare coverage of social services, part-time or intermittent home health aide services, and necessary medical supplies and durable medical equipment. You can receive up to 35 hours of services a week, although few beneficiaries actually get this level of service. You are entitled to the same level of services whether you are a member of an HMO or are enrolled in traditional fee-for-service Medicare.

What you pay: Nothing, with the exception of 20 percent of the cost of medical supplies and equipment, which is covered by some Medigap policies.

While the government insists that it has not changed the criteria for who is eligible for home care services, home health agencies have inevitably cut back on services they provide in order to make their own budgets balance.

What you can do: All this means that Medicare recipients must advocate for the services they need. If you have to appeal a termination of service, the good news is that most people who appeal Medicare home health benefits win their cases. At the first level of review, 39 percent are successful, and on appeal to an administrative law judge, 81 percent are successful. The bad news is that you have to pay privately for the care in order to have an appealable issue. This is because the issue on appeal is not the termination of a service, but the denial of Medicare payment for the service. As a result, many beneficiaries simply try to make do without the care or hire help on their own without the training and supervision provided by home health agencies.

1. Ask your home health agency to explain the cutback and write down its answer. Ask the agency to give you written notice of the cutback or termination of service.
2. Ask your physician to call the agency to urge it not to cut back the services and to provide a letter verifying the level of care you need. This can be essential to whether you ultimately receive the benefits you deserve.
3. Consult your attorney or a Medicare assistance agency in your state to determine whether you likely would be successful on appeal.
4. If you decide to appeal, do so immediately, and arrange with the home health agency to pay privately for the services pending the result of the appeal.

Medicare Part C

In the Balanced Budget Act (BBA) of 1997, Congress made changes in the Medicare program aimed at keeping it solvent at least until 2007. One of these changes was the expansion of alternatives to traditional Medicare. The new law relabeled these alternatives "Medicare+Choice," which many refer to as Medicare Part C. Under the old law, beneficiaries could choose between health maintenance organizations (HMOs) and traditional fee-for-service Medicare. Beginning in 1999, the menu of options (at least on paper) expanded to include:

• PPOs (preferred provider organizations), allowing the use of doctors and hospitals outside the plan network for an extra out-of-pocket cost;
• PSOs (provider sponsored organizations), networks established by doctors and hospitals;
• Private fee-for-service plans, a Medicare-approved private health insurance plan for which Medicare pays part of the cost. Plans would provide an unlimited choice of providers and could charge unlimited premiums;
• MSA (medical savings account) plans. This offers a way for Medicare recipients to opt out of the federal program altogether and reap some savings if they stay healthy. Each year, Medicare would give an enrollee a voucher equal to the average annual cost of treating a Medicare beneficiary. The enrollee would use part of the voucher's value to purchase a private health insurance policy with a high deductible (not to exceed $6,000), called a "catastrophic" policy. The remainder of the voucher's value could be invested in a tax-free MSA, which would be available to pay for any treatment costs. If the recipient stays healthy, he or she can pocket money left in the account. The MSA option is currently a demonstration program available to up to 390,000 Medicare enrollees.
• Beneficiaries who so desire may enter contractual agreements for specific services with physicians who have agreed not to participate in Medicare for two years. Medicare would not pay any part of the cost for these services and there are no limits on what the physician can charge.

Until 2002, Medicare beneficiaries were able to switch among traditional Medicare and these other new options easily, typically with just a month's notice. However, now nine months' notice is usually required to switch. But beneficiaries who are happy with the way they are receiving Medicare can stay with that program, unless the program stops participating in Medicare. New Medicare enrollees who do not choose a particular program will automatically be enrolled in traditional Medicare.

The Medicare Prescription Drug, Improvement, and Modernization Act (MMA), enacted in 2003, changed the name of these private Medicare alternatives to Medicare Advantage and raised payment levels to local plans and would-be regional preferred provider organizations (PPOs).

Appealing Medicare Decisions

While the federal government makes the rules about Medicare, the day-to-day administration and operation of the Medicare program are handled by private insurance companies that have contracted with the government. In the case of Medicare Part A, these insurers are called "intermediaries," and in the case of Medicare Part B they are referred to as "carriers." In addition, the government contracts with committees of physicians — "peer review organizations" (PROs) – to decide the appropriateness of care received by most Medicare beneficiaries who are inpatients in hospitals.

Sometimes an intermediary, carrier or PRO will decide that a particular treatment or service is not be covered by Medicare and will deny the beneficiary's claim. Many of these decisions are highly subjective and involve determining, for example, what is "medically and reasonably necessary" or what constitutes "custodial care." If a beneficiary disagrees with a decision, there are reconsideration and appeals procedures within the Medicare program. Once Medicare's review process has been exhausted, the matter can be taken to court if the amount of money in dispute exceeds either $1,000 or $2,000, depending on the type of claim. Medicare beneficiaries can represent themselves during these appeal proceedings, or they can be represented by a personal representative or an attorney. The Medicare Rights Center estimates that only about 2 percent of Medicare beneficiaries appeal denials of care, but 80 percent of those who do appeal win more care.

Even if Medicare ultimately rejects a disputed claim, a beneficiary may not necessarily have to pay for the care he or she received. If a recipient did not know or could not have been expected to know that Medicare coverage would be denied for certain services, the recipient is granted a "waiver of liability" and the health care provider is the one who suffers the economic loss. In cases where this limited waiver of liability does not apply, however, the beneficiary is liable for any costs of care that Medicare does not cover. For example, a patient is financially responsible for any services normally provided under Medicare Part B if provided by a nonparticipating provider who did not "accept assignment" of the claim.

Medigap Policies

What with all the deductibles, copayments and coverage exclusions, Medicare now pays for only about half of the medical costs of America's senior citizens. Much of the balance not covered by Medicare can be covered by purchasing a so-called "Medigap" insurance policy.

As the result of a law passed in 1992 that standardized Medigap policies, insurance companies may sell only policies that fall into one of ten standard benefit packages, ranging from basic coverage to the most comprehensive coverage. All Medigap policies must provide at least the following core benefits (dollar figures are for 2005):

• $228 a day coinsurance for days 61 to 90 of a hospital stay;
• $456 a day coinsurance for days 91-150 of a hospital stay (lifetime reserve days);
• All hospital approved costs from day 151 through 365.
• The cost of the first three pints of blood not covered by Medicare.
• The 20 percent coinsurance for Part B medical charges.

Nine additional policy models may provide a combination of eight other areas of coverage on top of the basic set. These areas of coverage include the coinsurance for days 21 to 100 in a skilled nursing facility, the Part A and Part B deductibles, foreign travel emergencies, and prescription drug coverage.

The 10 available Medigap policy packages are identified by the letters A (for the most basic package of benefits) through J, for the most comprehensive (see chart below). While the higher-letter plans are generally more comprehensive than the lower-letter plans, each plan package offers a different combination of benefits, allowing purchasers to choose the combination that is right for them. However, each plan package is the same across insurance companies — thus, a C package from one insurer will be identical to a C package offered by another. Of course, the more Medigap coverage you purchase, the more you will have to pay in premiums.

States may authorize the sale by insurance companies of the basic plan package and any number of the other nine approved combinations of benefits, so there may be fewer than 10 options to choose from in your state. Also, if you live in Massachusetts, Minnesota or Wisconsin, different types of standardized Medigap plans from the ones outlined below are sold.

A Medicare recipient cannot be denied a Medigap policy if he or she applies for one within six months of enrolling in Medicare Part B. Otherwise, claims relating to pre-existing conditions can be denied only during the first six months that the policy is in effect. However, federal law does not require that fee-for-service Medigap policies be offered to those who enroll in Medicare Part B because they are disabled.

Medigap policies do not fill all the gaps in Medicare coverage. The biggest gap they fail to bridge is for custodial care in a nursing facility or for skilled care in a nursing home beyond the first 100 days. For coverage of this type of care, you must either purchase long-term care insurance or qualify for Medicaid coverage.

Medigap also does not cover vision care, eyeglasses, hearing aids or dental care unless such treatment or equipment is needed as the result of an injury. Prescription drugs are covered in three plan packages (plans H, I and J), but there is a $250 deductible, and the plans pay only 50 percent of the costs thereafter up to an annual limit of $1,250 (plans H and I) or $3,000 (plan J). Once the Medicare prescription drug program provided in the Medicare Improvement Act takes effect in January, 2006, Medigap policies offering prescription drug coverage may no longer be sold.

A 2001 report by the General Accounting Office found that it pays to shop around for a policy. Premiums vary widely not only from state to state, but within states as well. For example, researchers found that in Texas a 65-year-old consumer could pay anywhere from $300 to $1,683 for plan A, depending on the insurer. In Ohio, plan F could range from $996 to $1,944 for an applicant of the same age. (For a news article on the GAO report, click here.)

To help you find and compare Medigap programs available in your area, the Medicare program offers a Web site called Medigap Compare. This interactive tool gives contact information for insurance companies in your state that sell Medigap policies, and offers basic information about the policies of some (but by no means all) of these insurers, including which plans they offer; if the plans are offered to persons at or over age 65, under 65 with disabilities and/or End-Stage Renal Disease (ESRD); how they price their plans based on what rating method they use; and if you need to be a member of a certain organization to buy one of their plans.

Also, the Center for Medicare Advocacy offers excellent online information about Medigap. Click on: www.medicareadvocacy.org/FAQ_Medigap.htm

Help with Paying for Medicare

If you don't qualify for Medicaid and can't afford a Medigap policy, you may be able to get help paying for the costs of Medicare.

There are three Medicare assistance programs, called Medicare Savings Plans:

• Qualified Medicare Beneficiary (QMB): The QMB program pays for Medicare Part A premiums, Medicare Part B premiums and deductibles, and coinsurance and deductibles for Part A and Part B.
• Specified Low-income Medicare Beneficiary (SLMB): The SLMB program pays for Medicare Part B Premium.
• Qualifying Individual (QI-1) Program: The QI-1 program is an expansion of the SLMB program that you must apply for each year. It pays for Medicare's Part B Premium.

To qualify for these programs, you must be eligible for Medicare Part A (even if you are not enrolled) and have limited income and resources. The income and resource requirements can vary from state to state, so check with your state before applying. In general the following limits are applied.

Personal assets, including cash, bank accounts, stocks and bonds must not exceed $4,000 for an individual and $6,000 for married couples. Your house and car do not count as personal assets. Some states allow additional resources above these figures, for example, New York has no resource limits for the QI-1 Program.

To apply for one of these programs, contact your state Department of Social Services office or the equivalent agency in your state.

Medicare Managed Care (Medicare Advantage)

We've all heard about managed care, and many of us have first-hand experience with this new health care arrangement. Managed care is a strategy to reduce health care costs by discouraging providers from performing unneeded services and by promoting preventive medicine.

The basic idea of managed care is that a health plan is paid a flat monthly fee for each patient under its care. If the plan's costs in caring for that patient are less than the fixed fee, the plan makes money. But if the patient is quite sick and requires many costly medical services, then the plan may lose money on that particular patient. In this way, plans have an investment in keeping costs down.

When Medicare costs started skyrocketing along with the rest of the health care sector, Congress looked to managed care as a partial remedy. As a consequence, the Medicare program now contracts with managed care plans to provide services to Medicare beneficiaries who choose the managed care option (now called Medicare Advantage). The managed care plan receives a fixed monthly fee to provide services to each Medicare beneficiary under its care. As a Medicare managed care enrollee, you receive all the coverage you would receive under regular Medicare, except without the large copayments and deductibles you would normally pay. In addition, you often receive coverage for products and services that Medicare doesn't cover, such as prescription drugs or custodial care. Generally, you do not need a supplemental Medigap policy if you join a managed care plan. Sound too good to be true? In a way, it is.

Restrictions on Providers and Services

First, managed care plans keep their costs down by limiting a patient's freedom to choose which doctors and other providers the patient can see. The most prominent type of managed care plan, the health maintenance organization (HMO), maintains a list or network of health care providers (doctors, hospitals, etc.) that their patients are allowed to use. The plan has negotiated special rates with these network providers. If you see a provider who is not in the network, the plan will not pay the bill, and neither will Medicare.

If a managed care plan you are considering joining restricts access to providers, it is important to determine whether your doctors and other providers are in the plan's network. But bear in mind that managed care plans drop providers from their networks if they start costing the plan too much money. So just because your doctor is a member of the network now doesn't guarantee that he or she will be part of the network later.

Another way plans strive to reduce costs is to require that all care be funneled through a primary care physician. This doctor makes all decisions about whether or not to refer you to a specialist. You cannot make an appointment with a specialist on your own. The primary care physician is strongly encouraged to take care of all medical problems herself and refer you to a specialist only when absolutely necessary. Medicare does require, however, that managed care plans allow patients with serious conditions, such as heart disease, kidney failure and cancer, to see specialists without referrals from their primary care physicians. Also, routine preventive women's heatlh care screening must be available without a referral.

For many, managed care's most disagreeable cost-cutting strategy is the common requirement that your primary care physician obtain the plan's approval before you can receive certain medical services. If the plan administrators disagree with your physician that a procedure is medically necessary, the plan may refuse to pay for it. Plans also attempt to reduce costs by allowing their members shorter periods of hospital and nursing home care than Medicare beneficiaries generally receive. In addition, managed care plans provide fewer rehabilitative services like home health care and outpatient therapies than does traditional Medicare.

Not all managed care plans are so restrictive, but the less restrictive plans are more expensive. Some offer what's known as a "point of service" option that allows you to see physicians or other providers that are not in their network. If you go outside of the network, however, you will pay a higher portion of the bill than if you saw an in-network physician.

Given the restrictions of managed care, if you are considering joining a particular plan, it is a good idea to talk with your doctor about his experiences with that plan. How is the plan about approving treatments, referring patients to specialists or allowing patients to remain in the hospital if they are not ready to leave? Does the plan frequently overrule the doctor? You might also want to ask the same questions of the doctor's billing staff.

The True Cost of Medicare Managed Care

Given all these restrictions, you would think that managed care would cost less than a Medigap policy. Maybe, maybe not. While many managed care plans charge you no premium over and above your Medicare Part B premium, others, such as those offering a "point of service" option or unlimited prescription drug coverage, charge a small additional premium.

In addition, you may be responsible for copayments. These are charges plan members must pay out of pocket when they receive certain kinds of care, such as an office visit or a prescription drug. The copayment usually ranges from $5 to $15, depending on the managed care plan. If you see a lot of doctors or take an array of prescribed medications, the costs can add up. The plan may also only cover medications listed in its "formulary" – the list of drugs it approves. For drugs not in the formulary, the copayment may be higher or the plan may pay nothing at all. Bear in mind that managed care plans often change the drugs in their formulary, so a medication covered now may not be covered later.

Another consideration is the extent of the plan's service area. If your plan's service area is limited, you may lack access to a broad range of providers.

On the plus side, managed care plans may offer coverage that goes well beyond regular Medicare coverage, including:

• Short-term custodial care
• 100 percent coverage of needed medical equipment
• Chiropractic care, acupuncture and acupressure
• Foreign travel coverage
• Eye examinations
• Dental work
• Hearing tests and hearing aids
• After-hours care

Comparison Shop Online

Medicare operates a helpful Web site that allows you to compare health insurers that offer Medicare managed care plans in your area. You can see how the plans stack up according to such useful indices as premium, prescription drug coverage, doctor and hospital choice, outpatient surgery costs, and much more. Also included is information on plan members leaving managed care plans. Starting in 2001, Medicare began asking people who chose to leave a managed care plan the reasons why they left. These reasons will soon become part of the Medicare Compare site. To go to the site, click here

Another great source of information for those trying to negotiate the managed care maze is the Health Insurance Counseling and Advocacy Program (HICAP). This independent group, which is funded by state agencies on aging and by private donations, counsels seniors about Medicare managed care and Medigap policies available to them in their area. HICAP offices have a different (usually toll-free "800") main number in each state.

You can also contact your State Health Insurance Assistance Program (SHIP). The telephone number for the SHIP in your State is available by calling 1-800-MEDICARE (1-800-633-4227). SHIP volunteers are available to discuss your individual situation and provide information on options available to you.

Appealing Managed Care Plan Decisions

Your plan may overrule your doctor and refuse to cover a treatment or procedure that it deems to be medically unnecessary or experimental. By one count, nearly one-third of Medicare managed care plan enrollees say they were denied coverage for treatment by their plans. Such denials of coverage can be enraging or even life-threatening. If your plan will not pay for, does not allow, or stops a service that you think should be covered or provided, you can file an appeal. However, this appeals process is run by the plan. After you file the appeal, the plan will review its decision. If the plan does not decide in your favor, the appeal is reviewed by an independent organization.

Several years ago, Medicare managed care beneficiaries sued the Medicare program, claiming that it was not adequately protecting their right to appeal adverse decisions by managed care plans. This suit was just settled and will result in new regulations that strengthen Medicare beneficiaries' appeal rights under managed care. Medicare must now require managed care plans to let you know four days before they end your home health, nursing home, or certain outpatient rehabilitation care. This advance written notice must explain:

• Why your HMO thinks that services are either not needed or are not covered;
• How you can go about obtaining a fast appeal of the decision from an independent decisionmaker outside the HMO if you think the services are covered; and
• That payment for the costs of your care will continue at least until noon of the day following the decision by the independent decisionmaker.

Medicare officials are also revising some of the requirements covering managed care organizations that terminate hospital services for Medicare beneficiaries.

You should check your plan's membership materials or contact the plan for details about your appeal rights.

Entering and Leaving Medicare Managed Care

You generally must be enrolled in Medicare Part A and Part B before you can enroll in a Medicare managed care plan. If you want to join a Medicare managed care plan, you should contact the plan and ask if it is accepting new member enrollments or if it has a waiting list. Plans must accept you if you apply within the first six months of signing up for both Parts A and B of Medicare. They also must enroll you during the "open enrollment" month of November for coverage beginning January 1. Some plans have continuous open enrollment, meaning that they will accept Medicare beneficiaries at any time.

Managed care plans do not always have to accept new enrollments, however. Some plans have approved limits on the number of beneficiaries they can enroll (called "capacity limits"). Once a plan has reached its capacity limit, it does not have to accept any new enrollments. Still, if a managed care plan refuses to accept your enrollment, it must provide a written denial.

It is be fairly easy to leave a managed care plan and return to regular Medicare if you so choose. You can leave a plan in one of three ways. You can:

• call the plan you wish to leave and ask for a disenrollment form; or
• call 1-800-MEDICARE (1-800-633-4227) to request that your disenrollment be processed over the phone; or
• call the Social Security Administration or visit your Social Security Office to file your disenrollment request.

In most cases, you are disenrolled the month after your request is made as long as your request was filed before the 10th day of the month. If your request was made after the 10th of the month, you will be disenrolled the first day of the second calendar month after your request was made.

You need not fill out a disenrollment form if you decide to join another managed care plan. You will be automatically disenrolled from your old plan when your new plan enrollment becomes effective.

After you leave Medicare managed care, you automatically return to the regular Medicare program. It is very likely you will be able to continue seeing the same doctors and other providers you were seeing in the managed care plan, if this is your wish.

Avoiding the Medigap Gap

One risk of enrolling in Medicare managed care is that when you leave you may not be eligible for the Medigap policy you had before you shifted to Medicare managed care. When you return to regular Medicare, you are only guaranteed the right to buy a Medigap policy designated "A", "B", "C", or "F" that is offered by insurers in your state. None of these policy types offers a prescription drug plan. Medigap policies that contain prescription drug coverage are available, but insurers may refuse to sell you a policy because of your health status, may impose waiting periods for pre-existing conditions, or may charge you more based on these conditions. However, insurers cannot refuse you coverage for even the more generous Medigap policies provided certain conditions are met:

• The Medigap policy you dropped is still being sold by the same insurance company; and
• This was the first time you had ever been enrolled in any kind of Medicare managed care plan; and
• You leave (disenroll from) the managed care plan within 12 months of joining the plan; and
• You apply for your previous Medigap policy no later than 63 days after coverage from your managed care plan terminates.

Before you disenroll from your managed care plan you should make sure the Medigap policy you had is still available from the original insurer.

Plan Withdrawals From Medicare

Managed care plans voluntarily enter into 12-month contracts (January – December) with the Medicare program to serve Medicare enrollees. Each year, managed care plans can choose whether or not to renew their contracts, and they generally must notify Medicare officials by July 1 if they are not going to renew. Covering Medicare patients has not turned out to be as lucrative as some insurers had hoped it would be. As a consequence, many managed care plans have withdrawn from the Medicare program, to such a degree that Medicare beneficiaries in many parts of the country no longer have access to a managed care plan of any kind. Thousands of former managed care enrollees have been forced to return to regular Medicare, with many of them losing prescription drug coverage.

Prescription Drug Coverage

As part of the new Medicare law enacted in December 2003, Congress added a modest prescription drug benefit. This benefit is scheduled to take effect January 1, 2006, and as that date approaches ElderLawAnswers will provide details of the program.

But in an effort to provide some relief now to Medicare beneficiaries who are spending large amounts on prescription drugs, Congress approved an interim benefit — a drug discount card program. The idea was that Medicare beneficiaries would be able to save between 10 percent and 25 percent on their prescriptions if Medicare contracted with private firms — mostly large health insurers and pharmacy benefit managers — to offer discount drug cards to beneficiaries.

Medicare has since approved 39 cards that are available nationally and an additional 33 cards that are available in one or more states. The card sponsors are required to offer a discounted price on at least one drug in each of 209 drug categories.

Almost everyone with Medicare can obtain a card. The only people who can't enroll for a card are those who have outpatient drug coverage through Medicaid. The drug discount card program is totally voluntary; no one has to enroll. You may choose to obtain a card at any time until December 31, 2005, when the discount card program will end and the new Medicare prescription drug benefit will kick in.

Comparing the Cards

Although there are scores of cards to choose from in any given area, each Medicare beneficiary must narrow the choice down to one. This can be a daunting task, because each card will offer different discounts on different drugs based on the deals the card sponsor makes with drug makers. This means that if you take a number of medications, you will have to carefully compare the cards available in your area.

You can compare the deals the competing cards will offer you by visiting Medicare's Web site at www.medicare.gov Or you can call 1-800-MEDICARE.

However, the discounts a card offers — and the list of drugs that are discounted — can change weekly, meaning that a card that looks like a good deal today may not be so good in a month or two, or vice versa. Another factor to consider is whether your local pharmacy will accept your card. If you are considering a card, check with your pharmacy first. If you are in a Medicare managed care plan that offers a discount card, your only option may be that plan's discount card program.

The card sponsors are allowed to charge Medicare beneficiaries up to $30 a year for a discount drug card, although many do not charge the maximum.

If you already have a discount card that is not Medicare-approved, you will not have to give up that card. However, only one of the cards can be used at a time to purchase any particular medication.

Help for Low-Income Cardholders

Under the discount program, if your annual income is less than $12,919 ($17,320 a year for couples) in 2005, you are eligible for extra assistance in paying for prescription drugs using the cards. Medicare will put a $600 credit on your card that you can use when you get your prescriptions. There is a $600 benefit for 2004 and another $600 benefit for 2005, and beneficiaries can get the full 2004 benefit even if they sign up for a card late in the year. To take advantage of the $600 low-income benefit, fill out a separate low-income assistance card application that is available from your card sponsor.

How to Enroll

After you have determined which, if any, of the cards best meets your needs, you must fill out either an application that is available from the card's sponsor, or a standard form available at www.medicare.gov

What are the savings?

A study by the Kaiser Family Foundation in May and June 2004, compared the discounts using seven cards available in Maryland with retail prices and with prices available through mail-order services run by Costco and Drugstore.com.

The study found that the Medicare cards offered prices ranging from 17 percent to 24 percent lower than retail, and the report also noted that consumers could often reap even bigger discounts by using their cards when ordering through by mail. There were significant differences in savings between cards, however. The study also found that beneficiaries could do just as well by buying their drugs from Drugstore.com

Despite beneficiary advocates' concerns that card sponsors would raise prices once enrollees were "locked in" to their cards, the report suggested that overall prices have remained stable.

Is It Worth It?

The Medicare Rights Center advises that if you already have prescription drug coverage or get discounts on your medications, you may not need to get a card. However, if you qualify for the low-income assistance, it's very likely to be worth your while to enroll in the program.

Have further questions about Medicare? The Medicare Rights Center operates a toll-free hotline where you can get answers from counselors. The hotline is open Monday through Thursday, 9am-2pm Eastern Time. Call (800) 333-4114.