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.

Other Popular Topics