Medicare -> 2006 Partnership Conference

 

New York State Bar Association
Committee on Legal Aid
Eighth Biannual Legal Assistance Partnership Conference
Albany, New York
June 7, 2006

ORIGINAL MEDICARE, MEDICARE ADVANTAGE AND PRIVATE HEALTH INSURANCE: CHOOSING BETWEEN ORIGINAL AND MEDICARE ADVANTAGE

1. Medicare is basic health insurance for almost all Americans over 65 years of age, in addition to long term Social Security Disability recipients and certain other limited groups of people. It is usually a companion to the Social Security or Railroad Retirement benefit. It is an insurance program, administered by the Federal government’s Centers for Medicare and Medicaid Services (CMS), not assistance for those of low income like Medicaid. Medicare is not means-tested and should not be; it is equally available to the rich and the poor and that is one of its strengths. 42 USC §1395c.

2. There are two alternate ways to receive the benefits of the program; the consequences of the choice to go with one or the other are significant. Your clients should consider their decision to go one way or the other very carefully.

   1. Original or fee-for-service.

      1. Part A: 42 USC §§1395c,1395d.

         Hospital, SNF, Hospice,
         Home Health Care (No premium)

      2. Part B: 42 USC §§1395j, 1395k.

         Medical services including physician
         (2006 Monthly Premium: $88.50)

      3. Part D: 42 USC §§1395w-101–1395w-151.

         Voluntary enrollment in private Prescription Drug Plans (PDPs) offering prescription drug coverage only (Premium varies by PDP)

   2. “Medicare Advantage,” formerly “Medicare+Choice.” Also known as Medicare Part C. 42 U.S.C. § 1395 w-21 et seq; 42 CFR § 422.

      In most areas of New York, Medicare Advantage includes mainly managed care plans such as Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs), but other managed care plans such as Provider Sponsored Organizations (PSOs) and other accounts and plans such as Medicare Savings Accounts (MSAs) and Private Fee-for-Service Plans (PFFS) are within the Advantage ambit, even though not generally available. MSAs are available no where in the country.

      
      

      1. Medicare Advantage also includes Specialized Medicare Advantage Plans for Special Needs Individuals, managed care plans which are available in at least some sections of New York for full Medicaid dual eligibles. 42 USC § 1395w-28(b)(6).

      2. This outline focuses on the more widely available HMO and PPO Medicare Advantage Plans..

      3. Enrollees usually continue to pay Part B premiums plus, usually, an additional premium. However, some Medicare Advantage Plans offer “reduced” Part B premiums as a benefit. The HMO or PPO must cover all services covered by Original Medicare, but there are various plans, coverages, co-pays and premiums within and among each of the Medicare Advantage Organizations’ offerings. 42 USC §§1395w-22(a); 1395w-24(e).

      4. Effective January 1, 2006, most Medicare Advantage HMOs and PPOs include Part D prescription drug coverage, often with several prescription coverage options and varying premiums, and are known as MA-PDs. However, it is still possible to enroll in a Medicare Advantage HMO without a Part D prescription drug benefit. With the advent of Part D prescription drug coverage, insurers (Medicare Advantage Organizations) offering Part D as part of their Medicare Advantage plans are moving into markets they had not previously served, complicating the choices and increasing the likelihood of problems resulting from those choices. 42 USC §1395w-101(a).

   
   

3. Comparison between Original and Medicare Advantage plans:

   
   

   1. Original fee-for-service has historically left several major health care needs completely uncovered, a lack which is seldom remedied by Medigap insurance:

      1. Prescription Drugs: Limited, voluntary coverage (Part D), which is not set up on the Original model, is now available from private insurers effective January 1, 2006. 42 USC §§ 1395w-101--1395w-151. The availability of Part D to those in both Original Medicare and Medicare Advantage plans has complicated the choice between Original and Advantage and seriously compromised one of Medicare’s great strengths--the uniformity of its benefits and consequent amenability to legal precedent and certainty.

      2. Long Term Skilled Nursing Home Care. 42 USC §1395d(a)(2)(A); 42 CFR §409.60.

      3. Dental Care.

      4. Vision Care and Glasses.

      5. Custodial Care, except through the Hospice election. 42 USC § 1395y(a)(9).

      Medicare Advantage HMOs and PPOs may and do offer some of these services as supplemental benefits (42 USC § 1395w-22; 42 CFR §422.102); in particular, most Medicare Advantage HMOs and PPOs now contain a Part D Prescription Drug Benefit, although plans without the drug benefit are still widely available; all Advantage Organizations offering HMO and PPO plans must provide a plan with Part D prescription drug coverage. 42 CFR §422.4.

   
   

   2. In addition to non-covered services, Original Medicare leaves unpaid deductibles and co-insurance (see, e.g., 42 CFR § 410.152 with respect to covered Part B services) which are ever-increasing, usually requiring the purchase of a Medigap (Medicare supplement) policy from a private insurer. These policies are becoming prohibitively expensive for many people. See, www.medicare.gov/MPPF/ http://www.medicare.gov for the cost of policies available in your client’s locality and individual situation.

      
      

      1. Exception: If your client has retiree coverage through a former employer, she would usually not have a buy a Medigap policy and would probably want to stay with Original Medicare, unless her only option as a retiree is an Advantage plan. In general, it is to her advantage to stick with an employer plan, even if she is paying the premiums. This would be especially true if the employer’s plan for retirees includes Part D “creditable” prescription drug coverage. Benefits and premiums are almost always better than with a policy she could buy on her own. BUT, many companies are cutting out or back on those benefits, or attempting to force retirees into Medicare Advantage plans, so she might in the future have to choose between Original Medicare and a Medicare Advantage HMO or PPO.

         
         

         It is important to note, as an aside, that those covered under retiree plans should not decline Medicare Part B:

         1. Almost all retiree plans pay claims as if the insured is enrolled in Part B, even if she is not.

         2. Even if the plan does not currently require Part B enrollment, it might require it in the future.

         3. Premium surcharge of 10% per year for delayed enrollment in Part B, but even more serious is possible liability for large uncovered hospital and doctor bills.

         4. Only exception: if your retired client is covered under her non-retired spouse’s Employer Group Health Plan, she can delay enrollment in Part B. But remember, within 8 months of end of spouse’s employment or coverage, she must enroll in Part B or suffer premium surcharge and possible liability for medical bills. I have seen so many people forget to enroll In Part B after, for instance, a working spouse’s death or a divorce, that unless your client is really in desperate need of the monthly $88.50, I would recommend signing up for Part B even if her working spouse’s health insurance is primary.

      
      

      2. Exception: Working or spouse working, Medicare usually secondary to employer-provided health insurance and your client likely does not have to buy a Medigap policy. 42 USC §1395y(b)(1)(A).

      
      

      3. Exception: Anyone who is eligible for Medicaid or is a Qualified Medicare Beneficiary (QMB) should, in my opinion, stay in Original Medicare and does not have to buy a Medigap policy.

      
      

      Medicare Advantage HMOs and PPOs fill in these gaps In Original Medicare to some extent, but many charge premiums, which tend to increase each year. Co-pays on these plans are also inching up, especially for services such as hospital and nursing home care and durable medical equipment, in an attempt to force more costly patients out of managed care. In most cases, however, it costs your clients less to sign up for a Medicare Advantage HMO or PPO than to pay for a Medigap policy. Again, visit www.medicare.gov/MPPF for an individualized up-to-date listing of the premiums and co-pays for your client’s local Medicare Advantage HMOs, PPOs, and other plans. Note that, in addition to the HMO and PPO premiums, Medicare Advantage enrollees must usually continue to pay the $88.50 monthly Medicare Part B premium.

      Problems for dual eligibles (full Medicaid & QMBs) enrolled in Medicare Advantage HMOs and PPOs include difficulty in arranging Medicaid payment of co-pays and, for full Medicaid patients, disputes between HMOs and Medicaid over responsibility for long term care, with the patient often caught in the middle.

      Also, just recently Specialized Medicare Advantage Plans for Special Needs Individuals (SNPs) (42 USC §1395w-28(b)(6); 42 CFR §422.52) have become available for full Medicaid dual eligibles in at least some sections of New York. These plans by definition include a Part D prescription drug benefit. I have no experience with these plans, but the Medicare website descriptions of the available plans are confusing because they list co-pays for medical services with just a general disclaimer that full Medicaid dual eligibles may not be responsible for them and then proceed to specify dollar amount out-of-pocket limits for the plans, a non-sequitur for anything other than Part D co-pays.

   
   

   3. Original Medicare and Medigap give your clients the flexibility to go to virtually any provider anywhere in the country.

      Medicare Advantage HMOs generally limit enrollees to networks, which don’t include all providers, require referrals to specialists, and will not provide coverage out of network except (1) in urgent or emergency cases if the patient is out of the geographic service area or (2) with prior permission if an appropriate practitioner is not available in the network.

      Medicare Advantage HMOs are not appropriate for “snowbirds” or frequent travelers, or if your client’s physicians are not in network or, in my opinion, for the reasons stated above, if you are a Medicaid recipient.

      Although requiring “prior approval” for many common services, the Medicare Advantage PPOs do cover out-of-network services at an additional cost or co-pay, do not require referrals for in-network specialists, and are more appropriate for travelers.

      See, generally, 42 USC §1395w-21; 42 CFR §422.4. And again, visit www.medicare.gov/MPPF for individual information.

      
      

   4. Original (fee-for-service) Medicare appeals (see, generally, 42 USC §1395ff; 42 CFR §§405.701 et seq, 405.801 et seq) almost always involve denials of payment and there is generally no opponent at the hearings held before Administrative Law Judges. Also, the provider or physician is usually your client’s economic ally in seeking payment. Note, however, that Part D prescription drug appeals, even for those enrolled in non-Advantage Prescription Drug Plans (PDPs) often involve denials of service, not payment, and tend to pit the patient against the pharmacist-provider. The Part D appeals process for both Advantage and non-Advantage plans is clearly modeled on the Advantage appeals process. 42 CFR §§423.560–423.636.

      Medicare Advantage HMO and PPO appeals (see, generally, 42 USC §§1395w-22(f)–1395w-22(g); 42 CFR §§422.560–422.626) often concern denials of care and the HMOs send their attorneys to ALJ hearings to argue against your clients; they take appeals from ALJ decisions favorable to your clients and must be made a party to your clients’ Federal District Court appeals. Moreover, because of the risk-sharing economics of the HMO and PPO networks, your client’s physician is often not her economic ally in seeking approval of the care. 42 USC §1395w-25(b)(4).

      The Medicare Advantage PPOs require “prior approval” for many common services, whether in or out of the network, some of which are, incredibly, not disclosed, and are, thus, more similar to the HMOs and their primary care physician “gatekeepers” than to Original fee-for-service Medicare in this critical “access to care” element of your clients’ health care.

      HINT: If your client needs care and can’t wait out the Medicare Advantage appeals process, she may be eligible to dis-enroll from the Medicare Advantage HMO or PPO and go back to Original Medicare. Get dis-enrollment forms from Social Security office or the HMO or PPO or call 1-800-MEDICARE.

      Except for dual eligibles (full Medicaid and Medicare Savings Program enrollees (QMB, SLMB, and QI)) in Medicare Advantage plans with prescription drug coverage (MA-PDs), the dis-enrollment option is severely limited beginning in 2006. Generally, only one change per year outside the November 15, 2005–May 15, 2006 annual coordinated election period is allowed. The change must be made before July 1^st. Dis-enrollment is even more limited in 2007 and beyond, when only one change per year outside the annual election period (November 15–December 31 of the preceding year) is allowed, which must be made before April 1st. 42 CFR §422.62(a); 42 USC §1395w-21(e). In switching to Original Medicare, however, beware of pre-existing condition limitations on Medigap policies.

   5. Physicians and other providers are generally paid on a fee-for-service basis in Original Medicare. See, e.g., 42 CFR §410.150 (Part B); 42 USC §1395ww (Part A hospital); 42 USC §1395yy (Part A Skilled Nursing Facility). If your client is enrolled in Original Medicare, the provider’s economic incentive is almost always, except in Home Health coverage situations, to provide her with health care.

      Medicare Advantage HMOs and PPOs turn this economic incentive on its head. For each individual, sick or healthy, who is enrolled in a Medicare Advantage HMO or PPO, the government pays that plan a set amount of money (capitation rate) each month to provide all care to that enrollee. 42 USC 1395w-23; 42 CFR 422.300 et seq. The economic incentive is to not provide care. The closely-guarded HMO and PPO contracts with network Primary Care Physicians (gatekeepers) rope them into these economic incentives to not provide care, setting up physicians and other providers to do economic battle with their patients.

      Indeed, the statute itself encourages and enshrines economic risk-sharing with Primary Care Physicians and other providers by warranting that Medicare Advantage Organizations:

      may make arrangements with physicians or other health care professionals, health care institutions, or any combination of such individuals or institutions to assume all or part of the financial risk on a prospective basis for the provision of basic health services by the physicians or other health professionals or through the institutions.
      
      
      

      42 USC §1395w-25(b)(4).

      Conversely, it is extremely unlikely that a Medicare Advantage HMO or PPO will encourage your clients to suffer through any unnecessary treatments or surgery.

   
   

   6. Original Medicare and your client’s Medigap insurance company will almost certainly be in business next year. Your clients will not be left scrambling for alternative health insurance or providers.

      The Medicare Advantage Organizations’ contracts with CMS to provide Medicare Advantage Plan coverage in a defined geographic area last for only one year and the Plans can pull out or reduce the size of the area upon simple notice to CMS before the first Monday in June of the year before termination, or later with approval of CMS. 42 USC §1395w-27(c)(1); 42 CFR §422.506.

      All Medicare Advantage Plans must give notice of termination to the enrollee (42 CFR §422.74(d)(7)) at least 90 days before the termination. Contradictorily, those Plans with a Part D Prescription Drug Benefit (MA-PDs) must give 90 days notice to CMS and 60 days to enrollees (42 CFR §423.510).

      With either an MA or MA-PD Plan termination, the enrollee gets a special election period to find a new Medicare Advantage Plan or go back to Original Medicare. 42 CFR §422.62(b).

      The termination danger is not theoretical and you should warn your clients: plan terminations have been a serious and continuing problem and enrollee protections do not limit disruptions in continuity of care, uncertainty and stress. Expect the problem to worsen as insurers disguised as Medicare Advantage Organizations come into new and unfamiliar markets to offer a Part D benefit as part of their Medicare Advantage plans.

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Last Updated: July 2008