** Hospital Care
** Nursing Home Care
** Hospice Care
** Home Health Care

Medicare Part A - Features

** $792 deductible per benefit period
** Diagnostic Related Groups (DRGs) to pay hospital
** 100% of nursing home care for 20 days;co-payment up to 100 days
** 100% of hospice care

Medicare Part A

Medicare has two parts. Part A covers all but the first $792 of inpatient care at the hospital per benefit period of 60 days. So if an individual is admitted in Week 1 for a heart attack and is re-admitted on Week 2 for a hip fracture, they would be required to pay $776 a second time. Part A does cover labs, x-rays, and other procedures in the hospital, but it does not cover any physician costs associated with the labs and x-rays, nor does it cover your physician, surgeons, and other specialists in the hospital.

In 1983, the federal government under TEFRA, decided to cap hospitals and pay them a certain amount of money for a procedure. If the costs to the hospital were less than the amount paid by the federal government, the hospital was allowed to keep the difference. Similarly, if the costs to the hospital were more than the amount paid by the federal government, the hospital had to continue to provide care. So what you frequently hear from hospital patients is "my days have run out" and they are needing to be discharged from the hospital. Technically this violates the spirit of the law, but does happen to patients on a regular basis.

Part A also covers the first 20 days in the nursing home at 100% if you need skilled care and if you are making progress. "Making Progress" is the key. One of the problems we have recently experienced is how we measure "progress". Part A may also cover up to 100 days in the nursing home if the individual continues to need skilled care and is making progress. Medicare will not pay any more than 100 days in the nursing home for a specific diagnosis under any circumstances.

Medicare Part A will also pay for 100% of hospice care. If the individual is determined to be terminal within six months, Medicare will pay for home health services, social workers, grief counselors and others to work with the dying patient. Medicare will not pay for room and board services. These services can be delivered on an in-patient or out-patient basis.

Medicare Part A will also pay for some home health services, but most services are covered under Part B.

Medicare Part B - Benefits

** Physician's services
** Specialist services
** Laboratories and X-rays
** Flu Shots
** Mammograms
** Psychiatric Services
** Home Health Care
** Therapy
** Durable Medical Equipment
** Preventative Services
** Immunizations (Flu and pneumococial)

MEDICARE - PART B - Features

** $100 annual deductible
** 80% of approved charges for physicians charges
** 100% for home health, lab, x-ray, therapy
** 80% for durable medical equipment
** 100% for flu shots
** 100% for mammograms every year
** Diabetic self-management
** Pap Smear and pelvic exam every two years
** Care from a nurse practitioner
** Bone mass measurements if you meet Medicare requirements
** 80% for Colorecteral Screening
** Medicare assignment

Medicare Part B

Now we will move to Part B of Medicare. Part B has a $100 deductible. After that, Part B pays for outpatient services, but the amount varies depending upon the type of services. These include physician's fees, specialists fees, labs, x-rays, flu shots, mammograms, home health care, therapies, durable medical equipment, psychiatric services, and other similar kinds of services.

So how does Medicare Part B pay? In the case of physician's services, Medicare pays only 80% of the approved charge for these services, not 80% of the physician's fee. So what happens is that the physician charges $100 for a visit. Medicare comes along and only approves $60. Medicare will be 80% or $48. This frequently causes individuals to owe money, if the physician does not accept Medicare assignment. Under Medicare assignment, the physician agrees to accept the payment of $60 as payment in full with $48 coming from Medicare and $12 from the individual or the supplement. The physician writes off the $40 or the difference between $60 and $100. Physicians are bound by the limiting charge which means they can only charge the patient 15% more than the Medicare approved charge.

As for labs, x-rays, home health care and therapies, the provider agrees to accept the payment from Medicare as payment in full. The provider negotiates a rate with Medicare.

As for mammograms and flu shots, the cost is paid in full. For durable medical equipment, Medicare pays 80% of the approved charge and the patient is responsible for the balance.

Oxygen is also a capitated benefit at this time, meaning if an oxygen company agrees to provide services, they take a lump sum of money each month and they agree to provide the necessary oxygen services to the patient. A co-payment may be charged.

There are four ways to pay for services that are not covered by Medicare. These include Medicaid, supplemental insurance, and health maintenance organizations.

First we will cover Medicaid.

MEDICAID - how do people qualify?

1. Old Age Pension

Income < $567/month ($1,134 couple)
Assets < $2000 (3000 couple)

2. Qualified Medicare Benefits

Income between $568 and $736 (less $1096 couple)
Assets < $4000 ($6000 for couple)

3. Home and Community Based Services

Income <$1590/month
Assets >$2000

4. Nursing Home Care (in Colorado - may differ for other states)

Income <$<$1590/month (if income is more, apply for a Medicaid Qualifying Trust)
Assets <$2000


Medicaid is a state run program with approximately 50% of the funds coming from the state and 50% coming from the federal government. Medicaid is what we used to call "welfare". Individuals qualify for Medicaid in four different ways:

1. Their income is less than $567 per month and they have less than $2000 in assets, excluding their house and car. These people are age 60 and over and are on a program called Old Age Pension (in other states individuals may qualify if on Supplemental Security Income).

2. Their income is between $567 and $736, have less than $4000. These people qualify under the Qualified Medicare Benefit program.

3. Their income is between $737 and $1590 and they need home and community based services. These services are provided to individuals who are sick enough to be in a nursing home, but with support can stay in their own home. Again, the house and car are exempt and the individual cannot have more than $2000 and $3000 for a couple.

4. The last way individuals qualify for Medicaid is if they make more than $1590 and less than $3792 and have to be in a nursing home. Again, the individual may have $2000 in resources. The car, house, irrevocable burial policy, and term life insurance are exempt only if there is a community spouse.

Medicaid pays for a lot of things in addition to health care. In situations where individuals need health care, Medicare pays as described above and Medicaid pays the balance for such things as Part A and B deductibles, co-pays, and premiums that would normally be the responsibility of the individual. In addition, to these basic services, Medicaid also pays for prescription drugs and limited dental care.

Rarely, if ever, is there a denial for Medicaid services if the individual has a valid card and is currently receiving benefits.

Recently, a number of individuals who are receiving Old Age Pension and who are not receiving Medicare benefits have been switched to a Medicaid managed care HMO. Individuals who are in these Medicaid managed care HMOs are required to select a primary care physician who manages their care. These individuals are also charged co-pays and denied services if they seek care which is not emergency and not pre-authorized by the primary care physician.

Individuals who receive Medicare and Medicaid cannot be forced to join a Medicaid health maintenance organization.

Medicare  Supplements

** 10 standardized plans A - J
** Must cover 20% not covered by Medicare
** Excess charges
** Medical Underwriting
** Premiums are age rated
** Guaranteed renewable
** Medical necessity
** Free choice of providers
** Prescription drug coverage only in H, I, J
** Providers must file with Medicare, but not the supplement

The next type of financing to supplement Medicare is Medicare supplements or sometimes referred to as MediGap insurance. A Medicare supplement is designed to provide insurance coverage for those charges that Medicare does not cover. For new enrollees, Medicare supplements are now standardized.

Ten standardized plans, A through J are available. Plan A, which is offered by every company, covers the 20% co-pay which the individual is responsible for when Medicare pays 80% of the approved charge. The other plans add additional benefits. Plan F is probably the most affordable for the coverage. It covers the "excess charges". In our example earlier, if the physician charged $100 and Medicare approved $60, Medicare would pay $48. The Medicare supplement has to pay the $12. Plan F would also pay the $40. Plans H, I and J cost more because they also pay for up to half of the prescription drug benefits.

Company A which offers coverage must offer the exact same benefits as Company B. The main difference between the two policies is cost to the consumer. Costs run usually from about $45/month for Plan A to as high as $170/month or more for Plan J. Plan F usually runs about $100 to $145 per month.

Other things to consider when purchasing a Medicare supplement are underwriting guidelines -- does the company make you take a physical before they insure you or do you answer medical questions. Most companies have some kind of policy on pre-existing conditions. According to the law if you are enrolling for the first time for Medicare Part B services, you have a six month window in which you do not have to meet underwriting criteria. However, after you have passed the six month window and change companies, you may be subject to a waiting period for pre-existing conditions. This can only happen once in a person's lifetime.

Another feature to review is renewability. Some companies offer a guaranteed issue, meaning if you pay your premiums, they cannot cancel your policy. Other companies reserve the right to cancel your policy if they feel your claim history is not consistent with their company goals.

Another thing to review when purchasing a Medicare supplement is how policies  rate their premiums. Many policies increase their premiums either annually depending on age or in classes such as one premium for 65 - 69 year olds, an increased premium for 70 to 74 year olds, and so forth.

Physicians and hospitals are required by law to submit their bills to Medicare, but they are not required to bill the Medicare supplement.

Medical necessity is determined by the primary care physician. There is limited review of the treatment plan by anyone in the insurance company or the community.

The individual has the ability to seek care from any physician, specialist, lab, nursing home, or other provider that is desired as long as they are located in the United States. The individual can seek that care at their own discretion without the approval by the insurance company. Procedures which may be termed experimental or investigational may be covered by Medicare.

Unless the individual has prescription drug coverage through some other source, most Medicare supplements do not have this benefit. The individual is free to purchase any type of medications that they choose.

Mental health visits are on a parity with other types of visits with Medicare paying 50% of the costs.

Health Maintenance Organization features  - or Medicare Part C

** Staff Model vs IPA model
** Payment of physicians -- salary vs contract
** Capitation vs risk
** Closed panel of physicians
** Pre-authorization and referrals do not guarantee payment
** Prescription drug benefits
** More restrictive definition of medical necessity

The next type of financing is an Health Maintenance Organization. An HMO is both a provider of care, as well as a financier of health care. Health care is delivered through a series of negotiated contracts between the HMO and the hospitals, physicians, specialists, pharmacies, nursing homes, home health agencies, laboratories, and therapy providers.

There are two types of HMOs -- the staff model in which all of the physicians are usually on salary and work for the company and some or all of the other providers such as hospitals, home health and so forth are on contract, and there is the Independent Practice model in which the HMO only contracts with a number of physicians and other providers to provide services.

In the staff model, primary care physicians are paid a salary and usually share in the profits of the company at the end of the fiscal year. In the Independent Practice Model, primary care physicians negotiate a rate of "say $25 per patient with the HMO". The physicians are paid in one of two ways -- either through capitation in which the primary care physician receives a flat fee for each patient he or she agrees to serve each month and the primary care physician is responsible for covering the costs of care including office visits, lab and x-rays, and specialist visits; or the primary care physician is paid on a fee for service basis in which the physician is only paid when he or she sees a patient. In the Independent Practice Model, primary care physician may also receive a share of the profits of the HMO, the hospital and/or the pharmacy depending on the arrangement between the primary care physician and the HMO.

HMOs usually have a closed panel of physicians. This means that individuals can only go to those physicians who have agreed to accept the fees negotiated with the HMO. Referrals to specialists are limited as well to those individuals who are on the panel. Individuals can only seek care that is referred by the primary care physician. However, referrals and pre-authorizations do not guarantee that the HMO will determine the procedure or visit was medically necessary and pay the fee.

Some HMOs offer prescription drug benefits. The prescription drug benefit is usually calculated on the price the HMO negotiates with the pharmacy, not the co-payment made by the individual. Pharmacies contract with the HMO to provide a certain list of drugs, which is called a formulary. To keep costs lower, pharmacists may use therapeutic substitutions in which they substitute one medication that is similar in nature to the one prescribed by the physician, but cheaper. Another option is for the HMO to utilize generic drugs that are cheaper, giving the pharmacist a larger profit margin. Some of the newest drugs with fewer side effects may not be on the formulary.

Mental health care is usually restricted by the number of visits per year to inpatient and outpatient facilities. There is usually little discrimination between type of diagnosis and number of visits. There is a tendency to treat mental illness with medications, rather than counseling and therapy.

Some areas in which costs may be reduced include:

1. Procedures which are termed investigational and/or experimental and are
    usually not covered  by the HMO;

2. Using restrictive definitions of medical necessity; reviewing procedures prior to authorization;

3. Referral to specialists after review by the HMO

The Medicare Risk contracts are required by federal law to have a coverage-appeals process. However, few people take advantage of it. According to the Wall Street Journal, insurance-industry officials figure that 10% to 20% of health-plan members informally question a coverage decision in any year, while at most 1% file a formal grievance or appeal.

Individuals first must utilize the internal appeals process that usually requires that a complaint be filed in writing to the HMO. The HMO usually has 14 days to review the complaint and make a decision. If the individual is not satisfied with the finding, the individual can file an appeal, again in writing usually within 14 days. Another review board in the HMO will review the appeal and make a determination. Any time a complaint is denied by an HMO to a Medicare beneficiary, it must be reported to the Network Design Group.

Individuals who feel the denial is life-threatening, may file an expedited appeal. Under an expedited appeal, the HMO has three days to make a decision.

If the individual is not pleased with the findings, a complaint can be filed using the regular routes followed by Medicare. Issues related to quality of care can be filed with the Colorado Foundation for Medical Care; issues related to reimbursement and interpretation of benefits can be filed with the Colorado Division of Insurance; and issues related to certification can be filed with the Colorado Department of Public Health and Environment.

In 1995, federal regulators handled 3,151 bill-payment disputes involving Medicare HMOs and their members last year. Here are results overall and for some common disputes.  

Disputes for Medicare HMO's in 1995

Another alternative if you are not satisfied with the outcome is to look to the courts. There are several organizations that are developing some expertise in mediation between patients and HMOs. However at this time, these findings are not binding on either party.

Your last alternative is to seek out remedies through the courts. There are a group of attorneys who have begun to practice in the area of filing cases on behalf of patients against HMOs. These cases are usually very costly and time consuming. When the courts find in favor of patients, the settlements are usually very large -- in the millions.

In summary, one of our biggest dilemmas facing health care today is whether we as a society are willing to look at the benefit of the society as a whole or if we view our personal health care as the most important. Our second problem is the expectation that health care will always deliver the best and latest technology. As we try to meet this expectation, we are often blinded by the good of the society and turn our attention to the individual -- ourselves or our loved ones -- thus the on-going concern over rising health care costs.