Hoping Medi-Cal’s Umbrella Is Wide

Question: I have read with great interest your columns about Medicare and supplemental health-care insurance. However, I have a couple of questions which I think many of your readers may have thought about and are concerned about.

I am 66 years old and at the moment am in reasonably good health. I am not under a physician’s care and am not taking medication of any kind. My only income is Social Security and I am covered by Medicare. I have no supplemental health insurance of any kind because I simply cannot afford the premiums. I am not eligible for Medi-Cal because I do have a small savings account, and I have a little more than Medi-Cal allows for coverage.

Very Expensive

I realize that medical attention and especially hospitalization is very expensive and that Medicare covers only a portion of these expenses. My meager savings could be wiped out in just one or two days if I should have to be hospitalized and if I had to pay the difference that Medicare doesn’t cover.

My questions are: What happens to me when my savings are used up and I do not have the funds to pay the difference? Would I then be able to apply for and receive Medi-Cal benefits and would they pay that difference? I absolutely do not want to be sent to County-USC General Hospital. Would I have anything to say about that?--H.L.

Answer: While there’s not a whole lot of comfort in it for you, you’re quite right in your assumption that many readers have, indeed, “thought about and are concerned about” this sort of problem, if our mail is any indicator.

Yes, without Medicare supplemental insurance, you’re vulnerable, all right. How does Medi-Cal dovetail with your Medicare coverage--or does it?

Fortunately, it does, and you are “categorically linked” to the state program (that’s Sacramento’s way of saying you are automatically qualified for Medi-Cal) by virtue of being already enrolled in Medicare. There are, indeed, financial limits, however.

In the case of a single individual, which is how I read your letter, eligibility depends on your not having more than $1,600 in liquid assets.

“Although,” according to Gary Pettigrew, chief of Medi-Cal’s eligibility policy section, “personal assets like his home, car and several other things are exempt. The cash-surrender value of a life insurance policy, however, would be considered a liquid asset.”

If, heaven forbid, you should be hospitalized, you “would have to spend down to the state limit--under the $1,600 level--although this wouldn’t necessarily have to be spent on medical or hospital costs,” Pettigrew adds. “It could be spent on other obligations as well.”

Once you are down below the Medi-Cal limit, however, you would apply to your county government (which acts as the administrator) for Medi-Cal assistance. Does this mean that Medi-Cal then dips into--or takes over--your monthly Social Security checks?

“There is a liability for a portion of what we call his ‘share of cost’ of monthly maintenance,” Pettigrew continues, “but there’s a good chance that it wouldn’t apply in this case if he is receiving Social Security Title II benefits--and that’s where straight retirement benefits fall. His ‘share of cost’ doesn’t apply unless his check exceeds about $500 or $600 a month, and most Title II benefits fall under that.

“Of course, if his monthly check exceeded that by, say, $100, he would have to spend $100 of it as his share of cost,” Pettigrew says, “but there would be no other claim on his Social Security check, and Medi-Cal would indeed pick up everything else not covered by Medicare.”

And no, Pettigrew adds, if you’re covered by Medicare, as you are, you wouldn’t be sent to County-USC Hospital. You can go to any hospital of your choice that accepts Medicare patients.

There is, however, another viable approach to your problem that has nothing at all to do with Medi-Cal, and that would be through one of the so-called “risk contract” health maintenance organizations (HMOs) operating in your area which offer supplemental Medicare insurance without the payment of any premium.

Little Understood

While the HMO concept of group medical coverage--utilizing centrally located clinics staffed by doctors and health-care personnel working under contract--goes back to World War II and was “invented” by Kaiser Permanente, this “risk contract” approach is brand new and still little understood. Even though, on the surface, they are conventional HMOs in every sense of the word, there is one all-important difference: They largely or entirely fill the critical gap between the allowable hospital and medical costs as defined by Medicare and the actual costs of the procedure but at no cost to the enrollee. Previously, this gap could be filled only by buying costly supplemental coverage offered by dozens of private insurance companies.

So, what’s the catch?

Well, it’s not a “catch,” really, but in the words of Jules L. Klowden, the retired insurance executive who serves as Medicare supplemental insurance expert for Senior World, the El Cajon-based monthly newspaper distributed to retirees in California, “it’s a matter of playing the law of averages.”

In other words, Klowden continues, Medicare back in 1982 began a three-year pilot experimental program utilizing about 29 HMOs scattered around the country. The whole thing was based on what the actual average monthly medical cost was to maintain the average Social Security recipient.

“This worked out, roughly, to about $265 a month, although, of course, it varies from area to area.”

Normal Scenario

Under the normal scenario, every Social Security beneficiary gets basic health-care coverage (hospital)--subject to deductibles and limits--without cost. That’s known as Part A. The other section of Medicare is Part B, covering doctors, X-rays, therapy and what-not, and this cost, currently $15.50 a month, is automatically deducted from the monthly Social Security check.

But there are a host of deductibles and costs normally associated with Part B that simply aren’t covered. Most procedures, for instance, stipulate that Medicare Part B will cover 80% of “reasonable fees and charges,” and that’s the big gap to be filled--for which most Social Security recipients (but not you) buy supplemental insurance.

So, how do these “risk contract” HMOs fill this same gap without charging any premium?

“When Medicare began this pilot program three years ago,” Klowden explains, “it offered to each of these HMOs who participated 95% of that average monthly cost for every member the HMO enrolled. Working with averages, you can understand that some folks would not have any medical care at all while others would have a great deal. The experiment was a success, though, and the savings to Medicare was many millions of dollars every year.”

So successful has this proved, Klowden adds, that Medicare, this past February, opened the door to all HMOs in the country that qualify, “although they have to have at least 5,000 enrollees already on the books in order to qualify.”

“I think, in time,” he continues, “that they’ll all go this way.”

The three pioneer risk-contract HMOs in this area were Maxicare, FHP Inc. and United Health Plan, but they have been recently joined by Pacific Care. And another established HMO, General Medical Health plan, is poised to enter the field as General Med.

Where is this rapid shift to the no-premium, risk-contract HMO going to leave the health-insurance companies that have long offered supplemental Medicare insurance for premiums that can go as high as $700 or $800 a year?

There undoubtedly will always be at least a limited market for such policies from people who simply don’t like the Club Med, “togetherness” approach that is inherent in any HMO, and, Klowden feels, it’s a restrictiveness that is even more binding in risk-contract HMOs.

Locked In

“With this type of plan, the subscriber is ‘locked in’ so that he may not get his medical care from any other source and expect Medicare to pay any share of the cost. This is what happens when an individual signs up with an HMO and forgets about it, then goes elsewhere for medical help and gets turned down by Medicare--Medicare has already paid the HMO on that average cost for this individual. Of course, for extreme emergencies out of the service area, when notified, the HMO will cover the cost.”

Also, enrolling in a risk-contract HMOs doesn’t, literally, “lock” you in for life. You can cancel at any time but, Klowden advises, “you shouldn’t jump around from one to another” because it may take anywhere from 30 to 45 days to complete the cancellation, and there’s always the danger of falling through a crack.

Undoubtedly, though, the no-premium, risk-contract HMOs are going to cut into the conventional Medicare-supplement business, “and that’s why a lot of these companies are so busy right now buying up HMOs,” he adds.

In your case--unable to afford any sort of Medicare supplemental insurance at all--you don’t really have any other options open to you. You must sign up with one of the no-premium, risk-contract HMOs as soon as humanly possible.