Seniors Who Lose HMO Still Covered

As HMOs continue to withdraw from the Medicare program, those eligible for the federal health program face tough choices: Do they find a new HMO or go back to traditional Medicare? Should they buy a supplemental Medigap policy?

Health maintenance organizations have been pulling out of Medicare quickly, claiming that the federal government doesn’t pay them enough to make a profit--or enough of a profit--in certain markets. Across the country, these health plans are dropping coverage for more than a half-million Medicare beneficiaries, effective Jan. 1. In California, nearly 84,000 seniors will face the prospect of losing their current HMO in January.

Members of Medicare HMOs should have received letters during the past week informing them that they have been dropped from coverage.

The situation is particularly complex this year. Traditionally, health plans departed an entire county. But federal regulators, hoping to keep plans participating whenever possible, allowed the HMOs to exit particular ZIP Codes while remaining in the rest of a county. Therefore, it is possible for friends and neighbors in the same health plan to find that one still has HMO coverage while the other doesn’t.

These “service area reductions ... will undoubtedly be a difficult concept for many abandoned HMO enrollees to understand,” Clare Smith, executive director of the California Health Advocates, a group of Medicare and health insurance counseling organizations, said in an e-mail message to her group. “It is becoming very clear ... that this season will be tough,” she wrote.

The first and most important rule is: Don’t panic, and don’t rush to do anything. The 40 million beneficiaries--people older than 65 and the disabled of all ages--must remember that their rights to Medicare are still safe and sound. They have the guaranteed access to traditional Medicare, which enables them to use any hospital or doctor participating in the Medicare program. Someone who loses HMO coverage can return to the regular Medicare program.

Even if an HMO withdraws, it will continue to provide services until Dec. 31.

This gives beneficiaries ample time to look for another HMO operating in their area. The selling point for HMOs usually is prescription drug coverage, which is included in many Medicare HMOs but is not covered by traditional Medicare. The Medicare HMOs also often cover the deductibles and co-payments required under regular Medicare. In return for the added benefits, the patient must stay within the HMO’s fixed network of doctors and hospitals.

If you are looking for a replacement HMO, you should check with your physician’s office to make sure the doctor sees patients in the new HMO you are considering. If you are undergoing physical therapy, ask the HMOs if they cover the same services and what they charge.

Choose carefully because there will be fewer escape hatches next year. Until now, the Medicare program has permitted people to freely switch HMOs, as often as once a month, throughout the year.

All this changes in 2002 because of a law Congress passed several years ago when legislators were confident that HMOs were the wave of the future. The idea was to minimize disruption in the program and to make the government’s Medicare program operate similarly to the way private, employer-sponsored insurance works, with people required to switch health plans only during an annual “open enrollment” period lasting several weeks.

“People need to know that, for the first time, they will be locked in for the choices they make,” said Diane Archer, executive director of the Medicare Rights Center, a New York-based advocacy group.

Between Jan. 1 and June 30, an individual will be allowed to switch just once: You can switch Medicare HMOs, for example, or leave an HMO to return to the traditional Medicare program. After July 1, you’ll be stuck with your choice for the rest of the calendar year.

“We are very, very concerned about the implications of the 2002 lock-in,” said Aileen Harper, associate director at the Center for Healthcare Rights in Los Angeles, an advice and counseling organization. Many of the center’s clients, she said, have resolved disputes with their HMOs--claims that medical services were denied to them--by simply quitting the HMO and returning to regular Medicare, she said.

Someone who is losing HMO coverage but decides not to try a different HMO has another decision to ponder. Should he or she rely on regular Medicare coverage exclusively or buy a supplemental policy, called Medigap coverage? As the name suggests, these are insurance policies designed to fill the holes remaining in the Medicare coverage.

For example, Medicare patients who go to the hospital must pay $792 for the first day of any hospital stay, an annual deductible of $100 for doctor visits and 20% of the cost of care provided by a doctor.

There are additional co-payments for lengthy hospital stays--beyond 60 days--and for extended stays in skilled nursing facilities.

Some or all of these costs may be covered by various Medigap policies, which vary in price depending on the level of benefits they provide. All the various policies have a minimum standard benefit package required by federal law.

For example, all “A” policies cover the 20% co-payment for doctor visits. The “B” policy takes care of the $792 hospital deductible. The “C” policy adds the hospital and doctor deductibles, co-insurance for skilled nursing care and coverage during a foreign travel emergency. The “D” policy adds some home care to this package. “E” adds preventive care. “F” and “G” provide extra coverage for a portion of doctor bills typically paid by the patient. “H,” “I,” and “J” cover prescription drugs. “H” has a $1,250 annual limit for drugs. “I” has the same limit plus some additional coverage for doctor bills. “J” has a $2,000 drug spending limit.

Someone who has been dropped by a Medicare HMO has a guaranteed right to purchase any of the following policies: A, B, C, F, and H, I or J.

The government advises consumers to be careful. “As you shop for a Medigap policy, keep in mind that each company’s benefits are alike, so they are competing on service, reliability and price,” according to the government’s official Guide to Health Insurance for People With Medicare.

The guarantee for former HMO members to buy Medigap coverage began Oct. 1 and continues through March 4, 2002. During this period, the government says, any insurance company that sells Medigap policies “cannot: refuse to sell the policy to the beneficiary, impose a waiting period, exclude coverage for a preexisting condition, charge a higher price for the policy because of a beneficiary’s health status.”

Consumer advocates say Medicare recipients should carefully consider whether they need a Medigap policy, study the benefits, and avoid being stampeded by sales people since all firms must offer standardized policies.

Don’t wait until the last minute, because it may take a company several weeks to process paperwork for a policy application. Someone who wants Medigap coverage to begin on Jan. 1 should file an application by the beginning of December, said Archer.

Individuals who apply for Medigap insurance should include with their application a copy of the termination notice from their Medicare HMO to show they have the guaranteed right to buy the policy.

Information on Medicare HMOs is available from the government’s hotline at (800) 633-4227 ([800] MEDICARE). On the Internet, go to https://www.medicare.gov, click on Medicare Health Plan Compare, and enter your state and ZIP Code for information about local plans.

California residents can call the Health Care Counseling and Advocacy Program hotline at (800) 434-0222.

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Bob Rosenblatt welcomes your questions, suggestions and tips about coping with the changing world of health care. You can contact him by writing Bob Rosenblatt, Health, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053, or by e-mailing bob.rosenblatt@latimes.com. Health Dollars & Sense runs the second Monday of each month.