FPA Financial
Planning Perspectives
Are you going to lose your current Medicare HMO
coverage beginning in 2001? You’re not alone if you are. In midsummer, the
federal government announced that Medicare HMOs nationwide would drop coverage
for over 700,000 enrollees next year. That’s equal to the total number of
enrollees Medicare HMOs dropped in the last two years combined. Many other
Medicare HMO beneficiaries still covered are losing benefits, paying more for
coverage or losing their doctor. If you’re faced with one of these situations, financial
planners recommend considering the following options so you’ll be able to keep
affordable coverage.
Don’t drop your current coverage. It’s okay to sign up with another HMO or other program
that starts at the beginning of 2001, but stick with your current HMO until the
end of the year. If you drop early, you could lose some important benefits,
which will be discussed below.
Start looking at alternatives now. Inform yourself of all available options in your
area: other Medicare HMOs, traditional Medicare, Medigap policies, retiree
health care benefits and so on. You want to be enrolled and ready to go at the
start of the new year so there are no lapses in coverage.
Consider another Medicare HMO. If you liked using a Medicare HMO, consider switching
into a new plan. They must take you regardless of your health, unless you have
kidney failure. Most
people should be able to find another HMO, but not everyone. A study by the
Barents Group and the Henry J. Kaiser Family Foundation found that 20 percent
of the 400,000 enrollees dropped in 1998 had no other HMO to sign up with. People
living in larger cities and in certain regions of the country will probably
have multiple HMOs to choose from. But start looking now. Some HMOs are capping
enrollments.
Study the other plans carefully to see what coverage
is offered at what price. You may be forced to change doctors or hospitals, or
pay higher premiums. Pick a solid HMO. Many are losing money and you don’t want
to join one that’s going to quit on you in a year. Local newspapers often carry
stories about the stability of area HMOs. Medicare HMOs getting out of the
business are required to inform their enrollees of area HMOs that are accepting patients. Also check with your state
insurance department or www.medicare.gov to learn which Medicare HMOs serve
your area.
Use traditional Medicare. If you can’t find another HMO, or don’t want to, you
are automatically enrolled in traditional Medicare. The Barents/Kaiser study
found that one-third of those dropped in 1998 returned to traditional
fee-for-service Medicare, and not always because they didn’t have an HMO option
available.
Of course, the reason 6.5 million of the 39 million
eligible Medicare beneficiaries are signed up for HMOs in the first place is
because they feel they get better coverage for less money than that provided by
traditional Medicare. HMOs typically cover prescriptions to some
degree—traditional Medicare does not, though that’s been proposed in
Congress—as well as covering co-pays and deductibles.
On the other hand, Medicare’s fee-for-service allows
for a wider range of doctors and it will cover you wherever you are in the
United States (but not abroad). Most HMOs limit coverage to their region.
Consider supplemental insurance. Medigap coverage is private supplemental insurance to
plug the holes left by traditional Medicare. Congress established ten
standardized plans, A through J, that are available in most states. The most
basic plan covers Medicare Part A and B coinsurance and 365 days of
hospitalization after Medicare benefits end. Other plans cover additional
benefits, such as Part A deductible, coverage in foreign nations, skilled
nursing coinsurance and prescriptions. However, only three of the ten plans
provide drug coverage, and that’s with a deductible, coinsurance and maximum
annual benefit.
Features in a given plan will be the same regardless
of the company offering that plan. The main differences in the coverages are
cost and the soundness of the company. As long as you don’t drop your Medicare
HMO coverage before December 31, and you sign up with a Medigap plan by March
3, 2001, you are guaranteed Medigap coverage regardless of your health.
September 2000— This column
is produced by the Financial Planning Association, the membership organization
for the financial planning community, and is provided by Rich Chambers, CFP, a
local member in good standing of the FPA. Questions? Contact Us…