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Special coverage: Medicare

Costs push more toward Medicare HMO

By GREGORY GAY
Published October 30, 2005

The Medicare program had 42-million beneficiaries and total expenditures of $309-billion in 2004. The Medicare Part A Trust Fund is reportedly unable to pay all claims by 2020 under the current funding provisions. Medicare Part A pays for hospital, nursing home, short-term home health and hospice care. The long-term outlook for Medicare Part A is of concern because of the steady increases in the projected health care costs and the growing number of Medicare beneficiaries.

The 1.65 percent of wages paid by the employee and the employer for Medicare has not been increased since 1985. Congress must decide if the amount withheld from wages should be increased. Physician services and most outpatient services are covered under Part B, which is funded by premiums from Medicare beneficiaries and our government's general revenues. The prescription drug benefit that begins in 2006 will also be funded without Trust Fund dollars.

Due to this increasing cost, the 2006 Medicare Part A hospital "spell of illness" deductible is increasing to $952 and the skilled nursing facility co-insurance amount is increasing to $119 per day.

The 2006 Medicare Part B premium is increasing to $85.50 per month, the Part B deductible is increasing to $124 per year and the monthly premium is expected to average $32 for the first year. In 2007, the Medicare Part B premium will increase by a greater percentage for a Medicare beneficiary with an annual income of more than $80,000 and a married couple with an annual income of more than $160,000.

The increasing cost of the Medicare deductibles, the Medicare supplement and the additional cost of the Medicare Part D prescription drug plan will eventually drive many of the 35-million original "fee-for-service" Medicare beneficiaries into joining the 4.6-million Medicare beneficiaries currently enrolled in a Medicare Advantage HMO.

A Medicare Advantage plan is owned by a private company that provides all of a beneficiary's health care and prescriptions through the plan's health care providers for a capitated rate paid by the Centers for Medicare and Medicaid. The primary physician, who is assigned to the Medicare Advantage beneficiary, serves as a gatekeeper to specialists. Thus, the beneficiary's health care cost is reduced while his or her health is maintained.

A Medicare Advantage beneficiary must select from a panel of physicians offered by the plan. Every year in November, the Center for Medicare and Medicaid conducts an election period during which time all Medicare beneficiaries are able to choose between the original Medicare program and a Medicare Advantage plan. Beneficiaries who fail to make an election and are in the traditional Medicare program remain in original Medicare. Those who do not make an election, but are already on a Medicare Advantage plan remain in that plan. Persons who enroll in a Medicare Advantage plan for 2006 will be locked in to that plan for six months. In subsequent years, the beneficiary will be locked in to a Medicare Advantage plan for the entire year.

Although Medicare Advantage may seem to save beneficiaries more money at first, they will only save money if they use the plan's doctors for all their care. In addition, because Medicare Advantage plans only have one-year contracts, the provider can decide to change its costs and even leave the Medicare program.

-- Vicki Gottlich of the Center for Medicare Advocacy Inc. contributed to this report.

-- Gregory G. Gay is a lawyer who specializes in elder law in Pasco, Hernando and Citrus counties. Write him in care of Seniority, St. Petersburg Times, P.O. Box 1121, St. Petersburg, FL 33731.

[Last modified October 28, 2005, 14:25:02]