Health Plans Boost Benefits for Seniors

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Health Plans Boost Benefits for Seniors

By Sarah Lueck, the Wall Street Journal

February 24, 2004

Private health plans are gearing up to sweeten coverage for senior citizens -- part of an aggressive effort to lure them away from the government-run Medicare program.

Starting next month, many private plans will begin using direct mail, advertising and informational meetings to entice seniors to sign up. The main selling point is better benefits.

Currently, more than 10% of the nation's 41 million Medicare beneficiaries are enrolled in such programs. The Bush administration wants to boost that number. As a result, the recent overhaul of Medicare showers $1.3 billion over the next two years on private plans that enroll Medicare beneficiaries. The law stipulates that the plans must use the money to enhance the benefits they offer senior citizens, lower the fees they charge them, or boost payments to the doctors and hospitals who treat them.

In New York , Oxford Health Plans Inc. says it will, pending federal approval, start covering $1,200 of prescription drugs per year instead of the $250 and $500 it currently offers Medicare beneficiaries. In Minnesota , the nonprofit health-maintenance organization UCare Minnesota will reduce premiums by $15 a month for most of the 26,000 seniors it covers. In Philadelphia , seniors in one of Aetna 's HMO options won't have to pay a monthly premium to the plan at all, beyond what the government-run program deducts from Social Security checks. "This is the gold rush for the insurance industry," says Robert Laszewski, a consultant with insurance-industry clients.

Whether it is a good idea for Medicare beneficiaries to enroll in private plans is one of the most heated subjects in the debate over the future of the program. Private plans typically offer more benefits than traditional Medicare; the government program doesn't cover routine physicals, for example, but many private plans do.

However, the private plans generally aren't as flexible about choice of doctors and hospitals. Medicare generally covers visits to any doctor or hospital the patient chooses. But the private Medicare plans -- known as Medicare Advantage plans -- tend to have managed-care type networks, limiting patients to certain doctors and hospitals that have agreed to discounts.x

While the Bush administration and many Republicans say that increasing the number of Medicare beneficiaries in private plans will help provide better care and eventually reduce Medicare spending, Democrats argue that the program will be weakened and seniors will end up with widely differing benefits depending on where they live. Medicare Advantage plans are offered in most major cities, but many sparsely populated regions don't have them. In fact, one-third of the counties in the U.S. don't have any at the moment.

Some seniors are enthusiastic about the changes. Jan Randolph, 79 years old, recently read in the newspaper that starting in March her Secure Horizons plan from PacifiCare Health Systems Inc. will stop charging her a monthly premium of $25 and start covering up to $2,000 in brand-name drugs a year. Right now the plan covers only generic medicines. To Mrs. Randolph's delight, the plan already offered a free membership to the health club near her home in a suburb of Fort Worth , Texas , where she and her husband exercise nearly every day.

In the past, relatively few Medicare recipients have joined private plans, largely because they aren't available everywhere and also because plans had been cutting back on coverage in recent years. Consequently, the government is now being very generous to private plans.

The extra federal money available to Medicare Advantage plans amounts to an average 10.6% payment increase over last year. That's a big switch from recent years, when annual increases were 2% and private plans dropped more than two million beneficiaries.

As a result of the increase in aid, AAHP-HIAA, the trade association for the insurance industry, says a new survey found that about 93% of Medicare Advantage beneficiaries will see premium reductions this year. About 60% of beneficiaries in the plans will get more generous benefits. Roughly a quarter of health plans said they would expand to new parts of the country.

But the risk to people choosing private plans is that if Medicare costs mount and deficits become a big political preoccupation, Congress will cut back on its subsidies. "What your HMO gives you, your HMO can take away," says Bonnie Burns, a policy specialist for California Health Advocates, an association for people that run state-contracted advocacy and counseling programs for Medicare beneficiaries.

Beneficiaries in traditional, government-run Medicare can switch to a private plan any time, provided there are Medicare Advantage plans available in the area where they live. (That won't always be true. Starting in 2006, government rules will require people to sign up during an enrollment period and then stick with their choice for the rest of the year.) To find out what is available in your area, contact 1-800-MEDICARE, the government's information hotline.

The challenge for many elderly people will be sorting through the array of choices. Plans in a given area may have widely varying premiums and co-payments and lists of preferred drugs that are vastly different from one another. Some may offer dental coverage or low fees for physician visits; others may pay for only generic drugs or charge high prices for brand-name medications that aren't on their list of preferred products.

"You have to take a good look at what you have now and what you're being offered," Ms. Burns of California Health Advocates says. She recommends a close examination of whether a private plan will offer better benefits at a lower cost. If seeing a particular doctor or having access to a specific hospital is a priority, check whether they are in the plan's network. The same goes for specialists, Ms. Burns says. People also might want to find out how far they will have to travel to reach in-network providers, such as pharmacies. And they should find out how much they'll have to pay for the medicines they typically take.

Beneficiaries in the private plans pay set co-payments, generally between $5 and $35, instead of the 20% of the bill patients are charged under traditional Medicare. Beneficiaries in Medicare Advantage pay the same premium that regular Medicare beneficiaries pay -- $66.60 a month this year, which is usually taken out of their Social Security checks. But the private plans may choose to cover some -- or even all -- of that cost.

The traditional Medicare program still will be available for beneficiaries who decide to leave the private plan or are dropped. If they are dropped, they are guaranteed coverage with no extra premiums under certain supplemental Medicare plans, called Medigap, for 63 days. (Medigap plans are private policies that pick up services and items that the government Medicare plan doesn't cover.) But if beneficiaries leave the plan because they are dissatisfied, they may have difficulty getting Medigap when they go back to Medicare.