Some advice for people with Medicare

Time marches on, and Fayette County continues to add to its population of people who reach age 65 and thus become enrolled in Medicare. These words of advice are for them, as they are now in the period of the year, Nov. 15 to Dec. 31, where they have to choose between all their Medicare options.

Medicare provides hospital benefits under Part A, medical benefits under Part B, and prescription drugs under Part D. Parts A and B constitute the original Medicare.

Part A requires no current premium from people who qualified by paying Social Security taxes long enough (and $443 a month from others), while the Part B premium is $96.40 a month per person (approximately 25 percent of the current real cost). Part D benefits are offered by insurance companies, with enough choices to make one’s head spin.

So where’s Part C?

Part C deals with the extra stuff. Originally, it served to regulate supplemental plans offered by insurance companies that offered to pay the deductibles and copays that Medicare didn’t pay. But it was eventually expanded to provide a legal structure for other insurance plans which rearranged all the Medicare benefits through imaginative new plans.

The new plans are called Medicare Advantage plans, and they now include health maintenance organizations (HMOs), preferred provider organizations (PPOs), and private-fee-for-service (PFFS) plans.

Different plans are available in different states and counties, from a multitude of insurance companies. These plans are generally promoted by insurance agents. As their compensation depends on their effectiveness in enrolling members, these agents’ advice is viewed with varying degrees of suspicion.

As a retired actuary — the type of financial experts who compute premiums, reserves and liabilities for insurance companies — I feel more comfortable than most people in wading through the various alternatives Medicare beneficiaries are confronting, and I thought I would volunteer a few helpful thoughts.

I get zero compensation from providing the information offered here, and your disregarding it will affect neither my pocketbook nor even my disposition.

Fayette County is a small county, with only one still fairly new hospital, and few insurance companies are competing for our Medicare business. Many plans advertised in the Atlanta area are not available to us.

The supplemental plans, often called Medigap plans because they claim to fill the benefit gap (deductibles and copays) in the original Medicare plan, are generally available. Their main drawback is that they cost about $150 a month per person, or $3,600 a year for a couple.

That’s on top of the $96.40 a month (over $2,300 per year for a couple) for Part B, bringing the annual total near $6,000 before even considering prescription drugs.

HMO and PPO plans require a network of doctors willing to accept patients, and Fayette does not seem to have enough physicians to make these plans practical or attractive to either insurance companies or Medicare patients.

That leaves the PFFS plans, which pay doctors and hospitals what Medicare would pay them, but makes them free not to accept patients they would otherwise take.

These plans generally have copays that the patient pays up front, and that gives doctors and hospitals the benefit of avoiding further billing and collection.

From an actuarial perspective, these PFFS plans are the soundest and most efficient of all, as the copay deters frivolous visits, and the burden of billing and collecting from patients is virtually eliminated.

PFFS plans are much cheaper than the Medigap plans, and some come with no extra premium at all beyond the Part B premium paid to Medicare. Until now the federal government has encouraged these Medicare Advantage plans on the theory they provide market-based efficient alternatives to basic Medicare. I personally agree.

People who use the original Medicare plan and supplement it with a Medigap plan still have to get themselves a drug plan. Thus they are looking at three plans and three premiums.

Many PFFS plans include a drug plan, thus wrapping up into one plan what could come from three plans.

There is at least one PFFS plan, in Fayette County, which in 2009 will provide full coverage, including an attractive drug plan, for no extra premium beyond the Part B $96.40 monthly premium.

That plan, called SecureHorizons (one word), is offered by United Healthcare, the same company that provides the popular Medigap plans sponsored by AARP. With no deductible and a copay of $5 for primary physicians and $15 for specialists, this plan can be easy on the pocketbook of most patients.

Naturally, I did phone the billing office of Piedmont Fayette Hospital and of my own doctors to inquire whether they would accept this plan, and each one said yes.

That’s the prudent thing for a patient to do, but, as I have explained, it is smart for health care providers to accept it as well, as it can eliminate virtually all patient billing.

If there are other great plans in Fayette County for 2009 Medicare beneficiaries, I am not aware of them, as I have, of course, not had the opportunity or time to investigate all the plans on the market. I have seen bad ones which, to be charitable, I won’t mention.

People who stick with original Medicare, with or without a Medigap supplement, should have a drug plan. Doing without is simply not prudent and brings on a price penalty later on when the need to sign up arises.

The best one I have found, for persons with a limited or zero need for prescription drugs on an ongoing basis, is the First Health Part D Secure plan, from Coventry Health Care, with a 2009 monthly premium of $16.10.

For healthy people with no need for prescription drugs, this is a low price for the protection. This plan has an annual deductible of $175, which is equivalent to paying an extra $14.58 a month for those who have to buy drugs, and that’s still a low price when one considers that the drug copays are just $4 on generics, $20 on Tier 2 drugs and $46 on Tier 3. Most other drug plans have higher premiums and much higher copays.

Going to an ice cream store which offers two flavors, vanilla and chocolate, is simpler than going to one which offers 56 flavors. Medicare comes in a great many flavors these days, and I agree this is confusing. But on balance, we’re all the better for all we have to choose from, so long as we choose wisely. (Avoid that bubble gum flavor ice cream.)

Each of these plans, as you well know, lasts one year. Then the insurance company is free to go back to the drawing board to revamp its plan, for better or for worse, and the customer gets an opportunity to make a plan change.

I hope my brief review of some of the Medicare choices available in Fayette County for 2009 will be helpful to some of you, and I encourage you to provide your thoughts and insights on the subject through letters to the editor or blog entries on The Citizen website (www.TheCitizen.com).

[Claude Y. Paquin, a resident of Fayette County, is a retired lawyer and actuary whose actuarial practice included health plans.]