Medicare and HMOs: A Discussion

Sunday, January 29, 2006 | 0

The following discussion recently appeared in our California Professional Forums. The editors felt this discussion was instructive and informative regarding the role of Medicare and managed care. The post has been edited slightly for readability, grammar and punctuation.

A1: Medicare is really the big bible to treatment. It is the one which all things point to including the ACOEM guidelines. This is the basis to treatment. Thus, I thought I would explain how this system works in the hopes that for those who receive it, they can better understand how this system works.

Medicare pays for treatment on what's called the DRG system. DRG stands for Diagnostic Related Groups. Long ago a group of individuals decided what would be the "normal" for treatment given the average use of the system.

So what happens with the DRG is that it is previously decided how much time one should stay in the hospital for a given operation. So let's say that a person has a surgery of which the normal stay would be 3 days under straight Medicare. That is the amount that Medicare pays for this hospital stay unless further needs happen which are then coded for higher payment.

So the HMO comes into play. The HMO is in the business to make money. It also saves the recipient money in that the recipient does not have to pay a co pay on hospital stay. The HMO assumes it. So now the HMO needs to make a profit. Thus, the HMO case-manager, who is paid to see their patients while in the hospital, and arranges for the patient to leave the hospital prior to that given 3 day need. They are still paid according to the Medicare amount; but what they save via having the patient discharge sooner than the Medicare payment amount is their profit.

The HMO also arranges for the prescription meds which until recently Medicare did not. This is also a cost factor in their decision making as to your care.

This system gets abused when HMO's are making dollars off your use of the system. For instance: according to the regs a patient must have a 3 day stay in the hospital before qualifying for rehabilitation benefits in an inpatient center. So here is what happens:

I had a patient who had a stomach cancer. Her cancer resulted in having her stomach removed. The normal stay in the hospital for this would have been 2 weeks. She had the most popular HMO. Their plan allowed her the 3 day stay in the hospital post surgery, sent her to one day of rehab, and then discharged her to home care and TPN. All of us in the hospital were amazed how this could be. But remember this is a system which makes profit. This HMO received payment from Medicare for two weeks stay but got off on 4 days stay. Here is where the profit is. Also that last day was at a lesser amount in rehab.

Now the best way to handle your Medicare in California is to what's called Medi Medi. This is Medicare with Medi Cal backing it up. Smart people who can get this coverage leave their Medicare alone. That way they will always get the full benefits of what Medicare pays for and covers. Most people don't know these rules of billing. I am sharing them with you because I had to work in that system arranging for patient needs in discharge planning.

There are other issues and rules of which I will not go into further since they really don't apply to the point I am trying to make here. The point I am making is chose your HMO carefully if that is what you must do. If you can qualify for Medi Cal at the same time do so. Medi Cal then picks up your co pays as to hospital stay and also covers the prescription drugs if in their formulary.

This is why I argue so strongly on these points. It is not anything personal against anyone. It is fact of how these HMO's that we choose operate. Some HMOs are worse than others. This is how they do business and make profit.

A2: Just wanted to add on to your excellent explanation that another possibility for some people (veterans) is Tricare for Life. I found out when I started receiving Medicare that I had to get the part B in order to keep my Tricare benefits. The Tricare has great prescription benefits, much better than any of the new Medicare ones I've seen!

A3: I agree, Tricare for Life is the Best of all the HMO's. I wish that I could get it as I worked for these people. It is most important that a person take the Medicare part B. Without this no HMO will accept your Medicare.

Remember A is for inpatient hospital and B is for outpatient.

When I worked for and with Tricare, they were spending three dollars to every dollar of Medicare reimbursement if that tells you anything. Great care and plan; it takes care of its own.

A4: There are many, many differences in what Medicare pays for vs. an HMO. Very few approach the need or eligibility of Medicare benefits. And Medicare is ALWAYS secondary to a work related injury.

That said, as a rule, what HMO's provide in benefits, vary by county. But most have co-payments for all services. And they are less than those for Medicare. ie. for an inpatient hospital stay, there is a deductible of $952.00 for each benefit period. (a benefit period is "each qualifying stay"...not annual) Under SH/PacifiCare that stay is $250.00/50.00 (depending on your policy).

The day rate under Medicare is $238 for day 61/90... day 91/150 is $476 per day..(these days are called "lifetime reserve days" and can only be used once.) ...under the HMO...there is NO charge for additional days. There is no limit (ie. 3 days) to hospital stays "as long as you are receiving active treatment, under an approved plan".

Doctor care (office calls etc) also is significantly different...under Medicare, you pay 20% of "Medicare approved charges"...HMO is $5/10.00 co pay. IF the doctor/provider does not accept "assignment", you could pay more than the 20%.

HMO's make their money on the laws of "averages"...hopefully there will be more people paying in, than use the services, just as all insurance companies make their money. IF you do not qualify for Medicare benefits because you didn't pay into Medicare over your working life, you can still get benefits...but you must pay part A, which is about $435.00 per month...when you sign up for an HMO, you "assign" your Medicare benefits to the HMO, and the gov pay them your part A and B premiums...plus more $$$, about 600.00 per month. (may be more now). Medicare will no longer be responsible for your care when you have an HMO. And Medicare does not pay the HMO by how many days you are in the hospital, they pay the "premium" for you, no more. Unlike a "regular" or Medigap policy , ie. Blue Cross...the IC pays the difference between Medicare and the approved charges.

The doctor "groups" you go to are "capitated", in that the HMO pays the group to take care of your medical needs on a day to day basis, if you don't see the doctor, they still get paid monthly for each patient in the "group".

But IF you stay in the hospital for 2 days for a "3 day injury/illness"... Medicare will only pay for the 2 days you stayed. The reason for the "3 day" issue, is that MC/HMO's give you a 3 day hospital stay in order for the doctors to determine the issue and a treatment plan. You MUST be in a hospital for 3 days in order to be eligible for a skilled nursing facility...otherwise you MUST go home, or pay for another facility on your own.

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