Question: I've enclosed two advertisements--one a full-page newspaper ad for Maxicare and the other a direct-mail pitch from FHP Inc. They seem pertinent to Medicare participants who may be seeking more reasonable health-coverage costs and who do not have any other supplements to cover those things that Medicare does not pay for.
The enclosed health information describes plans that seemingly offer full coverage without any need for a supplement and at no further medical cost to me, since I'm a Medicare enrollee. I presently have both hospital and medical coverage under Medicare deducted from my small Social Security check (for wages earned prior to government service). In addition, as a retired federal government employee I am also covered by Kaiser Permanente.
My Kaiser monthly premium has risen to about $29, not including the additional amount the federal government pays toward my Kaiser coverage.
But the question really is: Do these plans really offer total health coverage, or coverage at only 50% of what Medicare deems appropriate? If so, it seems to me that I would still need supplemental coverage and should keep the Kaiser plan. Do either of these plans offer sufficient coverage so I can drop the Kaiser plan and save $29 a month, a sizable outlay for me?--M.V.
Answer: We took your question to semi-retired, 74-year-old Jules Klowden, a former Mutual of New York executive, who has become Southern California's most visible expert on Medicare supplemental insurance.
In recognition of the fact that the average senior citizen is just about as equipped to read the blueprints for a nuclear submarine as he is to cope with the tiny type in an insurance policy, Klowden annually takes on the chore for Senior World of California, the El Cajon-based monthly publication aimed at the 55-plus market. For the eighth year, Klowden's eight-page supplement comparing the costs and features of 33 Medicare supplement policies being offered in the area has been published by Senior World.
Included in the comparisons: premium or subscription charges, registration fees, policies on pre-existing medical conditions, deductibles (if any) on hospital entry for the first 60 days, co-payment policies on the next 30 days, co-payment policies on the next 60 days, maximum periods of coverage for any one benefit, policies on skilled-nursing facilities, deductibles (if any) for blanket medical care, policies on outpatient care (for such things as X-rays, lab fees, radiation), policies on prescriptions, renewability of the contracts, travel restrictions out of the area and (where applicable) those portions of the state where the plan is available or, by omission, not available.
(Reprints of the 1985 "Comparison Guide to Medicare Supplement Insurance and Health Maintenance Organizations" are available at $2 each from Senior World Reprints, P. O. Box 1565, El Cajon, Calif. 92022).
The rationale behind all supplemental insurance, of course, is simple:
As indispensable as it is for Social Security recipients, Medicare has wide, gaping holes in its coverage of both hospital costs (known as "Part A") and other medical costs ("Part B"). Example: Medicare covers all of the hospital costs for the first 60 days, but there's a $400 deductible that the individual has to pay on admission. For the next 30 days in the hospital, Medicare pays the cost of everything over $100 a day, but the individual pays the first $100 per day.
And under Part B (medical), Medicare pays 80% of "reasonable fees and charges" for outpatient care, but "reasonable" doesn't necessarily translate as "prevailing" fees and charges. For example, your doctor may perform an office procedure for which he bills you $150. But Medicare, in its wisdom, has deemed that a "reasonable" fee for this service is $80. It, therefore, pays 80% of the $80 ($64), which leaves you stuck with $86 to pay yourself . . . which is 57% of the cost, not 20%.
The two coverages that you have seen advertised--Maxicare and FHP Inc.--are both HMOs (health maintenance organizations, which are medical/hospital providers in which services are normally performed at central locations--clinics or hospitals--by either staff personnel or personnel who are under contract to the HMO). Fourteen other HMOs are covered in Klowden's study. FHP, Maxicare and one other, whose mailing list you're not on yet (United Health Plan), are different, however, in one major respect.
FHP and Maxicare, at least, make much of the fact that they are "free."
Fee Is Being Paid
And, Klowden said in a telephone interview, while this is technically true--in the sense that you don't pay a monthly or quarterly premium as you do for the other policies--the fee is being paid by someone: the "someone" being Medicare.
"It's part of a pilot program," Klowden said, "that Medicare started about three or 3 1/2 years ago under which it entered into a contractual agreement with about 29 HMOs around the country."