The Centers for Medicare & Medicaid Services (CMS) has approved applications for 33 new health plans to participate in a Medicare+Choice (M+C) demonstration program to offer preferred provider organization (PPO) coverage to Medicare beneficiaries. Although private insurers have always had the option to offer a PPO under the M+Choice program, few have done so. The demonstration program will test whether changes in M+C payment methods for PPOs will encourage the development of PPO plans, thereby expanding the M+C options available to beneficiaries.

The new health plans will operate in 23 states: Alabama, Arizona, California, Florida, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Missouri, North Carolina, Nevada, New Jersey, New York, Ohio, Oregon, Pennsylvania, Rhode Island, Tennessee, Virginia, West Virginia and Washington. They will begin providing services as of January 1, 2003, and eligible beneficiaries will be able to enroll in the plans during the November coordinated enrollment period.

The newly approved PPOs will begin marketing their plans and beneficiaries will be eligible to enroll as part of the annual fall M+C enrollment period. Beneficiaries and their advocates should consider the following as they decide whether or not the PPO option works for them.

The PPOs established under the demonstration program are open to all beneficiaries who meet eligibility criteria for M+C plans. Press releases describing the demonstration program talked about giving "seniors" the PPO choice available to the under 65 population. Because these plans are M+C plans, they cannot limit enrollment to beneficiaries who are eligible for Medicare based on age. The PPOs also must be open to younger people with disabilities who meet the eligibility criteria. In order to be eligible to enroll in any M+C plan, including the new PPO plans, the beneficiary must have both Medicare Part A and Part B and must live in the geographic area served by the M+C plan. As with all M+C plans, an individual with end stage renal disease (ESRD) is not eligible to enroll in a PPO demonstration plan; however, the plan must provide services to an enrollee who subsequently develops ESRD.

PPOs traditionally establish a network of preferred providers. Most, however, allow enrollees to use the services of other providers who are out-of-network. Enrollees generally pay more out of their own pockets in terms of co-payments for out-of-network services.

The PPOs must provide all of the benefits available under Medicare Parts A and B. All M+C plans must provide the items and services, other than hospice, for which benefits are available under Medicare Parts A and B.

The demonstration program allows the PPO flexibility to determine how the benefits will be offered. A PPO may determine to limit the services for which an enrollee can go out-of-network, thereby placing more restriction on provider choice. A PPO may also determine not to offer all services in-network, requiring the beneficiary to pay more of the cost for services that are only available out-of-network. The plan will satisfy the requirement that it provide all Medicare benefits if the benefits are offered as a combination of in-network and out-of-network services. Beneficiaries will need to review plan material carefully to determine what, if any, limitations a plan places on how services are received. They should be particularly careful to examine whether any restrictions are placed on out-of-network emergency care.

Prescription drug coverage is not a required benefit for PPOs in the demonstration program. Medicare provides limited coverage for prescription drugs. Therefore, the PPOs are not required to offer a prescription drug benefit that exceeds existing Medicare coverage. A PPO that chooses to offer a prescription drug benefit can determine how that benefit will be structured, including caps on coverage, deductibles, co-payments and formularies. Beneficiaries need to review prescription drug coverage carefully to assure that a plan’s benefit meets their needs and provides meaningful coverage.

The PPOs can design the out-of-network benefit to encourage the use of in-network providers. A PPO may choose to impose a higher co-pay for out-of-network services than for in-network services. The higher cost sharing for out-of -network services may exceed the cost sharing required under traditional Medicare for the same service. For example, a PPO may require a 30% co-payment for doctor visits, rather than the 20% co-pay under traditional Medicare.

Out-of network physicians must accept the fee payable under traditional Medicare. Those who accept Medicare assignment may only bill the enrollee for the co-payment amount set by the PPO. Physicians who do not accept assignment are bound by the same limiting charge rules as apply to beneficiaries in traditional Medicare - they can only bill the beneficiary up to 15% more than the Medicare fee schedule. Of course, they can also bill for the plan’s co-payment amount.

An enrollee is responsible for payment in full to a physician who has opted out of Medicare. Once a physician opts out of Medicare, he or she cannot receive any payment from Medicare for two years. Thus, the PPO can neither include the physician in its network nor pay the physician as an out-of-network provider.

The current M+C appeals process will apply. Again, the PPO demonstrations are M+C plans, so the M+C appeals process will apply, even when an enrollee uses an out-of-network provider.

PPOs may be marketed as an alternative to traditional Medicare and a Medigap supplemental policy. In considering whether to enroll in a PPO rather than retaining a Medigap policy, beneficiaries need to compare premiums, additional benefits, and out-of-pocket costs. When comparing expenses, beneficiaries need to consider whether they will have to pay more because they use out-of-network providers. Choice of providers is another factor for beneficiaries to consider when reviewing their options.

Unlike HMOs, the PPOs in the demonstration program will have no capacity limits. They will be able to enroll all beneficiaries who want to enroll.

The PPO contract is an annual contract. Although the demonstration program will be three years, each of the new PPOs has an annual contract with Medicare to provide services. The PPO will have the same option of withdrawing from Medicare or expanding or reducing its service area as other M+C plans. Thus, beneficiaries have no more protection against the withdrawal of a PPO than they would have if they enrolled in an HMO.

Enrollees are guaranteed issuance of a Medigap policy in certain circumstances. They will have the same rights as other beneficiaries to obtain a Medigap policy if they are in the plan for less than a year or if the plan decides to withdraw from Medicare.

In the next few weeks, all Medicare beneficiaries will receive the Medicare & You Handbook 2003. That publication will contain specific information about the M+C plans available in their area, including any PPO demonstration. Information about the new PPO plans will also be included in Medicare Compare on the Medicare web site, www.medicare.gov, and through the 1-800-Medicare number.

Beneficiaries with questions about the specific PPOs or other M+C plans are encouraged to call their State Health Insurance Program (SHIP) for assistance. Phone numbers for SHIP offices are available from state and local offices on aging.
_________________________________

1. Much of the information is taken from the Applicant Questions and Answers on the provider section of the CMS web site, www.cms.hhs.gov.

© Center for Medicare Advocacy, Inc. 05/05/2008