Dumped by Your Medicare HMO

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More Medicare managed-care plans are dropping coverage for seniors. Here's what to do if it happens to you.

Every Autumn thousands of seniors are greeted with bad news when they open their mailboxes: Thanks to soaring health-care costs, their Medicare + Choice plan (a managed-care plan run by a private insurance company under contract with Medicare) is terminating coverage. This leaves frightened retirees no choice but to scramble for a replacement.

Enrollees always have the Original Medicare Plan to fall back on. But that's of little consolation, since traditional Medicare doesn't offer prescription-drug coverage, while many of the Medicare + Choice plans do. So when Medicare + Choice beneficiaries lose their coverage, they could suddenly face thousands of dollars in out-of-pocket expenses for costly pills.

"Private insurance companies promise you the sun, and then they either move out of your state or charge you more money," says Ron Pollack, executive director of consumer advocacy group Families USA. "You are then left out in the cold."

Of course, if you ask any Medicare + Choice managed-care plan, management will tell you that it's difficult to run a business based largely on the minimal payments they receive from the government. So they have no choice but to exit regions that are unprofitable. And exiting they are. "Florida is a great example," says Kirsten Sloan, a lobbyist with the AARP. "It started out with a lot of Medicare + Choice plans, but then many plans pulled out. We expect to see more plans pulling out this year nationwide."

How many seniors lose their health insurance every year? For 2003, 33 Medicare + Choice plans either withdrew or reduced their service area, affecting approximately 217,000 beneficiaries, or about 4% of the five million current Medicare + Choice enrollees, according to the Centers for Medicare & Medicaid Services (CMS). About 28,555 of those people were left with no other Medicare + Choice option.

Your Contingency Plan
By law, health plans are required to notify their members by early October if they're dropping coverage in a region. So what should you do if you receive a Dear John letter? First of all, don't panic. Your policy must stay in force until the end of the year, giving you nearly three months to come up with a game plan.

If you're lucky enough to have another Medicare + Choice plan (make sure it offers drug coverage) available in your area of the country, that company is required to take your business during the "special enrollment period". (This is the time after you receive your withdrawal notice and the end of the year.) The only time a plan can reject you is if it has too many existing members and has reached what the Centers for Medicare & Medicaid Services calls its approved capacity limit.

Unfortunately, if there are no other comparable Medicare + Choice plans available, you're stuck with the Original Medicare Plan. "That's one of the reasons AARP points to the need to strengthen the overall program," Sloan says. With so many Medicare + Choice plans dropping coverage, it's unrealistic to depend on them to fill in the gaps where the Medicare program falls short, she says.

One alternative: If you're unable to get a new Medicare + Choice plan, you can purchase a Medigap plan instead. (Medigap is a secondary insurance policy that supplements the Original Medicare Plan). Uncle Sam will give you 63 days from the date your Medicare + Choice plan expires to buy certain supplemental-insurance policies, Medigap A, B, C or F plans. These plans will help cover some of the health-care expenses, such as the Medicare Part A deductible and skilled-nursing co-insurance, that the traditional Medicare plan doesn't pay for. (Some states will provide additional rights and allow seniors to purchase other plans, as well.)

You'll notice we didn't mention a drug benefit. Under the current law, private health plans have no obligation to offer Medicare beneficiaries drug coverage after the initial enrollment period that usually coincides with a senior's 65th birthday, says Families USA's Pollack. "The private policies don't want to lose money," he says. "If they think you are sick or need lots of drugs, they will turn you down." If you're relatively healthy, you may be able to purchase other plans, but they'll usually come at inflated prices.

In the meantime, you can sign up for a drug discount card, or wait for May 2004 for a Medicare-endorsed discount card. These should help ease some of the pain, offering savings of 10% to 25%. (During open enrollment for the new 2006 plans, you'll have an opportunity to get Medicare Part D drug coverage or a Medicare Advantage plan, which will be obligated to offer a drug benefit.)

If you find you still can't afford to buy your medications, you may qualify for a state pharmacy assistance program that offers financial assistance for low-income seniors. To find a program in your state, click on www.medicare.gov. You can also speak with an advocate at your local State Health Insurance Counceling and Assistance Program office with any questions you may have regarding losing your managed-care coverage. When all else fails, write your senator or congressman. After all, keeping pressure on government officials to solve this problem can't hurt.