As individuals retire or age into Medicare, their insurance situation can change dramatically. There are a multitude of options open to those with Medicare. The terms are different, the prices are different, the products offered are dramatically different each year.
The purpose of this column is to give those who are eligible for Medicare, or soon to be eligible for Medicare, some understanding of their insurance options and how it could impact their health and finances.
These questions and answers are meant as a guide to help you understand the complex questions you are now thinking about. Each individual's specific situation may create a different solution. You shouldn't necessarily do what your friends, family and neighbors do.
Q: I am trying to understand Medicare, but I feel like I can't even understand the words they use. What resources can I use? Can you help with this?
A: The language that we use to talk about insurance is different than most everyday language we use. If you can't understand the language, you can't understand the insurance. Obviously we cannot define all the possible terms, but we will try to define the most common. If something you have come upon is not listed, please submit it and we will define it in a later column. These are not in alphabetical order, but grouped in similar groups or related terms. So here is an updated version of definitions commonly used with regard to Medicare. I would also refer you to the websites; www.medicare.gov or www.medicarerights.org. These two websites have a lot of useful information (if you use the internet).
Premium: The amount you pay the company for your insurance. This is usually paid monthly, but sometimes billed quarterly or annually.
Co-Payment: Many insurance products have some form of co-payment for services that the individual has to pay. This is the amount you pay for the medical services, prescriptions, doctor visits, etc. A co-payment could be a percentage like 20 percent or a set dollar amount, like $10. This is the money that you the individual pay, usually when services are received.
Deductible: This is the amount you the individual pay before the insurance begins to pay its part. These amounts generally change year to year. This is usually a specified amount, for example, $140, or $320, or $500.
Formulary: This is the list of prescriptions (medications/drugs) covered by the plan, or those drugs the plan will help pay for. No plan covers all drugs on the market, so each formulary is a little different. The formulary may cover different medications with different co-pay amounts.
Prior Approval: This is a term used for procedures, hospitalizations or even medications that the insurance company must be informed about and approve before you are allowed to have them. If you do not receive a Prior Approval first, the insurance company may not cover the cost of the procedure, hospitalization or medication.
Quantity Limit: This term usually refers to medications. This means the insurance company will limit the number of pills or doses you are given each day/week/month. An example could be a medication taken once weekly, will have a quantity limit of 4 per month (one a week). This quantity limit may be waived if your physician requests this from the insurance company.
Step-Therapy: This term usually refers to medications. This applies to a category of medications for which your insurance company would like to limit coverage. In this situation the insurance company usually covers a one month supply, and then sends you and sometimes your physician, a letter requesting you evaluate some alternative medication. The insurance will not help pay for a second month's supply unless your physician has reviewed your situation with the company. If your physician feels you need to be on this particular brand, the physician will need to review that concern with the company. If an alternative may work better, then the doctor can contact the pharmacy and you with a new alternative prescription.
Tier: Medications covered by your insurance company are usually grouped into tiers, and your co-payment is determined by the tier that your medication is on. Medicare Part D plans are typically four or five tiers. Tier 1 has the lowest co-payment and usually includes generic medications. Tier 2 has a higher co-payment than tier 1 and usually includes either higher cost generics or preferred brand name medications. Tier 3 usually includes preferred non-preferred brand name medications. Tier 4 and 5 usually include non preferred brand name medications and specialty drugs (like chemotherapy or other extremely expensive medications.) Your health plan may place a medication in tier 4 or 5 because it is new and not yet proven to be safe or effective. Another reason for higher tier is there is a similar drug on a lower tier of the formulary (generic) that may provide you with the same benefit at a lower cost.
Generic: When a brand name medication patent expires, a generic version of the medication can be produced or sold. The Generic version of the drug must use the same active ingredients as the brand name drug, and it must meet the same quality and safety standards as the brand name drug. (Example; Lipitor's patent recently expired and is now available as atorvastatin.)
Brand-Name Drug: This is a medication sold by a pharmaceutical company under a trademark-protected name. Brand name medications can only be produced and sold by the company that holds the patent for the drug. Brand name medications are available by prescription and over the counter (example; Pradaxa or Coumadin)
Medicare Advantage Plans: These are Health Insurance plans that include; Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), Private Fee For Service (PFFS), Special Need Plans (SNP) or Medicare Saving Account (MSA). These plans offer coverage to those individuals with both Medicare Part A and B, and usually without End Stage Renal Disease. Enrollment in these plans means the individual is opting out of original Medicare.
HMO: Health Maintenance Organization. This is a Medicare Advantage type of health plan that offers primarily local and regional coverage. It does provide for emergency care outside of your region and usually world wide. It often requires that you see only participating physicians, specialists and hospitals. These plans often require a primary physician who manages all of your needs and makes the appropriate referrals when necessary.
PPOs: Preferred Provider Organization. This is a Medicare Advantage type of health plan that offers primarily local or regional coverage. These plans allow you to see any physician, but if you see a participating physician (an in network physician) you pay less than a non-participating (an out of network physician). This is true for hospitals also, but out of network hospitals can be significantly more expensive. These types of plans usually do not require referrals. The out of network option allows individuals to have more choices in how they handle their health care.
PFFS: Private Fee For Service Plan. This is a Medicare Advantage type of health plan that allows you to go to any Medicare-approved doctor or hospital that accepts the plan's payment. When you insure with this type of plan you may pay more or less for Medicare-covered services and they may provide extra benefits, more than in Original Medicare. To see if physicians and hospitals participate with a PFFS plan, you need to call the plan itself or ask the physician's office prior to going to your appointment.
Special Needs Plan (SNP): This is a Medicare Advantage type of health plan that requires those enrolled to have specific medical diagnosis or conditions. This type of health plan is not commonly joined by the average Medicare eligible individual. These plans can be ideal for a person with a particular diagnosis or medication condition that is given extra attention by this plan.
Medicare Saving Account (MSA): This is the newest type of Medicare Advantage Plan. The individual enrolled in this plan has more responsibilities with regard to paying bills and managing claims. There are many special rules with this plan and not all Medicare eligible individuals are able to enroll in this type of insurance product. This plan does not provide prescription drug coverage, so you would need additional insurance for your medications.
Next week we will continue with more terms and definitions.
Janell Sluga is a geriatric care manager certified and works for Senior Life Matters, a program of Lutheran Senior Housing, and has worked in Chautauqua County with seniors for more than 18 years. She is HIICAP (Health Insurance Information, Counseling & Assistance Program) counselor-trained by Office for the Aging. She does not sell insurance or represent any insurance company. She is an unbiased source of insurance and education to help seniors choose the best option for them.
You may submit questions to be answered in later columns to Janell Sluga at Senior Life Matters, 737 Falconer St., Jamestown, NY 14701, or call 716-720-9797, or by email at janells@lutheran-jamestown.org. Please remember that not all questions can be answered in this format, but as many as can be, will be.