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Decoding Health Insurance in America

Every year the Centers for Medicare and Medicaid Services, a division of the U.S. Department of Health and Human Services, presents Congress with Medicare Fee Schedules. These schedules list the prices for services such as physicians, ambulance services, clinical laboratory services, and products like durable medical equipment, prosthetics, orthotics, and supplies. These fee schedules are accessible on the Department of Health’s CMS website (http://www.cms.hhs.gov/home/medicare.asp).

Enormous amounts of money go into marketing insurance, including developing a recognizable, memorable, and preferably comforting logo, such as those above. [logos clockwise from top left] 1.) CIGNA 2.) Blue Cross / Blue Shield 3.) CD PHP 4.) John Alden 5.) Kaiser Permanente

These fees apply only to those individuals who buy into Medicare through their Social Security benefits. Physicians may determine a higher fee, usually at an average increase of 150%, which is applicable to all those who are not covered by Medicare. Individual insurance companies then determine how these fees are paid.

Medicare is composed of two parts, A and B. Part A covers hospital services, while Part B is strictly for physician fees. Medicare only pays 80% of the entire fee, which means supplemental insurance, such as Encompass 65, Senior Choice, or AARP, is needed. Marlene Utz, a certified professional coder at Jamestown Area Medical Associates of Jamestown, New York, warns, “It’s a real problem. People don’t know that Medicare doesn’t cover the entire charge for a service.” Thus, even though fees are determined by the framers of Medicare, these framers also determine that Medicare will not cover the entire charge for a service. Other private insurance companies work in much the same way.

People pay different fees depending on the type of plan under which they are covered. Of the Americans today who have medical insurance, half are covered by some type of managed care plan. The other type of plan is an indemnity plan, which allows members much greater freedom to choose doctors and hospitals, but at a high price. The three types of managed care plans are Health Maintenance Organizations (HMOs), Preferred Provider Organizations, and Point of Service plans.

In HMOs, people pay a fixed monthly rate. If they go to a doctor who accepts their plan, the only fee is a co-payment, usually $20.00. If they go to a doctor outside of the plan, however, typically only about 80% of their medical fee will be covered.

Preferred Provider Organizations are groups of doctors and hospitals that administer medical services to specific groups. Ms. Utz’s employer, Jamestown Area Medical Associates, is a Preferred Provider organization. The fee for a service is negotiated between the doctors and the health care providers, such as Blue Cross and Blue Shield.

The third type of insurance plan, Point of Service, is not as common. In this plan, the individual pays no deductible and usually no co-payment when using a doctor within the network. The individual selects a primary care physician who is responsible for all referrals within the network. If a person chooses to go to a doctor not in the network, the individual is responsible for all excess charges or deductibles. Ms. Utz points out, “It all changes from plan to plan. Make sure you know what doctors accept your plan and what your co-pay is.”

In New York, the Health Care Reform Act of 2000 created HealthyNY. The objective of HealthyNY is to encourage small businesses to offer healthcare to their employees or provide affordable insurance through state sponsorship to eligible, working, uninsured individuals. Streamlined benefit packages, which are the standardized health insurance packages offered by HMOs in New York, are available for purchase. This package includes inpatient and outpatient hospital services, physician services, maternity care, preventative health services, diagnostic and x-ray services, and emergency care. Prescription benefits are optional. As to the percentage of fees paid, the amount differs depending on which private insurance company the “streamlined” package is purchased through. The funds for this program are drawn from what a representative of the state’s Insurance Department refers to as “the Health Care Reform Act coverage initiative pool.” This pool is formed from assessments and surcharges on insurance companies, premium taxes, and tobacco settlement money.

Where does the money for medical care go? Approximately 17-19% is required for hospital outpatient and ambulatory services, while 21-23% is required for inpatient hospital care. Physician services require 35-37%, and prescription drugs call for 17-19%. The remainder is saved for other services like home care, eye care, and medical equipment, such as wheelchairs and oxygen tanks. These figures are based on products and services offered in upstate New York.

As for the future of health care and the ever-present debates over universal health care, President Bush allotted $400 billion over the next decade to reform and strengthen Medicare, which he calls the “binding commitment of a caring society.” President Bush also proposed expanding Health Savings Accounts, first signed into law in 2004 with a previous Medicare reform bill. These accounts include higher deductible insurance policies that cover larger medical bills and preventative care. The President’s plan also calls for the development of a program such as HealthyNY at a national level and for the dispersion of price information to patients.

Other legislation includes the Health Insurance Marketplace Modernization and Affordability Act of 2005, a bill that will be brought before the Senate for consideration in May and that would allow businesses to come together to offer health care plans on a state or nationwide basis. State officials would be responsible for managing the plans, not the Department of Labor. Businesses would be required to set up fully funded plans and not self-insured plans. Medical advocacy groups, such as the American Cancer Society (ACS), the American Diabetes Association, and the American Academy of Pediatrics, as well as the American Association of Retired Persons (AARP), are planning to lobby against this bill, saying it will restrict benefits and may cause health care costs to rise. Dan Smith, Vice President of Government Relations with the ACS, said, “Not only would this legislation wipe out guaranteed access to cancer screenings, it would remove coverage guarantees for clinical trials, off-label drug use, and smoking cessation services.”

Meanwhile, a law was recently passed in Massachusetts that would require all uninsured state residents to buy health coverage by July 1, 2007 and will also require businesses with eleven employees or more to provide health coverage for their workers. Governor Mitt Romney says of this bill, “An achievement like this comes around once in a generation. Today, Massachusetts is leading the way with health insurance for everyone, without a government takeover and without raising taxes.” The more states that enact such legislation, the more pressure the federal government has to find a solution to universal health care.

For further information about decoding healthcare, see the 2005 New York Consumer Guide to Health Insurers accessible on the New York State Insurance Department website (www.ins.state.ny.us/acrobat/hg2005.pdf) or by writing to the Insurance Department at the following address: One Commerce Plaza, Albany, New York, 12257.

Jess Clever is a graduating senior at UAlbany and will be attending USM School of Law in Portland, ME starting Fall ‘06. Jess was born a writer, but this is her first time working as a journalist. Jess, we thank you for all your outstanding work. You will make a fine lawyer, too! - FBA

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