Ask the Medicare Specialist
QUESTION:
Can you explain the difference between a deductible and the Maximum Out of Pocket, co-pays vs. coinsurance, and HMO’s vs. PPO’s? I chose a PPO because it’s my understanding I can go to any doctor or hospital. Is that correct?
ANSWER:
So many people don’t understand how the Maximum Out of Pocket (MOOP) works. And in my opinion, it’s the second most important factor to consider when choosing an Advantage Plan HMO or PPO. Let me explain and get to your other questions as well.
The MOOP represents the maximum you can be billed in a calendar year. In Western PA plans, the MOOP can range from $3,400 to $6,700. Deductibles differ from the MOOP in the fact that when someone utilizes services that are subject to a deductible, the total cost of that service is billed to the insured. That’s not how the MOOP works. Let me give you an example. Let’s say you have a plan with a MOOP of $6,700, which is very common. In January you went to see an Orthopedist due to knee pain and the co-pay for that office visit was $40. The doctor then ordered an MRI that had a co-pay of $250. The MRI came back, and the doctor advised a knee replacement, an inpatient surgery that usually requires two to three nights in the hospital which had a co-pay on your plan of $675, let’s say. After surgery, outpatient rehab was required three times a week for six weeks, a total of 18 sessions at a co-pay of $40 per, which would come $720. The grand total you were responsible for during the whole process was $1,685. Subtract that amount from $6,700 MOOP and now there’s $5,015 left of that could potentially be billed to you this year. Paying all $6,700 could likely occur if you required Chemo or Radiation, expensive drugs like Remicade or Prolia that are infused or injected, a lengthy Skilled Nursing stay, or multiple hospitalizations. Please keep in mind that what you pay for prescription drugs does NOT count towards the MOOP!
This brings me to co-pays vs. coinsurance. Co-pays are a set, fixed cost the insured pays for specific services. All those I mentioned above related to the knee replacement would fall into that category. Co-insurance on the other hand, is a percentage of the bill one is responsible for. On virtually every Advantage Plan there’s coinsurance of 20% for Chemotherapy and other “Part B” drugs, durable medical equipment such as oxygen or a wheelchair, prosthetics, and diabetic supplies. Remicade retails for around $2,000 a pop. So, someone with an Advantage Plan would be responsible for $400 each time they received it, which for most people is every four to six weeks.
Most people don’t pay enough attention to what their MOOP is. We do, and almost never advise clients to choose an Advantage Plan with a MOOP on the high end. The MOOP is one reason why some people choose to pay a bit more and go with a Supplement instead. Supplements have little or no out of pocket costs associated with them. For example, a very popular Supplement among our clients is Plans G. A person who had plan G would have been billed just $185 for the same knee replacement scenario described above and wouldn’t be billed for any other Medicare covered services the rest of the year.
Now to the last part of the question on HMO’s vs. PPO’s. Let me first say that you don’t need a referral to see Specialists with an HMO. HMO stands for Health Management Organization, and basically, the only difference from a PPO is that you must get your care from an “in network” provider if you want the insurance company to pay claims.
PPO stands for Preferred Provider Organization and you can get services from “out of network” doctors and hospitals. However, there is a couple of important aspects most people aren’t aware of. First, an “out of network” doctor or hospital is not required to accept your PPO unless it’s for emergency services. For example, the Mayo Clinic, one of the top-rated hospitals in the country, doesn’t take out of state PPO’s. In addition, all available PPO plans in Western PA have an “in network” MOOP of $6,700 that increases to $10,000 when elected services are received “out of network”. And the majority of companies only pay 70% “out of network’ which means a bill for $10,000 would be highly likely if someone on a PPO was responsible for paying 30% for an inpatient a hospital stay or surgery. Lastly, PPO’s are also generally more expensive, sometimes priced higher than Supplements.
Another reason people go with Supplements is they are good anywhere Medicare is accepted. That means access to virtually any doctor or hospital in the country. In addition, claims are paid the same no matter where that service is received, be that in Western PA, West Virginia, Washington State, Washington DC, etc.
If you’re concerned that you may have a higher MOOP, don’t want to be in a situation where you could be billed thousands of dollars, would like to have the differences between Supplements and Advantage Plans explained in more detail, or would like to compare your plan to others on the market, you can do that anytime during the year. Even if you can’t change plans now, it’s always a good idea to learn more about how your current plan works and how to make it work better for you.