Health Insurance 


There are multiple forms of health insurance.  I will discuss the main ones.

  1. Indemnity insurance: This nowadays is a rare form of insurance in which the patient pays a certain premium and sees the physician who provides a service to the patient. The physician sends a claim to the insurance company and the company then pays him in full for the billed service.
  2. PPO: Preferred Provider Organization. In this model, an insurance company will go to a group of physicians and recruit them with the promise that it will channel patients to them, thus increasing their practice volume.  The exchange here is a discount.  This same company will also go to hospitals and try to exact a discount. Initially many years ago, this started with a 5% or 10% discount.  Today, discounts up to 75% or 80% of the doctor’s fee are not uncommon.  The preferred provider organization is a misnomer.  Almost all physicians, unless they have had obvious problems, can easily get into PPO organizations.  Patients continue to pay a premium, usually less than those associated with indemnity insurance premiums.   The patient must meet an annual deductible every year, such as $500.00 or so, and he will have a co pay, which was $5.00 many years ago, and reaches up to $65.00 these days.
  3. HMO:  Health Maintenance Organization.  When the PPO could not restrain healthcare spending, then the concept of HMO emerged. This model of giving the physicians incentives to reduce healthcare spending, was probably initially conceived in good faith.  However, for a long time, there was no discussion about providing quality care for less cost.  Only cost was emphasized.  As a matter of fact, physicians were given financial incentives to do less.  Most physicians were ethical enough not to be affected from these arrangements, but there were extremes on either side.  On one extreme, some physicians refused to work in such an aggressive cost-saving environment.  When forced, they quit.  On the other extreme, it was a bonanza for some physicians when they learned how to work the system. Today, it is generally accepted that the HMO model may not be the best kind of healthcare delivery system. 
  4. Medical Savings Accounts: are tax-deferred entities with high deductibles.
  5. Medicare: This is a government program that is made for the elderly, currently after the age of 65. Part A covers mainly hospitalization. Part B covers physician fees and outpatient procedures. Part C is insurance HMOs that contract with Medicare; this is also called Medicare Advantage Plan. Part D includes medication benefits.   Medicap is supplemental insurance to cover what Medicare does not cover. Patients subscribe to Medicare which is considered an entitlement, just like social security.  However, as Medicare could not keep up with the rising costs of healthcare, a freeze on all physician fees ensued in 1984, with only nominal raises since then.  In fact, some fees in 2003 were less than that which the physicians were charging in 1984.  Medicare, besides limiting and freezing the fees which physicians are allowed to bill then only pays 70 cents on the dollar, even on these already discounted fees with the responsibility for the remainder resting with the patient or the patient’s secondary insurance.  On the hospital side, Medicare has come up with a way of paying for patient care by grouping diseases into categories called Diagnostic Related Groups, better known as DRG’s. For example, if a patient has pneumonia and is admitted to the hospital, the hospital will be reimbursed the same whether the patient remains 2 days or 5 days. Of course, if there are unexpected complications during the hospital admission, there is some leeway where Medicare will improve on its payment.  But that is, in general, the way Medicare has functioned in the 21st century.
  6. Medicare Advantage Plans.
    1. Medicaid:  In most states, Medicaid is the government run healthcare system for the disabled and the citizens with no means.  The payment from Medicaid to physicians could be in some cases as low as 15% of their charge.
    2. Accountable Care Organizations (ACO):  Actually, these are variances of HMO's,  except the risk-taker is usually a hospital that will receive a finite amount of money from Medicare per year per insured. After that, the hospital will be responsible for the care of the patient and can no longer bill Medicare.

These are insurance plans that are actually private insurance plans. The insurance company has acquired the Medicare plan of the patient so now he is actually insured by the private plan. Regular Medicare has nothing to do with this. What this means is the patient does not have Medicare. His insurance is considered as a private plan and it could be an HMO product or PPO product. It is very important for the patient to check with his physician or provider to see if they take this HMO or PPO Advantage plan. Remember this has nothing to do with Medicare.

Medicare supplement is insurance that will pay what portion of the claim that Medicare does not pay.

Medicare secondary means the patient has a private insurance and Medicare may cover the rest of the claim that the private insurance will not pay.

Insurance Exchanges ( Market Place)

This is Obama Care insurance that different private insurance sell at the discount to mostly low-income individuals. Here are different products, which include Gold, Silver, and Bronze. The premiums, benefits, and deductibles vary with the level.


Medicare Advantage Plans (Medicare Replacement)
October 16,2019

Advantage plans are a kind of health insurance that replaces Medicare. When a patient signs up for the advantage plan, he is no longer covered under Medicare. Sometimes patients get confused about this, this is a misnomer. These are not Medicare patients anymore. Those that have Medicare do not apply. 

An advantage plan belongs to the different insurance companies, like BlueCross BlueShield, or United Healthcare. This is another issue that they have a replacement plan for Medicare, so they go sign up these Medicare patients. The way this works, is Medicare will go pay these people 10,000$ a year, but these patients have no rights under Medicare, they must follow the rules and regulations of lets just say United Healthcare, and there may be a PPO or an HMO with different kinds of advantage plans. Now when these people come to the office, there's a copay, whereas with regular Medicare there is no copay. It also differs in that we must get authorizations, and all kinds of other stuff that also applies to regular health insurance. 

About September-October there have been ads on TV, some of them are advertising that they pay for drugs and other stuff like that, they are trying to get all these people signed up. The monthly payments will be much less than regular Medicare, where with regular Medicare they also have to buy supplement insurance. So BlueCross BlueShield will also just be regular insurance, HMO, PPO, but when it comes to Medicare insurance, it can be regular medicare supplement insurance, but this advantage plan is a different kind of insurance, the rules apply as discussed above.