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2004

Value of California Medicare HMO Benefits up for 2004

Prescription drug benefits declining, online consumer guide shows

April 19, 2004

What California consumers get for their Medicare HMO dollar has increased significantly in most parts of the state, reversing a two-year decline, according the 2004 Guide to California Medicare Options, a Web-based consumer guide (CalMedicareOptions.org) developed by the California HealthCare Foundation and Consumers Union.

The consumer guide reports that many HMOs reduced premiums and other cost-sharing, which contributes to the value increases measured this year. The reduced costs to consumers follow a funding boost received from the 2003 Medicare Modernization Act. While overall value is up, the guide shows a trend toward less generous prescription drug coverage by HMOs.

The online guide, now in its fourth year, rates every Medicare HMO in California as well as some Medicare supplement policies (Medigap) in counties where Medicare HMO plans are offered. HMO plans and Medigap policies each receive a one- to five-star rating based on total benefits for the money.

Other findings include:

• Statewide, nearly 30% of Medicare HMOs received four or five stars, compared with only 11 percent last year.
• All Medigap policies rated received only one or two stars, indicating that Medicare HMOs usually provide better value to consumers.
• Nearly every Medicare HMO in the state offers some form of drug coverage, but just 15% of drug plans received four or five stars. A number of HMOs have opted to cover only generic drugs this year.

"Four million Californians will be affected by the sweeping changes Congress made to Medicare last year," said Mark D. Smith, M.D., M.B.A, president and CEO of the California HealthCare Foundation. "It is too early to know the full impact the law will have. Some changes, such as the new drug benefit, won't start until 2006. In the meantime, consumers are struggling to sort through a complex and confusing array of options. We hope that CalMedicareOptions.org will make it easier for seniors and their families to compare the choices available in each county."

A much-touted aspect of the new Medicare law is the prescription drug discount card, which is an interim option in force until the new broader drug benefits goes into effect in 2006. The cards provide a discount (expected to be 10 to 25%) on selected prescriptions purchased at participating pharmacies.

According to Trudy Lieberman, director of the Consumers Union Center for Consumer Health Choices, "Drug discount cards will help consumers in some situations, especially Californians with very low incomes. Eligibility rules can be complex, so it's critical to understand the rules before you sign up. For example, if you're a member of a particular HMO, you might be prohibited from purchasing discount cards offered by other sponsors, but if you're in a different HMO, you may be able to choose from a wide variety of discount cards."

In addition to value ratings, the CalMedicareOptions.org Web site provides information to help consumers understand the trade-offs among their Medicare options. "In the end, the value of a plan depends on an individual's needs and preferences," Smith said. "Each person has to decide what is most important to them and what best fits their situation."

About Medicare HMOs

Medicare HMOs are currently offered in 33 California counties. Where plans are available, consumers may select an HMO instead of traditional Medicare. Medicare HMOs generally offer more benefits than traditional Medicare, but they limit their members’ choice of providers and may require referrals to get care from specialists. Four million Medicare beneficiaries live in California and approximately one-third of them are currently enrolled in Medicare HMOs.

About Medigap Policies

Medigap policies (also known as Medicare supplement policies) are offered by insurance companies, but their benefits are determined by the federal government. Medigap policies work in conjunction with traditional Medicare coverage; they do not replace traditional Medicare, as Medicare HMOs do. There are ten standardized Medigap policies, Plans A through J. Medigap Plan A offers the least amount of additional coverage, and Plan J offers the most. Medigap policies place no significant restrictions on provider choice.

About the Consumers Union Ratings

Consumers Union assigned ratings to all Medicare HMO plans offered in California on a scale of one to five stars. Ratings were determined by measuring the total benefits provided to plan members and subtracting the amounts they pay for premiums and copayments, based on the level of services used by an average member. Consumers Union used the same method to evaluate the lowest premium Medigap Plan C and Plan J in all California counties where Medicare HMOs are available. Plan C and Plan J were rated because they are representative Medigap policies that provide a reasonable overview of the market. More details about the study’s methodology are available at CalMedicareOptions.org.

About Consumers Union

Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization serving only consumers. It is a comprehensive source for unbiased advice about products and services, personal finance, health and nutrition, and other consumer concerns. Its ratings may not be used for commercial purposes. For more information on Consumers Union, visit www.consumerreports.org.

Note: The CalMedicareOptions.org Web site was discontinued in December of 2004.

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