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Medicare: controlling costs by seeing younger physicians

In seeking to find ways to control their retirement healthcare costs, people sometimes find that they can save money if they are willing to see younger physicians. Because younger doctors frequently need several years to build their patient rolls, they are initially willing to accept lower fees..

At some point, though, typically after they have a substantial patient base, physicians may feel that they are working long hours for comparatively low pay. Then they look for ways to charge higher fees and perhaps see fewer patients.

When they start their practices, younger physicians are likely to be “participating providers” who accept assignment for all Medicare claims. They are also likely to belong to HMO networks, the lowest-cost choices for retirees. And, they are unlikely to establish concierge practices or to opt out of Medicare entirely.

But once they have an adequate number of patients, many doctors alter their business models. Since the earliest days of Medicare, physicians have found ways to sidestep its restrictions on how much they can be paid. For the first 25 years or so of Medicare’s existence, they found this fairly easy to do by simply billing patients for any balances not paid by Medicare or supplemental insurance.

One study by Medicare analysts found that in 1990, anesthesiologists who did not accept Medicare assignment averaged charging 23% more than the approved amounts, and that oral surgeons levied an average 24% surcharge. Accordingly, these doctors’ patients were responsible not just for the usual 20% Part B co-insurance, which was typically paid by their supplemental coverage, but also for the additional 23% or 24% balances.

As the amounts involved in balance billing increased, policymakers worried that a divided medical system was being created in which the less affluent, a large segment of the Medicare population, would no longer have access to the best care. Partly in response to such concerns, beginning in the late 1980s a few states and eventually Congress placed limits on the amounts that doctors could charge their Medicare patients.

Today the federal limit for excess charges is 15%, although a few states have lower limits. As one example of stricter state rules, Pennsylvania prohibits doctors from charging their Medicare patients more than Medicare’s approved amounts.

During the last decade, some physicians have established concierge practices, which are legally permissible ways to bypass Medicare’s caps by charging retainer fees for additional services like same-day appointments and telephone consultations. While retirees who are enrolled in Medicare Advantage plans do not have to worry about concierge fees, those with employer plans and Medigap policies can be asked by their doctors to pay these additional charges.

Patients whose doctors convert to concierge medicine sometimes face difficult and even complex decisions. Should they pay more to stay with experienced doctors they’ve been seeing for years or should they save money by switching to other, (usually) less experienced physicians?

Retirees’ income and health are key factors in their decisions about leaving doctors who have opened concierge practices. If a retiree is well-to-do or has health concerns, money may be a less important consideration. But people in good health who can reasonably expect to live many more years may want to lower their present costs by switching to less experienced doctors.

The dollars they save can perhaps be better used when they are older and more likely to need specialized care. Thus they use a lower-cost tier of coverage today, which often involves changing doctors, but maintain the option of moving to a higher-cost tier in the future.

In general, higher-cost tiers provide wider access to physicians and in many cases to the most experienced physicians. The average premiums for Advantage Local PPO plans, for example are almost twice as high in 2011 as the average premiums for Advantage HMO plans. In essence, people are paying higher premiums for the ability to see more physicians, including some who may not be network providers. Advantage Regional PPO plans, on the other hand, have average premiums that are about the same as those of Advantage HMO plans, but they are less likely to have an adequate number of providers in many geographic areas.

In choosing between Advantage HMO and PPO plans, retirees are committing to a plan for a single year. They can change back and forth among Advantage plans annually during open enrollment (people with end-stage renal disease are the sole exceptions). Knowing that he can readily change Advantage plans each year, someone who will have a hip replaced during the following year may decide to move to the PPO plan so that his surgery can be performed by a well-regarded specialist who is not in the HMO network. Then in one or two years, he may move back to the HMO. If his primary care doctor is in both plan networks, switching may not be that difficult.

Likewise retirees with employer supplements have a guaranteed right to switch to different plans and tiers during annual open enrollment. If they are in excellent health they may choose a low-cost HMO, but in later years decide to change to more expensive and better coverage that gives them better access to specialists.

The recent appearance of “narrow network” plans as minimal-cost employer options may enable some retirees to use these plans to trim costs by confining their treatments to a small network of providers, many of whom are likely to be younger, less experienced physicians who are starting to develop their practices. Last month a Kaiser Health News item described how these plans are designed for current employees, and presumably they will also be offered to retirees as supplemental coverage.

Finally, the coverage that provides the broadest access to providers and the most coverage options are Medigap plans, which are accepted by all doctors who accept Medicare. The comprehensive Medigap plans (C, D, F, and G) are the most costly type of supplemental coverage. In this sense, Medigap plans represent the highest tier of coverage available to retirees who don’t have employer plans.

People who wish to preserve healthcare dollars for later years will sometimes defer Medigap coverage because of its cost, planning to switch in later years if they need to. By deferring, though, they are also accepting the risk that they may not be able to buy an affordable Medigap plan later, particularly if they are in poor health, unless they live in a state like New York that requires community-rated policies.

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