Both the fee-for-service and managed care plans provide the basic Medicare hospital and medical benefits, but there are important differences in the way services are delivered, how and when payment is made, and how much you may have to pay out of your own pocket.

Fee-For-Service Approach

The program, administered by the federal Health Care Financing Administration (HCFA), has two separate parts for hospital and medical insurance.

While Medicare provides for basic coverage, it doesn't pay 100 percent of health care costs. Deductibles and co-payments apply to some of the benefits under both parts. Also, other medical expenses - such as prescription drugs and dental care - aren't covered at all.

To help pay for these out-of-pocket expenses, beneficiaries often apply for additional insurance. Those with low-incomes may be eligible for medical assistance from Medicaid. This joint federal/state program is administered through the Pennsylvania Department of Public Welfare and its local County Assistance Offices. Others may purchase supplemental private insurance policies, called Medigap, or enroll in a managed care plan that contracts with Medicare.

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While there is no standard definition of "managed care," the basic idea is to coordinate all health care services an individual receives in order to maximize benefits and minimize cost.

Plans use a limited network of health care providers (including specialists, hospitals, skilled nursing facilities, therapists and home health care agencies) and a system of prior approval from a primary care doctor to achieve these goals.

There are other forms of managed care, however, the health maintenance organization (HMO) model is the only one currently available to Medicare beneficiaries in Pennsylvania. Some HMO plans offer a Point-of- Service (POS) option where, for the cost of an added premium, you may see providers outside the plan's network and still have HMO coverage. Medicare HMOs are regulated by HCFA and the state departments of Health and Insurance.

In this system, an HMO signs a contract with HCFA to provide services at a set price for each Medicare beneficiary enrolled in the plan. HMOs are required by law to provide all the services you would be entitled to under Medicare coverage. Medicare pays the HMO in advance for your care, and the fee is the same no matter how many services are actually used.

Whether you are healthy and use few services or become ill and need more, the HMO gets paid the same amount. These plans are called risk-contract (or risk-based) HMOs and provide you with both Medicare and Medicare supplement insurance in one package.

Because HMOs believe they save money by managing your care through a primary doctor, many currently provide more preventive health services than Medicare and most Medigap plans. Extra benefits, such as periodic checkups, health screenings, vision services, prescription drugs, and dental visits, usually are available at a nominal or no additional charge.

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