Page 30 - Management Theory 2023-2024 Edition

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funded by Medicare based on the difference between what Medicare normally pays for beneficiary care
and the cost of high deductible traditional hospital and major medical coverage for catastrophic care.
The deductibles would be taken from the MSA balance. If there was an excess, the account could be
withdrawn and used for other purposes. But if it was not sufficient, the enrollee would have to pay the
difference. Essentially, there is the risk, if a patient is healthy and stays that way, he can come out
ahead. However, if the patient is sickly and ends up with large medical bills, they would come out of his
own pocket.

Option 5: Fee For Service: This is effectively what has been the “standard” for care for the past 20 years
before the advent of HMOs. One is able to pick whatever physician he/she wants, but is also responsible
for any costs beyond what Medicare allows. There are caveats to remember however. If you go back to
the 80s, you can count the huge number of articles of how difficult it was to get a doctor who would
accept Medicare payments. This is a most acceptable option if one has a lot of money, but if not, it could
backfire against the bulk of the public if doctors left the Medicare system for the higher payments.

Option 6: This goes further in that Medicare would not even be involved with any medical coverage at
all. The patient would contract directly with the physician to provide care.

The number of doctors might be limited; however Section 4507 of the Balanced Budget Act requires that
any physician that does opt for this system will not be able to take Medicare patients for up to two
years. Since so much medical care now covers the elderly, it is debatable how successful this option
might become. But if too many doctors found it financially beneficial, may be all the “good” doctors
would become private and the bulk of the citizenry would be left with the rest.

Medicare Fee-For-Service (2000): A private fee-for-service plan is private insurance program that
charges enrollees a premium and cost-sharing amounts and lets beneficiaries choose the providers they
want to see. No one knew if consumers would actually use the system. However, the First Medicare
Private Fee-for-Service Plan is now approved in eight more states.

The U. S. Health Care Financing Administration approved a request by Sterling Life Insurance Company
to expand private fee-for-service health care coverage to Medicare beneficiaries in eight states: Arizona,
Delaware, Illinois, Iowa, Oklahoma, Pennsylvania, South Carolina and Washington on September 1.
Earlier this year, Sterling Option 1 was approved to offer private fee-for-service health care coverage to
Medicare beneficiaries in 17 other states. In most cases, beneficiaries enrolled in the private fee-for-
service plan will pay less to see a doctor than under original fee-for-service Medicare.

4. Medicare Prescription Drug Plan (Part D):

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 added Part D. Beginning
January 1, 2006, Medicare beneficiaries purchasing optional part D will be able to get drug coverage
through the separate drug insurance policy. If they are covered by a privately operated health plan that
includes the prescription drug benefit, they would be ineligible for Part D.

Medicare Part D was projected to cost about $35 per month as a premium. If an eligible Medicare
beneficiary puts off getting the Medicare Part D beyond the initial enrollment date, that individual will
have to pay a higher premium. Medicare Part D will have a $250 deductible and will pay:

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