Medicare Question

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If Medicare is a government run system why do so many different providers like Blue Cross and USAA, etc. offer Medicare? If it's government run is it possible to get a better deal through other providers? I don't get it.
I thought Medicare is just Medicare.

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The private plans are Medicare Advantage plans and the smaller plans like USAA are typically Medicare Supplement plans.

When you become eligible for Medicare (typically at age 65, but you can also become eligible if you received social security disability payments) you can opt to have “traditional” Medicare which is operated by several regional government contractors under the auspices of the Centers for Medicare and Medicaid services. This plan is a straight reimbursement plan for your providers. They bill and will receive 80% of the allowable charge for your visit/procedure/etc. You will have a 20% copay for most services. This is known as Part A and it covers most inpatient and doctor related visits.

Part B is for outpatient services and you have to opt in to that and pay a monthly premium. If you do not opt in to Part B when you are first eligible, your monthly premiums are higher and you only have certain windows during which you can add Part B coverage.

Drugs are covered under Part D mostly (except for those given in a hospital or some clinic-administered drugs). A separate copay/deductible applies to prescriptions.

All of those are considered “traditional” Medicare and the onus is on providers to determine whether the procedure, etc meets requirements for Medicare reimbursement. They bill after the fact.

In addition, the private insurers you mention plus others (Humana, Peoples, etc) have the ability to offer products known as “Medicare replacement” or “Medicare Advantage” plans. These plans bundle Part A,B, and C together into a single service that has no premiums for subscribers/recipients. Sounds like a great deal on the surface, doesn’t it? The way it works is Medicare pays a per person amount to the companies managing these plans. So Humana, for instance gets 1,000 per month to manage and provide payment for John’s care (the numbers are purely made up. I have no idea what they are in reality). Out of that 1,000 Humana then reimburses John’s doctor for any office visits, the hospital for any stays John has, and the pharmacy for any prescriptions. Oh- and don’t forget the PT visits John needs because he fell and injured his knee.

All those visits add up pretty quickly. And Humana is not on this as an altruistic endeavor. They are in it to make money for their shareholders. So they have an incentive to reduce the costs of care. There are a couple ways to do this. They can keep the rates they pay to providers low, and they can institute the managed care piece of the puzzle. Managed care means that when John’s physician wants to perform a procedure for example, his office has to first contact Humana for their approval. They look at the circumstances and the clinical information available and decide whether John is approved to receive the procedure. The Medicare managed care companies have an incentive to approve the fewest possible number of procedures, hospital days , etc. And to make providers jump through hoops to get them approved.

So when looking at Medicare, the managed care plans make sense for people who have few serious illnesses. If you need things like inpatient rehab or skilled nursing care, then traditional Medicare serves you much better in most cases.

If you are fortunate enough to have Medicare and another insurance through an employer retirement plan or if you have Tricare secondary to Medicare, then traditional Medicare is the way to go. The secondary insurance picks up the copays and there is no (or almost no) out of pocket expense.