Introductory Information to Medicare HMO's

Part 3, Chapter 11: Medicare and Medicare Related Programs: Medicare HMO's Page 1

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Medicare HMOs

As part of the movement toward managed care, the federal government recently began to allow Medicare beneficiaries to obtain benefits through Medicare HMOs instead of through the traditional Medicare plan. These HMOs are designed specifically for Medicare beneficiaries who are enrolled in both Medicare: Part A and Medicare: Part B.

Medicare HMOs are paid by the government on the basis of either a cost-based contract or a risk-based contract. Under a cost-based contract, the federal government's payments to the HMO are based on the actual costs. Under a risk-based contract, the federal government pays a flat fee for each Medicare beneficiary enrolled in the HMO. That fee is determined statistically on the basis of an analysis of the average expenses of Medicare beneficiaries in the area in which the HMO operates, and may thus differ from area to area. At this point, the overwhelming majority of Medicare HMOs operate under risk-based contracts.

Medicare HMOs may offer important benefits to Medicare beneficiaries. While the traditional Medicare plan allows beneficiaries to choose their own doctors, hospitals, and testing centers, there are significant limitations in terms of coverage and deductibles. In contrast, in addition to providing coverage for the standard types of Medicare benefits, Medicare HMOs may also provide some benefits for services that are not covered under the traditional Medicare plan. Those additional benefits may include coverage for prescription medications, hearing aids, eyeglasses, and such preventive services as vaccinations and annual physical exams. The specific benefits differ from one Medicare HMO to another.

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