# **2. Coverage of health care received abroad under existing health plans**

Table 1 presents a summary of how different health plans in the US treat health care received overseas. Federally funded programs such as Medicare and Medicaid, which cover almost 26 percent of the US population, do not cover treatments received outside the U.S. as a matter of policy, except in special circumstances.<sup>6</sup> Even though Medicare beneficiaries can purchase supplemental “Medigap” insurance, it only covers emergency treatments abroad during the first 60 days of overseas travel. The lack of adequate overseas coverage under Medicare becomes particularly burdensome for the growing numbers of US retirees abroad in countries such as Mexico and the Caribbean. Other federal health plans, e.g., Tricare, which covers US military personnel and their families, do cover both emergency as well as non-emergency care received while the beneficiary is stationed overseas.

Approximately 60 percent of the US population receives employment-based health insurance. A majority of these health plans are managed care plans such as Health Maintenance Organization (HMO) plans, or Preferred Provider Organization (PPO) plans. Most individual and group HMO plans contract with a network of health care providers, but restrict health care consumption by consumers to that network. HMO beneficiaries are required to select a primary care physician who traditionally acted as a gatekeeper, essentially controlling referrals to in-network specialists.<sup>7</sup> As foreign providers are out-of-network, HMOs do not cover treatments obtained overseas, except in case of medical emergencies that occur while traveling abroad.

PPO health plans also maintain a network of providers, but are more flexible in their coverage benefits, giving the consumer the option to consume health care from any provider they choose.<sup>8</sup> However, the consumer is responsible for higher out-of-pocket payments if the provider is out-of-network. Overseas providers are treated as out-ofnetwork, and insurance coverage abroad typically only applies to medical emergencies. There are also Point of Service (POS) plans which offer consumers the option of obtaining care out-of-network like a PPO plan, except that the in-network portion of the plan is structured exactly like an HMO, with a primary care physician controlling referrals to in-network specialists.

6 US Statute, Title 42, Section 1395Y (a4) of the original Medicare (1965) plan states that “No payment may be made under part A or part B of this sub-chapter for any expenses incurred for items or services which are not provided within the US, except for inpatient hospital services furnished outside the US under the conditions described in section 1395F.” The conditions are that the beneficiary be a US border resident, require hospitalization, and live closer to the foreign hospital than to the US hospital (see, e.g., CMS, 2005).

7 Some HMO plans offered by insurers such as Kaiser, Blue Cross of California, and Highmark are Direct Access or Open Access HMOs that do not have a gatekeeper primary care physician requirement.

8 Interestingly, while PPO premiums are higher than HMO premiums, averaging $10,217 for a PPO plan covering a family of four versus $9,504 under an HMO in 2004, more than half of employees with health insurance coverage chose the former, with only about a quarter enrolling in HMO plans (see, e.g., Kaiser Family Foundation study, 2004).

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