Medicare advantage plans

What Is Medicare Advantage Plans?

Medicare Advantage plans, also known as Medicare Part C, are a type of health insurance plan offered by private companies that contract with Medicare to provide Medicare Part A (hospital insurance) and Medicare Part B (medical insurance) benefits. These plans are a key component within the broader category of health insurance and represent an alternative way for beneficiaries to receive their Medicare coverage, rather than through Original Medicare. Medicare Advantage plans often include additional benefits not covered by Original Medicare, such as prescription drug coverage, dental, vision, and hearing services.

History and Origin

The origins of private health plan options within Medicare can be traced back to earlier arrangements with health maintenance organizations (HMOs). However, the formal creation of what would become Medicare Advantage plans occurred with the passage of the Balanced Budget Act of 1997. This legislation established the Medicare+Choice program, designed to offer beneficiaries more choices in their health coverage and help control the growth of Medicare spending. Under this program, private insurers could contract with the government to provide Medicare benefits, often through a capitated payment model where the private plan receives a fixed monthly payment per enrollee.⁷,⁶,

A significant transformation happened with the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. This act renamed Medicare+Choice plans to Medicare Advantage plans (MA plans) and introduced major changes, including enhanced payments to the plans and the creation of a new optional prescription drug benefit, Medicare Part D, which many Medicare Advantage plans now integrate directly.⁵,⁴, The goal was to provide a more robust and attractive alternative to Original Medicare.³

Key Takeaways

• Medicare Advantage plans are private health insurance plans that contract with the federal government to provide Medicare Part A and Part B benefits.
• They often bundle additional benefits not covered by Original Medicare, such as vision, dental, hearing, and prescription drug coverage.
• Enrollees typically continue to pay their Medicare Part B premiums in addition to any plan-specific premiums.
• These plans often use managed care models like HMOs or PPOs, which may involve network providers, referrals, and prior authorizations.
• Enrollment in Medicare Advantage plans has grown significantly since their inception, indicating their increasing popularity among beneficiaries.

Interpreting Medicare Advantage Plans

Medicare Advantage plans are interpreted as an integrated healthcare solution for Medicare beneficiaries. Unlike Original Medicare, which operates on a fee-for-service basis, Medicare Advantage plans receive a capitation payment from Medicare for each enrollee. This means the private plan assumes the financial risk for providing the member's care. Beneficiaries evaluate these plans based on factors such as their network of doctors and hospitals, additional benefits offered (like prescription drug coverage, dental, vision, and hearing), monthly premiums, deductibles, copayments, and the annual out-of-pocket maximum. The comprehensive nature and potential for lower out-of-pocket costs for specific services can be appealing.

Hypothetical Example

Consider Maria, a 70-year-old living in Arizona who is evaluating her Medicare options. She currently has Original Medicare but is looking for a plan that includes prescription drug coverage and vision benefits without purchasing separate plans.

Maria researches Medicare Advantage plans available in her county during the annual enrollment period. She finds "UnityCare MA Plan PPO," which has a $0 monthly premium (beyond her standard Medicare Part B premium), includes Part D prescription drug coverage, and offers a $150 annual allowance for eyewear. The plan also has a $3,500 in-network out-of-pocket maximum.

If Maria enrolls in UnityCare MA Plan PPO, her doctors and hospitals would need to be part of the plan's network for her to receive the highest level of benefits. When she fills a prescription, she would pay a copayment, and when she sees her eye doctor, the cost would be covered up to the annual allowance. All her medical and drug costs would count towards the plan's out-of-pocket maximum, providing a financial ceiling for her healthcare expenses within that benefit period.

Practical Applications

Medicare Advantage plans are primarily used by individuals who are eligible for Medicare (typically those aged 65 and older, or younger individuals with certain disabilities or End-Stage Renal Disease) and prefer to receive their Medicare benefits through a private insurer. These plans are a common choice in personal financial planning for retirees, as they can simplify healthcare management by combining various benefits into a single plan.

Key applications include:

• Integrated Coverage: Many beneficiaries choose Medicare Advantage for the convenience of having medical, hospital, and often prescription drug coverage, along with extra benefits like dental and vision, all under one plan.
• Cost Management: While beneficiaries still pay the Part B premium, some Medicare Advantage plans offer low or $0 additional monthly premiums. They also often have an out-of-pocket maximum, which limits annual healthcare spending, a feature not present in Original Medicare.
• Managed care Access: These plans operate through government contracts with private insurance companies and often utilize managed care structures, such as Health Maintenance Organizations (HMOs) or Preferred Provider Organizations (PPOs), which can offer coordinated care and potentially lower costs for in-network services.
• Supplemental Benefits: Beyond the basic Medicare benefits, these plans can offer valuable supplemental benefits tailored to specific needs, such as transportation to appointments, fitness programs, and telehealth services. Information on current enrollment trends and popular plan features can be found through resources like the Kaiser Family Foundation.²

Limitations and Criticisms

While Medicare Advantage plans offer comprehensive benefits, they also have limitations and have faced criticism. One common concern relates to network restrictions. Many plans, particularly HMOs, require enrollees to use doctors, hospitals, and other providers within the plan's specific network. Going outside the network can result in higher costs or no coverage at all, which can be restrictive for beneficiaries who wish to retain specific healthcare providers.

Another area of criticism pertains to prior authorization requirements. Medicare Advantage plans frequently require prior authorization for certain services, treatments, or medications. This process, where the plan must approve care before it is received, can lead to delays or denials of medically necessary services, which has been a point of contention for some beneficiaries and healthcare advocates. In 2021, Medicare Advantage plans reportedly denied millions of prior authorization requests.¹

Furthermore, the payment structure to Medicare Advantage plans, based on risk adjustment, has been scrutinized. Plans receive higher payments for sicker enrollees, and some have been accused of "upcoding" diagnoses to inflate risk scores and increase payments. This practice has led to federal fraud charges against several large Medicare Advantage operators. Concerns also exist regarding whether the plans genuinely reduce overall Medicare spending, with some analyses suggesting they may cost taxpayers more than if enrollees remained in Original Medicare.

Medicare Advantage Plans vs. Original Medicare

The primary difference between Medicare Advantage plans and Original Medicare lies in how healthcare benefits are administered and the scope of coverage.

Medicare Advantage plans provide a consolidated approach to Medicare benefits, appealing to those who prefer an all-in-one plan with predictable costs through an out-of-pocket maximum. Original Medicare offers greater flexibility in provider choice but may require separate supplemental insurance (Medigap) and a standalone prescription drug coverage plan (Part D) to cover cost-sharing and drug costs.

FAQs

1. Can I switch from a Medicare Advantage plan back to Original Medicare?

Yes, generally, you can switch from a Medicare Advantage plan back to Original Medicare during specific enrollment periods, such as the Annual Enrollment Period (October 15 – December 7) or the Medicare Advantage Open Enrollment Period (January 1 – March 31).

2. Do Medicare Advantage plans cover prescription drugs?

Most Medicare Advantage plans, known as MA-PD plans, include prescription drug coverage (Part D). If a plan does not include prescription drug coverage, beneficiaries would need to enroll in a separate Medicare Part D plan.

3. What is the difference between an HMO and a PPO Medicare Advantage plan?

An HMO (Health Maintenance Organization) plan typically requires you to choose a primary care provider (PCP) within the plan's network providers and get referrals to see specialists. PPO (Preferred Provider Organization) plans offer more flexibility, allowing you to see out-of-network providers, though usually at a higher cost.

4. Do I still pay my Medicare Part B premium with a Medicare Advantage plan?

Yes, generally, you must continue to pay your Medicare Part B premiums even if you enroll in a Medicare Advantage plan. Some Medicare Advantage plans may offer a partial or full rebate of your Part B premium, but this is not universal.

5. Are Medicare Advantage plans regulated?

Yes, Medicare Advantage plans are offered by private insurance companies but are regulated by the Centers for Medicare & Medicaid Services (CMS). CMS sets guidelines and standards that these plans must follow regarding benefits, cost-sharing, and consumer protections.