Making the Most of the Medicare Advantage

Medicare Advantage plans are HMOs or PPOs by a different name. Many eligible participants prefer these plans because they are less expensive than traditional Medicare and offer the ease of “one-stop shopping.”  Medicare Advantage plans were introduced in 2003 and by 2014 more than 35% of Medicare-eligible individuals were enrolled in these plans.¹ So what exactly is an advantage plan?

As a refresher, Medicare has four parts. 

1. Part A is hospital insurance
2. Part B is medical insurance
3. Part C provides for Medicare Advantage Plans (These plans are typically offered by HMOs, PPOs and combine Parts A, B and, D).
4. Part D provides prescription drug coverage

Medicare Advantage Plans roll Part A, Part B, and Part D together. Once united, these three parts comprise Part C. (Remember, Medicaid, Medicare, and Obamacare are completely different programs). According to the U.S. Centers for Medicare & Medicaid Services, Advantage Plans are:

“a type of Medicare health plan offered by a private company that contracts with Medicare to provide you with all your Part A and Part B benefits. Medicare Advantage Plans include Health Maintenance Organizations, Preferred Provider Organizations, Private Fee-for-Service Plans, Special Needs Plans and Medicare Medical Savings Account Plans. If you’re enrolled in a Medicare Advantage Plan, most Medicare services are covered through the plan and aren’t paid for under Original Medicare. Most Medicare Advantage Plans offer prescription drug coverage.”²

Key takeaway:  Advantage plans are less expensive, and provide for one-stop shopping. Most advantage plan participants enroll in HMOs because these are the least expensive plans. However, if you are in an HMO, you cannot choose your own physicians. In a PPO and other types of Advantage plans, you can choose your own physicians, but you have to pay more for this flexibility. 

Like HMOs, there are deductibles and co-pays although these have an annual cap. Choosing a Medicare Advantage Plan is difficult because there are many plans and based on your premium, they offer different services at different prices. Every Medicare Advantage Plan can charge different out-of-pocket costs and have different rules about seeing specialists and other issues.

When choosing a plan, you need to look carefully at what type of prescription drug benefits you are going to receive because you can’t change plans whenever you want.  If you belong to a Medicare Advantage Plan which offers prescription drug coverage, you cannot have Medicare Part D. (These are Medicare-approved prescription drug plans offered by private insurance companies). If you have both, you could be suspended from both plans.

Another thing to remember, you can’t have a Medi-gap policy if you belong to a Medicare Advantage Plan. Last, just as with original Medicare, Advantage Plans do not provide for long-term custodial care. You need a separate policy from a private insurer for that. Remember that long-term custodial care and long-term skilled nursing care are different from hospice care. While Medicare Advantage Plans do not pay for hospice care, Medicare does and in this one instance they will step in and cover the costs.

Key takeaway: Medicare Advantage Plans are similar to HMOs and are often run by the same companies. There are many plans and you will need to think about your healthcare needs then choose your plan carefully.

To learn more about this topic, register for our Issues & Updates: The Why, What, And How of Medicare online course.

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Resources: 

¹http://www.kpmg-institutes.com/content/dam/kpmg/healthcarelifesciencesinstitute/pdf/2015/medicare-advantage-whitepaper.pdf

²https://www.medicare.gov/supplement-other-insurance/medigap/medigap-and-medicare-advantage/medigap-and-medicare-advantage-plans.html

Contributing Writer: Subject Matter Expert Charles McCain