Details about Medicare Advantage and who should select it.
This is the 2nd of 3 basic Medicare educational modules.
What is Medicare Advantage?
Medicare Advantage (MA) plans, also known as Medicare Part C, are offered only by private health insurance companies, also known as insurance ‘carriers’. These companies enter into contracts with Medicare’s headquarters: “Centers for Medicare and Medicaid Services” (CMS) located in Baltimore. The private insurance company takes full responsibility for providing at least the services provided by Original Medicare. These Original Medicare services are known as Medicare Parts A & B. Think of Medicare Advantage as a private company “wrapper” around the government program. An enrollee has contact only with their insurance company which provides a nice, simple (hopefully) interface with their benefits.
Your coverage within in the plan is paid for by the Part B premium that all enrollees pay. CMS sends the premium directly to your Medicare Advantage provider and they pool that money to provide benefits to their population of enrollees. Part B premiums for 2020 start at $144.60 and go as high as $491.60 for those with income of $500,000.
The Balanced Budget Act of 1997 formalized Medicare-in-HMO demonstration programs across the U.S. into an official, legislated product. The idea of managed healthcare had been growing since the early 1970’s and MA was a logical conclusion to that trend.
The alternative to MA is Medicare Supplement Insurance, often called Medigap. An enrollee cannot have both an MA plan and a Medigap plan. The Omnibus Reconciliation Act of 1980 brought Medigap policies under government oversight. The policies are also provided by private sector carriers…but there is no wrapper relationship. The options are standardized, but there are many of them and they all run separately from Original Medicare coverage. Original Medicare leaves some costs to the enrollee—deductibles and co-pays are the most common. Medigap will pay or reimburse for some or all of these costs, depending on the particular Medigap plan. Medigap policies are never offered for a $0 premium (as some MA plans are).
The 4 Different Flavors of Medicare Advantage plans
Health Maintenance Organization (HMO) Plans
These are the most popular and the most widespread. Most people reading this will comfortably be able to stop here and not worry too much about the other types of Medicare Advantage. HMOs are built to provide all medical services, except emergency or urgent care, through a network of health professionals. If it’s not an emergency and you go outside the network, you risk not being covered for the costs.
Preferred Provider Organization (PPO) Plans
PPO plans also have networks of providers. You pay less if you stay within network, and more if you don’t. If you have a specialist you feel you must keep and they don’t participate in any HMO, then you might select a PPO.
Private Fee-for-Service (PFFS) Plans
These plans are a bit more “old school”. You can use any provider that accepts Medicare payment. The plan sets the pay rate for providers and hospitals and how much you, the patient, will pay.
Special Needs Plans (SNPs)
As the name suggests, these plans are for limited groups of enrollees. When spoken, they’re often referred to as “snips”. A Chronic Condition SNP would be pronounced “C snip”.
Chronic Condition SNP (C-SNP)
Certain conditions require extensive care and/or prescription drugs. These conditions change the cost curve of healthcare, so specialized Medicare Advantage plans are designed and offered. A list of the most common of these conditions can be found here. These plans can be designed for only specific conditions. A plan can be offered, for example, that accepts only people requiring dialysis.
Institutional SNP (I-SNP)
These plans are for people living in an assisted living facility, or who require similar nursing care at home.
Dual Eligible SNP (D-SNP)
The “dual” refers to being Medicare eligible AND on Medicaid assistance.
Adding a Prescription Drug Plan (PDP)
These optional plans are also known as Medicare Part D. Each type of Medicare Advantage plan can be paired with a PDP. When combined, the plan is a Medicare Advantage Prescription Drug (MAPD) plan. This is the type of plan most appropriate for most Medicare enrollees. Although optional, if you don’t join during your Initial Enrollment Period (IEP) and join a plan later, you will likely pay a higher premium as penalty. In insurance lingo, this is known as preventing adverse selection. It’s better for the carriers if we all don’t wait till we need meds before we enroll in a drug plan.
If you have “creditable prescription drug coverage” through an employer or union plan (and you can prove it!), you can safely skip enrolling in a PDP right away and join one later.
Medicare Advantage “extras”
Original Medicare provides only core medical coverage—hospital costs and doctor visits. Medicare Advantage plans, because they’re managed by private insurers with massive networks can offer a lot more for your Part B buck. Typical benefits are
- Nutrition guidance, fitness membership discounts, activity trackers, mindfulness programs, and anything that incorporates latest knowledge on healthy living
The Takeaway from this Advisor
So, a key takeaway is that Medigap will always take a bite out of your wallet, and it loses the battle of simplicity against Medicare Advantage. There are certainly scenarios where Medigap will save a hospital or doctor patient some money in the long run. But looking at the big picture of the most
typical Medicare enrollee, a Part C plan will probably be the best ticket. It may be helpful to know that carriers sometimes offer extra incentives to agents and brokers who sell Medigap plans.
A Medicare Advantage Prescription Drug plan (MAPD) within a Health Maintenance Organization (HMO) is likely to be the best choice when
- You live in or around a city OR
- Your doctors are included in the plan network OR
- You’re flexible enough to change doctors
If you feel comfortable enough with your knowledge of the possibilities, use this link (which will take you to another site) to shop for 2020 plans or just take a look at the system to prepare for 2021 enrollment.