Medicare Advantage

Medicare Advantage Plans

Medicare Part C or Medicare advantage plans (MA) are privatized Medicare plans. To better understand this concept, here is an analogy: Many people living in rural areas have privatized mail delivery. The Post Office contracts with private mail carriers for so much per mile to deliver the mail. Once the private carrier picks up the mail from the Post Office, the delivery service from there on out is performed by a private party.

In a similar fashion, Medicare Advantage plans are privatized in that Medicare contracts with the insurance companies that offer MA plans. Medicare pays the insurance company a monthly capitation rate, meaning so much per head per month. It might start around $800 per person per month and up. This amount can go higher for people with chronic illnesses or in higher-cost regions of the United States. From that point onward, Medicare no longer pays a provider when an MA plan member has a claim. Instead, the MA plan pays the doctors and hospitals. You, the MA plan member have copays for most medical events.

There are some people that erroneously believe that the premium the MA plan charges, let’s say from $0 to $150 per month, plus a person’s Medicare Part B premium ($143.40 per month for most people in 2020), plus the medical copays is what finances MA plans. That would be nice if that were the case, but it’s not. It’s the $800+ monthly capitation rate that makes MA plans work. Your Medicare Part B premium simply goes into Medicare’s or the government’s pot.

History

Depending on what source you start with, the concept of MA began with the 1982 Tax Equity and Fiscal Responsibility Act (TEFRA). This act allowed privatized HMO plans to contract with Medicare to deliver a form of privatized Medicare. The Balanced Budget Act of 1997 established the Medicare+Choice program. The latter was renamed Medicare Advantage by one of the provisions of the 2003 Medicare Modernization Act (MMA). It was this act that also stepped up the controversial capitation rate to the MA plans.

Types of Medicare Advantage Plans

HMOs or Health Maintenance Organization Plans: In most HMOs, you can only go to network doctors, hospitals, or other health care providers that are contracted with the plan. In an emergency, all hospitals must accept your plan. You may also need to get a referral from your primary care doctor to see a specialist.

HMO-POS: The “POS” stands for point-of service: This means that you can go to non-network providers. In many cases, you may have higher, out-of-network copays. Please check with your specific plan.

PPO or Preferred Provider Plan: Again, this is a networked plan. You pay lower copays for network providers and usually higher copays for non-network ones. PPOs are more suitable, in general, for going out-of-network.

PFFS or Private Fee for Service: This model is similar to original fee-for-service (FFS) Medicare. You can go to any provider that agrees to accept the terms and conditions of the plan.

Medical Savings Accounts (MSAs)

The MSAs are an older concept but have now been reinvented. The new, MSA Medicare advantage plans have only recently been available for Medicare beneficiaries. Please check with us for a state by state availability.

For more details about the types of MA plans, please refer to the following documents: The first is the Kaiser Foundation’s Medicare Advantage Fact Sheet. Additionally, this document provides another historical perspective and other details about MA plans.

Centers for Medicare & Medicaid Services (CMS) publishes Medicare and You. For more details about MA plans, please consult this booklet. This publication, though daunting for some, is very thorough and does a good job of explaining the subject it is covering. Note: The version that CMS mails to you lists the MA plans available in your county of residence. This generic version does not.

Many MA plans have Part D prescription drugs included in the plan. These are MA-PDs for short. If you enroll in an MA-PD, you do NOT sign up for a stand-alone Part D prescription plan. Doing so will disenroll you from your existing MA-PD plan.

There is another important wrinkle to understand. Some HMO or PPO MA plans are medical only. They do NOT have a prescription plan embedded in them. People who sign up for these plans may have VA benefits for prescriptions. Others simply have a plan without prescription coverage.

If you have one of these MA plans only, you cannot sign up for a stand-alone Part D plan. Doing so will disenroll you from your HMO or PPO MA plan.

For more details and information, please consult with Medicare and You, call 1-800-MEDICARE (1-800-633-4227), or call any particular MA plan. Lastly, a good agent will be able to answer many of your questions. If you desire to dig into all sorts of statistical minutia about MA plans, go to CMS.gov.

Controversy
Here is the controversy concerning MA plans, although it seems to have lessened in the past few years. It is beyond the scope of this document to do an in-depth study, but I will bring up the basic issue. MA plans receive an extra subsidy from Medicare of around 12-14%. In other words, Medicare budgets so much money per month for every American on Medicare. The MA plans, subsequent to the 2003 MMA, receive about 12-14% extra subsidy above and beyond the funds that Medicare budgets for each American.

This extra funding is what allows the plans to offer extras beyond what original Medicare offers. These extras include routine vision exams and eyewear, preventative and/or comprehensive dental, over-the-counter items, and health club memberships. More recently some plans have added a meals benefit to follow a hospital discharge.