Getting Started With Medicare: Medicare Advantage Plans

Some Medicare beneficiaries want more healthcare benefits than Original Medicare can offer, even with Medigap supplemental policies. Medicare Advantage Plans (sometimes known as Medicare Part C) fill this need by providing more benefits for beneficiaries who agree to extra costs and less flexibility.

The Medicare Advantage Alternative

Offered by private insurance companies, Medicare Advantage Plans provide Part A and Part B coverage as an alternative to Original Medicare. Medicare pays a fixed amount to these insurers for each beneficiary enrolled in their plans but requires these companies to follow specific rules. These rules allow the companies flexibility to offer more services. However, to do this, they may handle out-of-pocket costs differently and impose certain restrictions on enrollees.

An enrollee must be eligible for Medicare parts A and B, live in the plan's service area, and be a U.S. citizen or legal resident. Potential enrollees with other coverage from an employer or a union may need to give up that coverage if enrolling in a Medicare Advantage Plan.

Medicare Advantage Plan Benefits

Medicare Advantage Plans deliver the same Part A and Part B coverage as Original Medicare but may offer coverage for additional services:

  • Fitness programs
  • Vision, hearing, and dental
  • Transportation to doctor's visits
  • Over-the-counter drugs
  • Services that promote health and wellness
  • Special benefits for chronically ill enrollees

One of the major benefits of most Medicare Advantage Plans is a cap on out-of-pocket expenses. Under Original Medicare, there is no limit to such costs in terms of copayments and coinsurance. In contrast, most Medicare Advantage Plans will pay all Part A and Part B expenses after the enrollee reaches an out-of-pocket limit.

The Trade-Offs

To provide these benefits, Medicare Advantage Plans require their enrollees to abide by certain restrictions:

  • Some Medicare Advantage Plans allow access only to providers in their network. Original Medicare allows beneficiaries to see any doctor accepting Assignment.
  • Medicare Advantage Plans often involve higher out-of-pocket costs in the form of higher deductibles, copays, and coinsurance.
  • Some plans may allow access to out-of-network providers for even higher out-of-pocket costs.
  • Plan rules can change each year. This may force some enrollees to seek different plans that better meet their needs.

A key disadvantage of some Medicare Advantage Plans is restricting enrollees to the plan's provider network. This can be a problem because an enrollee's preferred provider could possibly leave the network at some point. This can happen in two ways. First, a doctor may withdraw from the plan's network. Second, the plan can choose to drop a provider from its network. In either case, the plan must provide a 30-day notice to enrollees of the change and offer in-network providers as a replacement.

Enrollees can possibly get back with their original provider by switching to another Medicare Advantage Plan or Original Medicare during the annual renewal period.

Different Plan Types

Medicare Advantage Plans can differ in terms of how they offer benefits:

Health Maintenance Organization (HMO)

  • An HMO requires enrollees to use providers in its network. Exceptions may be made for emergency/urgent care or temporary dialysis. Enrollees receiving non-emergency services outside the network without prior authorization may need to pay the total cost.
  • Another type of HMO known as a "Point-of-Service" plan offers out-of-network options, but these may require higher copayments or coinsurance.
  • Most HMO plans offer Medicare drug coverage. Unfortunately, enrollees choosing HMOs without drug coverage cannot get a separate Medicare drug coverage.
  • A referral is usually required to see a specialist.

Preferred Provider Organization (PPO)

  • A PPO has a network like an HMO, but the rules for using in-network providers are less stringent. The trade-off is higher costs for using out-of-network providers.
  • PPO plans typically cover drug costs. However, like HMOs, enrollees of PPOs without drug coverage are not allowed to have a separate Part D policy.
  • Referrals are usually not needed to see a specialist.

Private Fee-for-Service (PFFS)

  • PFFS enrollees can see any provider approved by Medicare.
  • Some PFFS plans have networks that have providers offering lower costs than out-of-network options.
  • Each PFFS plan has different rates paid for covered services. Therefore, enrollees need to carefully review plan documents to understand coverage rules.
  • Some PFFS plans offer drug coverage. If not, enrollees CAN join a Medicare Part D drug plan.
  • Specialist referrals are not required.

Special Needs Plan (SNP)

  • Sometimes people with specific conditions or income constraints need more tailored plans to meet their needs. SNPs customize provider coverage and drug benefits to fit these individual needs.
  • Medicare rules restrict SNP plan enrollment only to certain individuals.
  • SNPs vary in the ways they handle out-of-network coverage.
  • SNPs, by law, must provide Medicare drug coverage.
  • SNP plan enrollees need a referral to see a specialist.

Medical Savings Account (MSA)

  • Under an MSA, an enrollee deposits money into a special savings account to pay for medical expenses. The money saved can pay for Medicare-covered costs after a deductible has been met.
  • MSA plan enrollees must continue to pay their Medicare Part B premium.
  • Some MSA plans will cover extra services like vision and dental.
  • MSA plans do not offer drug coverage. Instead, enrollees must join a separate Medicare Part D drug plan to obtain coverage.

Annual Notice of Change and Evidence of Coverage

Each year, every Medicare Advantage Plan provides an Annual Notice of Change document by September 30 detailing changes to costs, coverage, plus all else that affects enrollees.

An Evidence of Coverage document is also sent each year by October 15. It details what the plan covers and costs along with other things.

Medicare Advantage Plan enrollees should carefully review these documents each year to ensure their needs continue to be met by the current plan.

Medicare Advantage Plan Costs

Costs for Medicare Advantage Plans differ from plan to plan. Insurance companies offering Medicare Advantage Plans juggle the various financial components to create a basket of benefits to differentiate themselves from the competition in the quest to sign up new enrollees.

  • Premiums – Some plans pay for all or part of an enrollee's Medicare Part B premium.
  • Deductibles – Deductibles will vary among plans. Higher deductibles could mean lower copays or coinsurance.
  • Copays and Coinsurance – These costs also vary among plans. However, Medicare Advantage Plans are not allowed to charge more than Original Medicare for some services like skilled nursing care, dialysis, and chemotherapy. Copays and coinsurance for out-of-network services may be higher for plans involving a provider network.

Enrollees who have financial limitations can contact the State Health Insurance Assistance Program to find ways to pay for Medicare costs.

Sign-Up, Renewal, and Change Periods

Medicare provides various times for beneficiaries to join, switch, drop, or make changes to Medicare Advantage Plans.

  • Initial Enrollment Period (When first Medicare eligible) – This is when people first sign up for Medicare. It usually encompasses the seven months beginning three months before age 65, the 65th birthday month, and three months after that. There's also an option in the first 90 days after enrollment to switch to another Medicare Advantage Plan or Original Medicare.
  • General Enrollment (January 1 to March 31) - For Medicare beneficiaries who have Part A and are receiving Part B coverage for the first time during this period, a Medicare Advantage Plan can be joined with coverage starting July 1.
  • Open Enrollment (October 15 – December 7) – Medicare beneficiaries can join, switch or drop a Medicare Advantage Plan with coverage beginning January 1. If an enrollee has a change of heart, then there's the option to switch to another plan or to Original Medicare during the Medicare Advantage Open Enrollment Period. (See below.)
  • Medicare Advantage Open Enrollment (January 1 – March 31) – Those enrolled in a Medicare Advantage Plan can switch to another plan, drop a plan, or return to Original Medicare. There's also the option to join a separate Medicare drug plan if the enrollee needs one. However, this is not the period to switch from Original Medicare to a Medicare Advantage Plan. There can only be one change during this period, and the changes go into effect on the first day of the following month.
  • Special Enrollment Period (Qualifying Life Event) – In most cases, a Medicare Advantage Plan goes from January to December. However, for people experiencing certain life events (moving or losing other insurance coverage), then they may be able to join, switch or drop a Medicare Advantage Plan during the year.
  • Five-Star Special Enrollment Period (December 8 – November 30) – Medicare uses a 5-star rating system to compare Medicare Advantage Plan on quality and performance. Enrollees can switch to a 5-star rated plan or Medicare drug plan.

Comparing Medicare Advantage Plans

Potential enrollees to a Medicare Advantage Plan should first take time to write down all their healthcare priorities. Items on the list could include:

  • What known or potential conditions need to be treated?
  • How much out-of-pocket cost can the household budget bear?
  • How do plans compare on these factors?
    • Premium
    • Deductibles
    • Copays
    • Coinsurance
    • Cap level on annual copays and coinsurance
    • Other services offered beyond Original Medicare
    • Foreign travel coverage options
    • Out-of-network options
    • Helpline availability

Also, if a particular service, drug, or supply item is required, check in advance on coverage with each plan. In this process of "organizational determination," the plan must provide an oral or written decision on coverage. If coverage is denied, the plan must provide information on how to appeal.

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