Private health insurers contract with the government to provide Medicare insurance benefits. The government only approves plans with benefits at least as good as Medicare Part A and B, the two parts of Original Medicare. These plans often also include additional benefits, including coverage that Medicare doesn’t offer.
How Medicare Advantage Plans Work
Instead of using the Original Medicare Card, Medicare Advantage plan members will show their health plan’s ID card to providers. In turn, the healthcare provider should file claims and charge the patient deductibles or copays if needed.
Common characteristics of Medicare Advantage plans include:
- Very often, these plans also provide Part D drug coverage.
- The plans may include extra benefits, like coverage for dental and vision care or discounts for OTC medicine.
- The most common Medicare Advantage plans include HMOs and PPOs, which use a plan network.
- Typically, plan members will pay copays or deductibles to access covered services.
- The plans will also have an annual out-of-pocket maximum, which limits the amount members need to pay in a year.
Types of Medicare Advantage Plans
As with other health insurance, private insurers offer more than one kind of Medicare Advantage plan. HMOs stand out as the most common kind of Medicare Advantage plan, with PPOs ranked second in popularity.
Health Maintenance Organization (HMO)
An HMO typically has strict rules that only allow covered services from in-network providers except for emergencies. An HMO may also require members to choose a primary care doctor and to seek referrals for specialists. In exchange for these strict rules, HMO plans generally cost less than other plans.
Preferred Provider Organization (PPO)
A PPO plan also has a network of providers. However, the PPO will allow members to step outside these providers if they share more of the cost. A PPO also won’t force its members to choose a primary care physician or get referrals to see specialists. Some PPOs have broader networks, allowing members to access in-network services when they’re out of town.
Private Fee for Service (PFFS)
Special Needs Plans (SNPs)
Medical Savings Account (MSA plans)
- High-deductible health plan: The high-deductible Medicare Advantage plan will only pay its part after meeting the annual deductible.
- Savings account: The plan makes monthly deposits into this account. Plan members can use the money for healthcare expenses.
Medicare Advantage Vs Original Medicare
Original Medicare consists of Medicare Part A and B. Some people refer to these as the hospital and medical plans because Part A focuses on in-patient care, and B centers more upon out-patient services.
These plans offer comprehensive coverage for many healthcare services. Still, Original Medicare includes many deductibles and copays and doesn’t cover every healthcare service. Thus, people who only have Original Medicare could risk high out-of-pocket costs for serious medical issues.
Medicare Advantage plans come from private insurance companies. They need to provide benefits that are at least as good as Original Medicare; however, they don’t need to structure their benefits precisely the same. For instance, a plan member may have a modest copay for a doctor’s visit and lab tests instead of paying 80 percent of the total bill, as with Original Medicare.
Medicare Advantage Vs Medigap
What is a Medicare Advantage plan compared to a Medicare supplement plan (Medigap)? Again, Medicare Advantage will replace Part A and B. In contrast, Medigap works with Original Medicare. Thus, supplements pay deductibles, copays, or coinsurance to fill in the gaps for things Original Medicare won’t cover. That way, they can reduce or eliminate out-of-pocket costs for Medicare beneficiaries.Medicare supplement plans don’t use networks as PPO or HMO plans do. Most US doctors accept them, so they can provide flexibility for people who plan to travel. Some Medigap plans even cover urgent care outside of the country.
Like Original Medicare, Medicare supplements don’t cover most prescriptions. Most Medicare Advantage plans include Part D drug coverage, making enrolling in an additional Part D plan unnecessary.
How to Choose a Medicare Advantage Plan
- Cost: Consider the monthly premium against the cost of accessing various services, including prescriptions.
- Network: Ensure the network includes favorite doctors, pharmacies, and other healthcare providers for a PPO or HMO. For a fee-for-service plan, contact providers to ensure they will accept it and file claims.
- Check covered drugs: Each plan has a formulary. This list includes all covered prescriptions and how they’re covered.
- Quality: Medicare publishes ratings for Medicare Advantage plans every year. Try to find plans with four- and five-star ratings.
Most older people want to save money. Many plans have low or even $0 monthly premiums. At the same time, beneficiaries should weigh the premiums against potential costs for covered services.
Many Medicare recipients find that paying a little more for more extensive provider networks and more convenient services will offer value. Typically, plans with local networks cost the least, but they may not cover services outside the hometown. Also, fewer local doctors may accept plans with limited networks.
How to Enroll in Medicare Advantage
Members can enroll in a plan through the insurance company or an insurance agent during an enrollment period. The insurers or agents may take applications in person, by phone, or online.
Note that the plan won’t start immediately after signing up. The plan will activate on its effective date. Other Medicare Advantage plans will automatically deactivate when the new policy becomes active. New members should wait until their policy becomes effective to cancel any prior health insurance.