Medicare Advantage Framework

There tends to be confusion among Medicare beneficiaries on what Medicare Advantage is and how it works. Medicare Advantage was created as an alternative to Original Medicare:

Original Medicare was first offered to Medicare beneficiaries in 1965. Original Medicare is made up of Part A (Hospital Insurance) and Part B (Medical Insurance).

Centers for Medicare & Medicaid Services (CMS) is the federal agency that administers Original Medicare.

Effective in 1999, CMS was authorized to contract with private insurance organizations to offer Medicare benefits (Part A & B) through a Medicare Advantage plan.

A Medicare Advantage plan is a private health insurance plan that has been approved by Medicare.

Medicare beneficiaries have a choice- should the beneficiary take Original Medicare or take a Medicare Advantage? To determine which is the best path, there are several factors to consider:

Benefits

  • If a Medicare beneficiary joins a Medicare Advantage Plan, Medicare is directed to pay a monthly amount to the insurance company for the enrollee’s  care.  
  • The Medicare Advantage plan then delivers your Part A and B services and takes on your health care risk and pays your doctors instead of CMS.  
  • You have the same benefits as defined by Parts A and B.  Prior approval may be required for some services by the plan.  The plan may offer additional benefits not covered by Part A and B like dental, vision and hearing coverage.

Networks and Doctors

  • A majority of the Medicare Advantage Plans offered are HMOs (Health Maintenance Organization) and PPOs (Preferred Provider Organization).  HMOs and PPOs  are managed care plans and have networks.  A network is a list of doctors, health care providers and hospitals that a plan has contracted with to provide medical care to the plan’s members.  

HMOs generally only cover services provided by in-network providers, except in emergencies.  

PPOs cover in-network providers but also cover services by out-of-network providers but you will pay a higher copay or coinsurance for services provided.

  • When choosing a Medicare Advantage plan, you should inquire if your doctor is in-network in your plan.  This is a discussion you need to have with your advisor before choosing a plan, unless you are willing to switch doctors.  

Costs

  • In order to join a Medicare Advantage Plan, the Medicare Beneficiary must first enroll in Parts A & B of Medicare.   Medicare Part B has a monthly premium.  Even if you are enrolled in a Medicare Advantage plan, you still must pay a Part B premium.  
  • Medicare Advantage Plans typically have a low or no monthly premium. 
  • However, the participant cost shares for the services received.  Each plan has its own summary of benefits which tells you your copays and coinsurances for the different services.   It’s important to understand what these are when figuring out which plan is right for you.
  • Each plan has an out of pocket (OOP) maximum for cost sharing for services rendered.  Part D spending and non Medicare covered services (i.e. hearing aids) do not count toward the OOP. 

Part D Prescription Drugs

  • Prescription drug coverage is typically included in Medicare Advantage Plans. 
  • The participant does not pay a separate premium for prescription coverage but may have a deductible and copay for the medications. 

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