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Exploring Medicare Advantage Plans

Medicare Advantage is a health insurance program of health maintenance organizations (HMOs), preferred provider organizations (PPOs), and other private plans that substitute for original Medicare Parts A and B benefits. Medicare Part A covers inpatient hospital expenses. Part B covers the costs associated with care from a physician, medically necessary outpatient hospital services like laboratory tests, X-rays, and diagnostic procedures, and certain durable medical equipment and supplies. The Centers for Medicare and Medicaid Services (CMS) processes original Medicare claims. Commercial insurers and private HMO and PPO corporations offer Medicare Advantage and receive compensation from the federal government but do not process claims through the CMS.

Medicare Advantage Origins

Medicare Advantage originated when the Balanced Budget Act of 1997 offered Medicare beneficiaries this option for receipt of benefits through original Medicare Parts A and B. At first they appeared as Medicare+Choice or Part C plans and later became Medicare Advantage plans under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.

Medicare has a standard benefit package that covers medically necessary health care services. People who reach age 65 qualify for Medicare coverage. All Medicare beneficiaries who enroll for Part B benefits pay monthly premiums.

Medicare Advantage Plan Costs

For those who enroll in Medicare Advantage plans, Medicare pays the private health insurance plans a set amount every month for each beneficiary. Beneficiaries may have to pay monthly premiums in addition to Medicare Part B premiums, but some companies offer Medicare Advantage plans with no premium in addition to the Medicare Part B premium paid directly to Medicare. Medicare Advantage beneficiaries generally pay a fixed copayment every time they see a physician rather than meet a deductible and pay coinsurance as under original Medicare. Medicare Advantage plans must offer a benefit package at least equal to Medicare coverage, but they need not cover every benefit in the same way. Plans that require higher patient costs for some benefits than Original Medicare plans can offset those costs by offering other benefits for a lower cost. Private plans may use some excess payments from Medicare for each beneficiary to offer supplemental benefits.

In sum, health care insurers contract with Medicare to provide all Part A (hospitalization) and Part B (medical) benefits by Medicare Advantage plans operated by HMOs, PPOs, PFFS plans, special needs plans, and Medicare medical savings account (MSA) plans. Medicare Advantage plans, not original Medicare, cover the expenses of Medicare services. Most Medicare Advantage plans cover prescription drug expenses.

Medicare Advantage And HMO Plans

In most HMO plans the beneficiary can go to only doctors, other health care providers, or hospitals on the HMO network except in emergency situations. The beneficiary may need a referral from a primary care physician to consult a specialist. In some plans, the beneficiary may go outside the HMO network for certain services at usually extra costs in HMOs with point-of-service options. HMO plans cover prescription drugs in most cases. For Medicare Part D prescription drug coverage, the beneficiary must join an HMO that offers it.

In most HMOs the beneficiary must designate a primary care physician to make referrals to specialists. Certain services, however, like annual mammogram screenings, do not require referrals. If the primary care physician or other health care provider leaves the HMO, the beneficiary can choose another doctor in the network. It’s important that you follow HMO rules like prior approval for services when necessary. A beneficiary who receives without prior approval health care outside the HMO network may have to pay the full cost.

In Medicare Advantage PPOs, the beneficiary pays less to use physicians, hospitals, and other health care providers in the PPO network than to use outside providers, so PPOs offer flexibility in that way but usually at an extra cost. Not all PPOs cover prescription drugs, so for Medicare Part D drug coverage the beneficiary must join a PPO that offers it.

Medicare Advantage And PPO Plans

Designation of a primary care physician is not necessary in PPO plans, nor in most cases is a referral necessary to see a specialist. Costs to use PPO specialists, however, are usually lower than for outsiders. PPOs usually offer more benefits than does original Medicare, but there may be extra costs for them.

PFFS plans determine how much it will pay physicians, other health care providers, and hospitals for each event and how much the beneficiary must pay for the care received. In some cases, PFFS plans cover health care services from any provider or hospital; that is, the beneficiary can go to any Medicare-approved provider or hospital that accepts the PFFS payment terms. Not all providers accept them. In PFFS plans with networks, the beneficiary can see any network providers who agree to treat plan members at all times. The beneficiary also may choose providers not in the network willing to accept the PFFS terms but may pay more than customary. Some PFFS plans cover prescription drugs. If not, the beneficiary may join a Medicare prescription drug plan for coverage.

PFFS plans require neither designations of primary care physicians nor referrals to specialists. Some PFFS plans contract with network providers who agree to treat plan member beneficiary never seen before. Providers outside the network may decide not to treat even patients they have seen before. For all services the beneficiary should make sure providers agree to and accept the PFFS payment terms. Providers must treat beneficiaries in emergencies.

Providers can choose at any visit or event whether to accept PFFS payment terms and conditions. Original Medicare will not cover health care for PFFS member patients, who first must return to original Medicare coverage. The beneficiary pays the copayment or coinsurance amount allowed by the plan for services.

Comparing Medicare Advantage

Less common types of Medicare Advantage plans are available in some areas. HMO point of service plans are HMOs that may allow some services outside their networks at extra costs. Medicare MSA plans that combine a high deductible with a bank account have two parts. The first is a special type of high-deductible Medicare Advantage plan that begins to cover health care costs after the beneficiary meets a high annual deductible which varies by plan. The second is a special type of savings account. The Medicare MSA plan deposits money into an account that the beneficiary can choose to use to pay health care costs before meeting the deductible.

In addition to the Medicare services that all Medicare Advantage plans must cover, some plans may offer extra benefits not included in Medicare like dental, vision, or long-term care at extra costs. Medicare MSA plans don’t cover Medicare Part D prescription drug costs. Patients who join Medicare MSA plans and need drug coverage have to join a separate Medicare Prescription Drug plan.