Medicare Advantage plans are gaining in popularity. At least one-third of all Medicare patients have these plans and the numbers are growing.
What is a Medicare Advantage plan?
The Balanced Budget Act of 1997 introduced Medicare Part C and the term “Medicare + Choice” and the Medicare Prescription Drug, Improvement and Modernization Act of 2003 renamed “+ Choice” to Medicare Advantage. Both bills were passed by a Republican-controlled Congress.
Medicare Advantage plans pay for managed health care based on a monthly fee per enrollee (capitation), rather than on the basis of billing for each medical service provided (fee-for-service). Most such plans are health maintenance organizations (HMOs) or preferred provider organizations (PPOs). Medicare Advantage plans provide beneficiaries the same medical services via capitated-fee as “Original Medicare” Parts A and B Medicare provides via fee-for-service.
A Medicare Advantage beneficiary must first sign up for both Part A and Part B of Medicare but all three of these Parts, A, B and C, are administered by private insurance companies (usually the same insurance company). Part C health plans, including Medicare Advantage plans, not only cover the same medical services as Parts A and B but also typically include an annual physical exam and vision and/or dental coverage of some sort not covered under Original Medicare.
Less often, hearing and wellness benefits not found in Original Medicare are included in a Medicare Advantage plan. The most important difference between a Part C health plan and FFS Original Medicare is that all Part C plans, including capitated-fee Medicare Advantage plans, include a limit on how much a beneficiary will have to spend annually out of pocket; that amount is unlimited in Original Medicare.
Most but not all Medicare Advantage plans (and many of the other public managed-care health plans within Medicare Part C) include integrated self-administered drug coverage similar to the stand-alone Part D prescription drug benefit plan. The federal government makes separate capitated-fee payments to Medicare Advantage plans for providing these Part-D-like benefits if applicable just as it does for anyone on Original Medicare using Part D.
There are drawbacks to Medicare Advantage. Like all HMOs, you must pick your primary care provider from an approved list and must have a referral to see a specialist.The providers on the approved list have accepted lower reimbursement rates than original Medicare, and therefore may be in less demand than other physicians.
With the cost of healthcare rising rapidly, these plans are growing in popularity. Enrollment in Medicare Advantage plans has risen steadily, now exceeding 20 million or one-third of the Medicare market. They are projected to reach 40% of the market by 2024. If limiting healthcare expenses is your goal, this is your answer. If you prefer freedom of choice (and don’t mind the higher costs), stick with original Medicare.
Former Louisiana Governor Bobby Jindal, writing in The Wall Street Journal, warns Republicans to encourage these popular and successful plans by maintaining adequate funding. He says these privately-managed government-funded plans are doing a good job of keeping costs down by competing for patients. He says, “Specialized companies have sprung up to help avoid medication conflicts, manage specialty care, or prevent complications. Medical providers are taking risk and measuring patient outcomes, not just services performed.”
He suggests encouraging these plans by making them the default enrollment of new seniors while still allowing them to opt-out if they want original Medicare. He also suggests pursuing a similar program for seniors also enrolled in Medicaid.
The real “advantage” of these plans is lower costs and they are privately-managed. The less we allow the government to meddle in our healthcare, the better.