Medicare Advantage

Medicare Advantage plans, also called Medicare Part C, are an alternative way to receive your Medicare health insurance.  These private health insurance plans replace your federal Medicare health insurance.  In addition, these plans offer benefits and, most importantly,  a safety net not found in Medicare.

Original Medicare (Part A and Part B) is excellent health insurance, but it was never intended to be a stand alone solution to your health care needs.  Therefore, the need for some kind of supplemental plan was necessary when Medicare was signed into law in 1965.  The first of these supplemental policies were known as Medicare Supplement, or Medigap, policies. However, Medicare Advantage plans didn’t come into existence until 1997.

The gaps in coverage in Original Medicare can be substantial.  These costs come in the form of deductibles, coinsurance and copayments.  In addition, unlike a group health insurance policy you’re familiar with from your employer, Original Medicare contains no safety net – or limit on how much you can spend on your healthcare.  This lack of a safety net is one of the main reasons a Medicare Advantage plan is sought after.  It offers an annual safety net so you know ahead of time what the financial worst case scenario will be.

How do Medicare Advantage plans work?

Medicare Advantage plans actually replace your Medicare.  This means you will receive your healthcare from a private insurance company instead of federal Medicare.  The law says these plans have to be “actuarially equivalent” to Medicare.  They are indeed equivalent and offer additional benefits as well.

A Medicare Advantage plan is a managed healthcare plan from a private insurer.  Each plan has a defined network of providers that you can choose from.  Each plan has it’s own unique set of copays, coinsurance and deductibles for different healthcare procedures.

Think of a Medicare Advantage plan like a restaurant menu.  Each item on that menu has a different price.  Likewise, every healthcare service on a Medicare Advantage plan will have a specific copay or coinsurance associated with it.

The federal government pays each Medicare Advantage plan a fixed sum of money for each beneficiary.  The insurer then has the freedom to set up their plan in the manner they see fit.  For example, their network may be an HMO or a PPO.  They may require you to get a referral to see a specialist.  One plan may have a specialist copay of $25 and another may have a specialist copay of $50.

Because Medicare Advantage plans replace Medicare, you only need to bring your Medicare Advantage card when you go to the doctor.  You can leave your red, white and blue Medicare card at home.  This is because you will be receiving all of your health care from a private insurance company and not through the federal Medicare program.

Benefits of a Medicare Advantage Plan

• Gives you a financial safety net, or MOOP (Max Out Of Pocket), that doesn’t exist in Original Medicare
• Most zip codes offer a $0 month premium
• Part D prescription drug coverage is included
• Offers insurance benefits not found in Medicare – like dental, vision and hearing insurance
• Free gym membership
• OTC benefit -money to spend every quarter on common items like vitamins, pain relievers, band-aids and cold and flue medicine
• $0 copays for many preventive services like breast cancer screenings, cardiovascular screenings, diabetes screenings and prostate cancer screenings

Pitfalls of a Medicare Advantage plan

• Networks – you are restricted to a network of providers
• Potentially expensive – If you are diagnosed with a serious illness like cancer, you will have to pay 20% of the cost of any chemotherapy and radiation medications up to the plans Maximum Out of Pocket (MOOP).  This is no better than Original Medicare and much worse coverage than a Medigap plan, which would pay the 20% coinsurance.
• Prior authorization – Enrollees in a Medicare Advantage plan have to endure more prior authorizations for services than a person with a Medicare/Medigap combination.  This can lead to a delay or denial of services.
• Appealing a denied procedure is more tedious with a Medicare Advantage plan that it is with a Medicare/Medigap combination.  This is because the rules and regulations are better defined in Medicare.
• Networks can change mid year.  This may mean you’ll need to find a new doctor that is in the network.
• Out of Pocket expenses can change each plan year so you need to stay on top of these changes.

How to choose a Medicare Advantage plan

Every Medicare Advantage plan is structured different.  Your job is to find the plan that most closely matches your healthcare needs, financial risk tolerance and offers the richest “extras”.  In addition, every plan makes changes each year that may or may not benefit you.  It is your responsibility to stay aware of these changes and determine if you are still in the “best” plan for you.

Top 10 items to know about your Medicare Advantage Plan

1. Doctors –  Are your doctors in the plan’s network?  If not, are you willing to change doctors?  Remember, it’s always cheaper to use a doctor in the plan’s network (PPO) and required in an HMO (unless it’s emergency or urgent care).
2. Medications – Are your medications covered by the plan?  If so, what Tier do they fall in and what is the copay.  You also need to check and see if there is a deductible.
3. PPO or HMO – A majority of the plans will either be structured as an HMO or a PPO.  Sometimes the more restrictive HMO will have lower out of pocket expenses than the PPO.  Are you willing to be in a more restrictive network in exchange for, lets say…more dental coverage?
4. Monthly premium – Most zip codes will offer a $0 month premium plan along side plans with a monthly premium.  You have to compare the benefits of the plan with a monthly premium to decide whether it’s worth it or not.  Also, in some rural areas your only choice will be a non-zero monthly premium plan.
5. Maximum Out Of Pocket (MOOP) – Each plan will have a safety net in the form of a MOOP.  The lower the MOOP, the less financial risk an enrollee is subject to.
6. Primary Care Physician (PCP) and Specialist copay – Most plans will have a $0 copay for a primary care physician.  Specialist copays usually range from $25 to $50.
7. Inpatient Hospital Care – This can be one of the more expensive set of copays you will have.  Most plans will require a copay of between $290 – $330 per day for the first 5-7 days.
8. Skilled Nursing Facility – This is one that is easily overlooked.  Most Medicare Advantage plans will offer you a $0 copay for days 1-20.  However, days 21-100 will have a copay.  Some have a flat copay for days 21-100 and some are tiered.  In other words, some plans will have a scaled down copay for days 41-100.
9. Dental, Vision and Hearing coverage – Nearly all plans will include coverage for dental cleanings, fillings, dentures, eye exams, eyeglasses/contacts and hearing aids.  Each plan will offer this coverage in different ways.  You need to closely compare to find the most coverage.
10. Extras – Gym memberships and an OTC benefits fall into this category.  Some plans are more generous than others – it pays to know which ones offer you the most benefits.

When to enroll in a Medicare Advantage Plan

You have to be enrolled in Medicare Part A and B in order to enroll in a Medicare Advantage plan.

The first chance you have to enroll in a Medicare Advantage plan is during your Initial Enrollment Period (IEP).  The IEP lasts for 7 months.  It starts 3 months before your 65th birthday month and ends 3 months after your 65th birthday month.  If you enroll during the first 3 months of your IEP, your plan will start the first day of your 65th birthday month.  If you enroll in any of the following 4 months, your start date will be the first day of the month following the month you enrolled.

If you don’t get enrolled during your IEP, then the next chance is during the Annual Election Period (AEP) which lasts from October 15 – December 7 each year.  If you enroll during the AEP, your effective date will be January 1 of the following year.

Some people will delay enrolling in Part B when they turn 65 because they have an employer group health plan from their employer.  When that person finally decides to retire and enroll in Part B, they will be able to enroll in a Medicare Advantage plan during their Initial Coverage Election Period (ICEP).  The ICEP is the 3 months prior to your Part B start date.  For example, if you have a Part B start date planned for July 1, then you can enroll in a Medicare Advantage plan from April to June.  Your start date would be July 1.

Finally, for those people that didn’t sign up for Part B during their IEP or when they retired and lost their employer group health plan,  they can enroll in Part B during the General Enrollment Period (GEP).  The GEP runs from January to March each year.  After enrolling in Part B during this time, they can enroll in a Medicare Advantage plan from April to June.  Coverage starts July 1.  Note, enrolling in Part B during the GEP will usually result in a permanent Part B Late Enrollment Penalty.