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Medicare Advantage Basics

What is Medicare Advantage?

When you become eligible for Medicare, you can receive your Medicare coverage through Original (sometimes called "fee for service") Medicare, where you can go to any doctor, hospital or other health-care provider that takes Medicare, and you pay a deductible and a portion of the cost of the services you receive. Or you can get your Medicare coverage through what is called "Medicare Advantage."

Medicare Advantage is the name for the system where private companies offer Medicare benefits through private plans. People with Medicare may choose to join these plans. If you join a Medicare Advantage plan, you still have Medicare; you would simply receive your Medicare coverage through the Medicare Advantage plan. (These plans are also sometimes called "Medicare health plans.") These plans must obey the government's Medicare rules about the coverage of the care and services that Medicare provides. Some Medicare Advantage plans offer additional services that Medicare doesn't cover, such as eye glasses, hearing aides, health club membership and other wellness benefits.

Some Medicare Advantage plans offer Part D drug coverage. These plans are called Medicare Advantage-Prescription Drug plans, or "MA-PDs." Other Medicare Advantage plans do not offer Part D drug coverage. These plans are called Medicare Advantage - Only or MA-Only plans.

If you join a Medicare Advantage plan there are rules you'll have to follow to get your Medicare coverage and pay the least amount of money for your health care. For example, some Medicare Advantage plans require you to stay within the network of providers with which they have a contract. They won't cover you at all if you go to a doctor's office or a hospital outside of that network. Other plans might cover you, but require you to pay more out-of-pocket if you go out of their network to get your care.

Are All Medicare Advantage Plans the Same?

No. There are five major kinds of Medicare Advantage plans. Let's review each separately:

Health Maintenance Organizations (HMOs)

An HMO has a network of providers including doctors, hospitals, nursing homes, rehabilitation therapy clinics and laboratories. You must receive all of your care at a network provider.

You are only allowed to receive care outside of the HMO network if you believe you are experiencing an emergency medical situation, such as you cannot breathe, or you have severe chest pains and you think you might be having a heart attack. In an emergency you should always go to the nearest Emergency Room. Your HMO is required to cover your care even if it turns out that you were experiencing indigestion and not a heart attack as long as you reasonably believed you had an emergency.

Your HMO must also cover your urgently needed medical care even if you cannot get to an in-network provider. An example of urgently needed care would be if you live in New Hampshire but went to visit your grandchildren in Colorado and fell, breaking your leg. While your medical condition is not life-threatening, you need to have your leg taken care of and will not be able to return home for that care. Your hospital stay in Colorado to operate, reset and cast your leg would be covered because it was urgently needed.

Preferred Provider Organization (PPO)

A PPO has a network of providers like an HMO, and if you see providers in the network you will pay the lower co-payments. If you decided to see a provider that wasn't in the PPO network, your care would still be covered, but you could end up having to pay more for your care than if you'd gone to an in-network provider.

Regional PPO

Regional PPOs work like other PPOs, although they must have Part D coverage. They just serve a particular region of the country. A region may be a single state, or multiple states depending on where you live.

Special Needs Plan (SNP)

Special Needs Plans are Medicare Advantage plans that are only open to one of three groups of people with Medicare -- those who live in specific nursing homes, beneficiaries diagnosed with certain chronic diseases (specified by the plan), or beneficiaries who also have Medicaid. Most SNPs are for people with Medicare and Medicaid. SNPs must offer Part D coverage. It's important when considering a SNP to be sure you understand the special ways in which the plan will help you coordinate Medicare and Medicaid in a SNP for people who have both, or treat the condition that makes you eligible to join the plan.

Private Fee-for-Service Plan (PFFS)

A PFFS plan usually allows its members to see any Medicare provider that accepts the plan's terms and conditions. Providers get to decide whether or not to accept the plan's terms and conditions each time a plan member comes into the office or otherwise seeks care (such as in a clinic or hospital). If you are in a PFFS plan and a provider treats you, he or she is said to have accepted the plan's terms and conditions. That rule has caused many providers to decline to treat PFFS members. It's very important to check with all of your providers about their willingness to treat you if you join a PFFS plan.

Medicare Savings Accounts (MSAs)

An MSA is a high deductible private insurance policy that is combined with a special savings account. You cannot buy the high deductible Medicare policy without also opening the savings account. Medicare deposits a sum of money into the Medicare Savings Account that pays for some, but not all, of the insurance policy's deductible. You use this deductible to pay for the costs of Medicare-covered care. After you've paid the deductible, the MSA insurance policy then covers all Medicare-covered care for the rest of the calendar year.

Can Any Medicare Beneficiary Join a Medicare Advantage Plan?

You must have both Medicare Parts A and B to join a Medicare Advantage plan. If you only have Part A (or Part B), Medicare Advantage, plans cannot take you as a member. You must also live permanently in the area served by the Medicare Advantage plan. However, some Medicare Advantage plans offer an option called Point-of-Service. For example, generally you cannot join a Florida Medicare Advantage plan if your permanent residence is in Michigan. However if a plan based in Michigan had a Florida Point-of-Service option, you could join that plan and get any medical care that you needed while you were vacationing in Florida.

Some Medicare Advantage plans have additional restrictions as to who is allowed to join. People with Medicare and Medicaid are not allowed to sign up for an MSA plan. Special Needs Plans can only serve certain groups of people with Medicare, and as such, people not in one of those groups cannot join those plans. For example, you can only join a chronic disease SNP for people with congestive heart failure if you have that diagnosis.

When Can A Medicare Beneficiary Join a Medicare Advantage Plan?

You can join or drop a Medicare Advantage plan during the Annual Enrollment Period, from November 15 - December 31st each year. If you joined a plan during this period, your membership would take effect on January 1st of the next year.

You can also switch plans (or drop your Medicare Advantage plan and switch to Original Medicare) during the Medicare Advantage Open Enrollment Period from January 1st - March 31st each year. Here are two resources that explain your options during the Medicare Advantage Open Enrollment Period:

If you go to Original Medicare during the Open Enrollment Period, it is important to think about the various ways in which you can protect yourself from the costs associated with Original Medicare, such as deductibles, coinsurance or copayments. You will also need to think about your prescription drug coverage.

Generally you must remain in your Medicare Advantage plan during the rest of the year. There are a few exceptions that permit you to change plans. Here are some of the most common circumstances that permit a change of plans at times other than the Annual and Open Enrollment Periods:

  • People with Medicare and Medicaid can join or switch into or out of a Medicare Advantage plan at any time, effective the first day of the following month.
  • If you move permanently away from the area served by your Medicare Advantage plan, you must switch out of that plan. You can join another Medicare Advantage plan where you've moved to, or you can go to Original Medicare.
  • You can also change plans if you are admitted to a nursing home, while you live there and when you leave.

If you are at least 65 years old and have not previously tried out Medicare Advantage, can switch out of your Medicare Advantage plan and get Original Medicare generally during the first year you are in a Medicare Advantage plan. If you use this option, you may have certain rights to buy a Medigap supplemental policy, but only if you had never been in a Medicare Advantage plan before. Under those circumstances, you also might have rights to join a Prescription Drug Plan (PDP) if you dropped an MA-PD.

To summarize , here is an outline of these Medigap and Prescription Drug Plan enrollment rights.

How Much Does Medicare Advantage Cost?

Generally, you must continue to pay your Medicare Part B premium when you belong to a Medicare Advantage plan. For most people, this just means that your Part B premium will continue to be deducted from your monthly Social Security or Railroad Retirement benefit. However, Medicare Advantage plans sometimes charge an extra plan premium that you must also pay. Sometimes Medicare Advantage plans pay some or all of Part B premiums for members as an extra benefit.

Medicare Advantage plans often require members to pay co-payments or coinsurance when they receive medical care. The plans set how much those charges will be. It's important to understand these charges as they are likely to differ from what Original Medicare Parts A and B charges.

In some instances these out-of-pocket co-payment or coinsurance costs may be less than the comparable cost in Original Medicare. For example, you might pay a $20 co-payment to see your doctor for ongoing treatment of your arthritis whereas in Original Medicare you'd pay at least 20 percent of the Medicare charge.

In other situations a Medicare Advantage plan co-payment or coinsurance might actually cost you more than the comparable cost if you were in Original Medicare. For example, in Original Medicare, you pay nothing for the first 20 days of a Medicare-covered skilled nursing facility stay. A Medicare Advantage plan might charge a co-payment of $100 a day for a skilled nursing facility stay. So depending upon your health care needs, a Medicare Advantage plan's cost-sharing requirements could work in your favor -- or not -- so it's important to understand the costs in order to make educated decisions.

What Does a Medicare Advantage Plan Cover?

Medicare Advantage plans are required to cover all medically reasonable and necessary care and services that are covered by Medicare Parts A and B. MA-PDs must also cover offer Part D prescription drug coverage. Medicare Advantage plans sometimes offer extra coverage that isn't included in Original Medicare. For example, you might find Medicare Advantage plans in your area that cover annual physicals, over-the-counter medications like pain remedies or cough syrup, or even health-related items such as hearing aids and glasses. You should check to see whether the Medicare Advantage plan offers limited extras, such as offering $100 towards the cost of eyeglasses every two years. You should also consider whether the extra benefits offered are benefits you would use such as health club membership.

What If I Don't Agree With My Plan?

You can appeal:

  • if you disagree with a plan decision to deny you care or services that you think Medicare should cover, OR
  • if your plan refuses to pay for care that you believe they should let you have.

You start your appeal by asking for a formal decision from the plan, called an ‘Organizational Determination.' Plans must issue these within 14 days of your request. You are entitled to a decision within 72 hours if your plan decides to stop home health, skilled nursing facility, or certain rehabilitation services that you were receiving. You will be given a notice when you are admitted to a hospital explaining your rights if you disagree with a decision that you are ready for discharge.

If you are dissatisfied with the customer service of your plan or plan providers you can file a grievance with the plan.

Updated 1.10.08

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