Medicare Advantage: an overview
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1. Overview of Medicare Advantage plans
Medicare Advantage is also known as Medicare Part C. A Medicare Advantage (MA) plan is an alternative to Original fee-for-service Medicare. Medicare sponsors MA plans as part of the Medicare program and pays private insurance companies to provide health services to beneficiaries who have enrolled in these plans.
In order to join an MA plan, you must be enrolled in both Medicare Part A and Part B and must continue to pay the Part B premium ($96.40 in 2008). If you join a Medicare Advantage plan, you are still on Medicare and still retain the full rights and protections entitled to all Medicare beneficiaries.
You receive all Medicare-covered benefits through the private plan you choose. Some Medicare Advantage plans offer Medicare prescription drug coverage (known as “MA-PD” plans), but other plans do not (known as “MA-only” plans). Most Medicare Advantage plans have extra benefits and may charge lower co-payments than Original Medicare. Yet, several MA plans do charge the same or more than Original Medicare for certain services. Many Medicare Advantage plans require you to see doctors who belong to the plan or to go to certain hospitals to get services.
There are 5 types of Medicare Advantage plans discussed below:
- Health Maintenance Organizations (HMOs)
- Preferred Provider Organizations (PPOs)
- Private Fee-for-Service Plans (PFFS)
- Special Needs Plans (SNPs)
- Medical Savings Accounts (MSAs)
Medicare HMOs
If you enroll in a Medicare HMO (Health Maintenance Organization), you will be required to use only doctors and facilities that contract with that particular HMO. You will have a primary care doctor who manages your health care needs. Before you see a specialist in your HMO network (except for an OB-GYN), you must generally get a referral from your primary care doctor. This requirement will be waived in such cases as emergency care, out-of-the area urgent care, or with a pre-approved referral to a doctor outside the network. If your current doctors are not under contract with the HMO, you must select new physicians who are part of the HMO network.
If you want to see a doctor outside the plan, and you do not have a pre-approved referral, you cannot use your Medicare Advantage plan card or your Medicare card to pay for those services. You will have to pay for some or all of the costs of your care.
Some HMOs offer a Point-of-Service (POS) option. If yours does, then you are allowed to see doctors out of the HMO’s network. Usually, however, HMOs charge for this option and may limit when you can use it.
Some HMOs offer Medicare Part D prescription drug coverage and others do not. If you are in an HMO plan that does not offer Part D coverage, you generally cannot get other Part D coverage outside your plan.
HMOs are the most popular kinds of Medicare Advantage plans in California, but they are not available in every part of the state. California’s HMO Guide for Seniors, produced by the University of California, Berkeley and the State of California Office of the Patient Advocate is a good resource to learn about how managed care plans work. It can also help you understand your rights so you can get the most out of your plan. You can obtain a free copy: download the PDF.
Medicare PPOs
Medicare PPOs (Preferred Provider Organizations), like Medicare HMOs, have networks of providers. If you see providers in the network, you pay a lower co-payment than if you go to providers outside the network (“out-of-network” or “non-preferred”). If you go to “out-of-network” providers, the plan still covers you but at a lower rate, i.e. your co-payment is higher. In a PPO, you do not generally need a referral to see a specialist or any provider out-of-network.
In 2008, two regional PPOs are available statewide in California. In certain counties, local PPOs are also available. The regional PPOs offer Medicare prescription drug coverage. While there are deductibles that must be met before coverage starts, there are also annual limits on out-of-pocket costs, which vary depending on the plan.
Medicare PFFS Plans
Medicare PFFS (Private Fee-for-Service) plans are offered by private companies and allow you to go to any Medicare-approved doctor or hospital as long as they accept the terms of your plan’s payment. Before enrolling in a Medicare PFFS plan, make sure that your doctors and other health care providers accept the plan’s terms and conditions for payment. In other words, your providers must agree to bill the plan, not Medicare, for their services. The private company (not Medicare) decides how much it will pay and what you pay for the services you receive.
Some Medicare PFFS plans offer Medicare prescription drug coverage. If a Medicare PFFS plan does not offer prescription drug coverage, you can join a separate Medicare prescription drug plan (PDP). In addition, a PFFS plan may offer extra benefits not covered under Original Medicare, such as extra days in the hospital.
Medicare SNPs
Medicare SNPs (Special Needs Plans) are designed for certain populations. For example, a Medicare SNP may limit its enrollment only to people in certain long term care facilities (like a nursing home), or people who are eligible for both Medicare and Medi-Cal (“dual eligibles”), or people with certain chronic or disabling conditions.
The goal of these plans is to provide health care and services to those who can benefit the most from the special expertise of the plans’ providers and focused care management. All SNPs must provide Medicare prescription drug coverage. Most of these plans offer extra benefits and lower co-payments than those in Original Medicare. These plans are available in some, but not all, areas of California.
Medicare MSAs
Medicare MSAs (Medical Savings Accounts) were available for the first time in California in 2007 and are offered again in 2008. MSAs have two parts: 1) a high deductible health plan that covers Medicare Parts A and B services once the high deductible is met; and 2) a medical savings account – an independent bank account into which Medicare makes a deposit, which can be used to pay for health care services (including meeting the health plan deductible). Note that the deposit amount Medicare makes will be less than the deductible that an individual must meet before health services are covered.
MSAs cannot offer Part D prescription drug coverage, so MSA enrollees can enroll in a separate Medicare prescription drug plan (PDP).
2. Costs and Benefits
Medicare Advantage plans contract with Medicare on an annual basis. Medicare pays a plan a fixed monthly amount for each member. This amount is readjusted each year based on a formula created by Medicare and it varies from county to county. In turn, the plan must provide, as a minimum, all Medicare covered services. It may also choose to provide additional services not covered by Medicare, such as preventive care, hearing, dental, and eye exams. These additional services can vary by specific geographic areas.
The MA plan takes the financial risk of being able to provide all required services and still make a profit. It receives the fixed, monthly payment from Medicare regardless of how many or how few people use its services, or how often services are provided.
MA plans can charge a premium, which varies from region to region and can range from no premium to more than $100 a month. Additionally, most MA plans require a co-payment for services, such as doctor visits. You also continue to pay the Medicare Part B monthly premium.
Many Medicare Advantage (MA) plans offer prescription drug coverage. These plans are often referred to as MA-PDs. If you enroll in an MA-PD, you do not need to enroll in a stand-alone Prescription Drug Plan (PDP).
3. Enrollment
You cannot be denied enrollment in an MA plan due to a pre-existing condition, unless you have end-stage renal disease (ESRD) — permanent kidney failure. If you develop end-stage renal disease while enrolled in an MA plan, the plan cannot disenroll you.
If you want to join a MA plan, you must:
- reside in the plan’s service area and
- enroll during an applicable enrollment period (see below).
Submit your application directly to the plan or a plan sales representative. Enrollment is usually effective on the first of the month following the month you submitted your enrollment application. You cannot receive coverage for medical care by the MA plan providers until enrollment takes effect. In general, you should not drop your existing coverage until your coverage with your preferred MA plan is in effect.
You are only allowed to enroll into and disenroll from MA plans during certain times of the year, including:
- the Annual Election Period (from November 15th through December 31st each year); and
- the Open Enrollment Period (from January 1st through March 31st each year). Note: During this OEP, you can not drop or add Part D coverage. If you are in an MA plan with Part D coverage (MA-PD), you can either switch to another MA-PD or to Original Medicare and enroll into a stand-alone prescription drug plan (PDP). If you are in an MA only plan without Part D coverage, you can either join another MA only plan or switch to Original Medicare with no PDP.
There are exceptions to these 2 periods if you are new to Medicare. For example: you may be eligible to enroll in a Medicare Advantage plan if you just turned 65, or your COBRA coverage ended, or you are younger than 65 but are now eligible for Medicare Part A and B due to a disability, or you or your spouse’s health coverage ended. You also have Special Enrollment Periods that may apply. For example, you may be able to change plans mid-year if you move out of the service area or if you are on Medicare and Medi-Cal.
4. Disenrollment
If you want to get out of an MA plan, and you don’t want to join another Medicare Advantage plan, you must send a written request to the plan or call 1-800-MEDICARE during the allowable enrollment periods mentioned above. Your disenrollment generally will be effective the first of the month following the month in which you made your request to disenroll. Medicare will not pay if you use providers and services outside of the MA plan’s network until the effective date of your disenrollment.
Remember that Medicare pays MA plans for your care at the beginning of each month. If you require medical care prior to the end of the month in which you requested disenrollment from your MA plan, you must seek treatment from this same MA plan, or you will be responsible for paying for out-of-network services.
If you want to switch from one Medicare Advantage plan to another, simply submit an enrollment application to the new plan and you will automatically be disenrolled from your current plan. Remember that, in general, you can only make these changes during the Annual Election Period and the Open Enrollment period.
Note: This way of disenrolling also applies to Part D drug coverage. For example, if you are in an MA plan with Part D coverage (MA-PD) and wish to switch to a stand-alone prescription drug plan (PDP), enrolling in a PDP automatically disenrolls you from your previous MA-PD plan and vice versa.
In general you can only make plan changes involving drug coverage during Part D’s Annual Election Period (between November 15th and December 31st of each year) with coverage beginning January 1st of the next year.
For more information, see our sections on Prescription Drugs.
Page updated April 23, 2008