If you’re reading this, it’s probably because you know about Medicare supplements but keep hearing about Medicare Advantage plans and wondering whether they’re legitimate. I assure you, they are legitimate, they’re just a different way for you to protect yourself. For those of you who are used to purchasing health insurance through your employer’s group health plan, these plans will seem very familiar.
Let me answer the main concerns I’ve heard regarding Medicare Advantage plans.
What’s Medicare Advantage?
Basically, it’s the government outsourcing Medicare duties, such as administration and claims processing, to private insurance companies. A Medicare Advantage plan can take three forms: Health Maintenance Organizations (HMO), Preferred Provider Organizations (PPO) and Private-Fee-For-Service (PFFS) plans. HMOs and PPOs are similar in that both are managed care systems based on contractual agreements between providers (hospitals and/or doctors) and insurance companies. The difference between the two is PPOs will allow you to go outside their network, but make you pay more of the bill.
PFFS plans are different; they’re also what most people are talking about when they ask about Medicare Advantage plans.
Here’s how they work: Medicare contracts with private insurance companies and pays them a “subsidy” to take care of seniors in a specific geographic area. For example, let us say that it costs Medicare $100 per senior to administer Medicare in Berks County in Pennsylvania. Medicare contracts with a private insurance company and says it will pay the company $75 per senior in Berks County to administer Medicare and pay all claims coming from those seniors. The catch is that the insurance company must provide everything Medicare covers plus extra benefits. Everybody wins here. Medicare saves money, the insurance company receives more clients and the policy holder pays less for more benefits.
How much do I have to pay?
It’s tough to say. Most of the more than 200 companies that contract with Medicare have some sort of $0 premium plan in their arsenal. Most Medicare Advantage plans are less than $100 per month, which is a lot less than the average Medicare supplement. So far, premiums have remained flat compared to the rising costs of Medicare supplements, but I don’t expect that to last very long, especially with the $0 premium plans.
What do I get out of it?
Besides the lower premium you usually get more benefits than you would if you had traditional Medicare plus a Medicare supplement. Many plans offer some form of hearing, vision and dental benefit, for example, although these extra benefits vary wildly from company to company. Most plans are also very heavy on preventive medicine so seeing a doctor for a mammogram, pap smear or colorectal screening is paid for and encouraged. You also get the freedom to choose any doctor or hospital for your care.
Lower premium and more benefits. It sounds like it’s too good to be true.
Yes, it does. Now here’s the catch: if you choose one of the $0 premium plans that are floating around out there you will pay co-pays and co-insurances. Many are relatively inexpensive, like $15 for to see a specialist or $5 for a doctor visit or $150 a hospital stay. Most of the plans with premiums have few, if any, co-payments and lower yearly out-of-pocket maximums, but it really does depend on the policy and company. Always check to see what the yearly out-of-pocket maximum will cost you, since if you have health troubles it may cost you more for a $0 premium plan than for a traditional Medicare Supplement due to co-pays and co-insurances.
My Medicare supplement has paid everything. I’ve never had to worry. Why should I change now?
It depends on where you’re at in your health history. A person in good health would probably snap up a $0 premium plan since he or she will save a lot of money over the course of the year. A person with a poor medical history will probably want to pay more to get more benefits and fewer co-pays. But to fully answer the question, I’d say that trust and piece-of-mind are more important than money when it comes to health. If you trust your Medicare supplement company and are comfortable paying $500 or $600 more per year for that security, I’d advice you to stick with it.
I have to take a lot of prescription drugs. How does a Medicare Advantage plan help?
Most companies offer some Medicare Advantage plans with prescription drug benefits. You will pay more, of course, but the cost should still be less than the cost of a Medicare supplement plus a prescription drug plan. Medicare Advantage plans usually follow guidelines similar to traditional prescription drug plans.
Who offers these plans?
Medicare contracts with more than 200 companies. Your best bet might be to call independent insurance brokerages because they represent multiple insurance companies.
I got a lot of health problems, will I be accepted?
The only health question is this: “Do you currently suffer from end-stage renal disease?” This is kidney failure requiring dialysis or transplant. So, yes, you would probably be accepted.
Are these things a flash in the pan?
There’s a chance that they could disappear in the next 10 years or evolve into something new, but I don’t see them as being the same as they are now. Medicare Advantage plans seem like a small Band-Aid on a gushing wound. When the Baby Boom generation starts officially hitting 65 in 2010, I think the insurance companies will ask for more money from Medicare or Congress and not get it. This will create an even larger health care crisis among seniors. But that’s just a guess.
If you have other questions about Medicare Advantage plans contact your county or state department of aging. You can also contact Medicare at 1-(800)-MEDICARE or www.medicare.gov.