Medicare Advantage plans were created under the Balanced Budget Act of 1997 and signed into law by President Bill Clinton. These plans are commonly called Part C of Medicare. There are some important things to know if you are thinking of purchasing a Medicare Advantage plan. We will explain those things below.
Medicare Advantage plans fall under Part C. These plans will have provider networks and will require referrals to see a specialist. Your care, in general must be within that network. If you had an employer plan in the 90’s, that’s when HMO plans first entered the market. If you had one then you will find some similarities in the way Advantage plans operate.
Congress designed this program to give Medicare beneficiaries a lower-premium option than Medigap. They also have very little Medicare underwriting. This means they are a coverage option for people who missed their open enrollment window for Medigap and now cannot qualify for Medigap due to health conditions.
Medicare Advantage plans are very different than a Medigap plan. Members get their benefits from a private insurance company like Aetna, instead of original Medicare. You never permanently replace your Medicare when you join a Medicare plan. Instead, you are just choosing to get your benefits from a private company for the rest of the calendar year. You can always return to Original Medicare during a valid election period.
How Medicare Advantage Works
A Medicare Advantage plan is a private Medicare insurance plan that you may join as an alternative way to get your Medicare benefits. For your voluntary enrollment into this plan, Medicare pays the plan a fee every month to administer your Part A and B benefits. How are Advantage plans funded? Medicare pays the Medicare Advantage company on your behalf to take on your medical risk. You must continue to stay enrolled in both Medicare Part A and B while enrolled in your Medicare Advantage plan. When you present your Advantage plan ID card at the time of treatment, your providers will bill the plan instead of Original Medicare.
Medicare Advantage Plan Coverage
Each Advantage plan has a summary of benefits. This summary will tell you what your copays will be for various healthcare services. Your plan will offer all the same services as Original Medicare, such as doctor visits, surgeries, lab work and so on.
You may pay varying copays for services like office visits, diagnostic services, hospital stays and surgeries. Review the plans in your area to get specifics.
Depending on the carrier, Advantage plans may offer minor benefits for routine dental, vision or hearing. Some plans include gym memberships. My suggestion is to choose the Medicare Advantage plan that best meets your health needs, not for the add-on. Make a plan each year, take the time to review your summary of benefits to make sure it still meets your current healthcare needs.
See our Medicare Part C page for more on what Medicare Advantage covers.
Medicare Advantage Networks
There is a cost for those lower monthly premiums. In joining a Medicare Advantage plan, you agree to play by the network rules. You have a network of providers you must use. Medicare HMO networks generally require you to use network providers, except in emergencies. These networks usually require you to select a primary care physician. That physician will coordinate your referral if you need to see an in-network specialist. Some Advantage HMO plans offer a point-of-service feature where you can see out-of-network providers in certain circumstances. Expect to use in-network providers.
Medicare HMO plans are the most prevalent type of network. Medicare PPO networks allow you to see doctors outside the network but you’ll have substantially higher out-of-pocket spending to do so. In limited counties, there are Medicare Private-Fee-for-Service plans. These plans may or may not include Part D. Depending on where you live, these plans don’t exist or are being phased out.
Medicare Annual Election Periods
The Annual Election Period is the most common time to change your Medicare Advantage plan. This period runs from October 15th – December 7th each fall. Changes made to your enrollment will take effect January 1. If you decide to leave an Advantage plan and return back to Original Medicare, you must notify your Medicare Advantage plan carrier. Otherwise, Medicare will continue to show that you are enrolled in the Advantage plan instead of Medicare.
Medicare Advantage Open Enrollment Period
Some people join Medicare Advantage plans without doing any research about how these plans work. It is important to do your research and speak with a local agent who can give you the ins and outs of how this program works. The bad part is finding out after the fact that your doctor doesn’t participate in the network or the plan doesn’t include one of their medications. Many find out in January after they have tried to use their insurance. Panic sets in.
That’s why Congress designed the Medicare Advantage Open Enrollment Period that runs from January 1st – March 31st each year. During this time, you can disenroll from any Advantage plan and return to Original Medicare. At that time, you will be allowed to add a standalone Part D drug plan.
If you decide you want to go back to Original Medicare and get a Medigap plan, it doesn’t guarantee that you can return to the Medigap plan you had before. Generally, you will have to answer health questions and go through medical underwriting to get re-approved for Medigap. Your other option during the Medicare Advantage Open Enrollment Period is to change from your current Medicare Advantage plan to a different Medicare Advantage plan. Please be aware that you can only use this period once per calendar year.
Medicare vs Medicare Advantage
The intent of Congress in creating these plans was to give you options in accessing your Medicare benefits. Some reasons why people might choose an Advantage plan are:
- A $0 premium plan, if available is of interests (you must continue to pay your Medicare Part B premium)
- Pay as you go for medical services in the form of copays and coinsurance
- Medicare advantage plans have an out-of-pocket maximum cap to protect you against catastrophic spending
- The convenience of having your medical and Part D drug benefits rolled into one plan
- Some plans may include Extra benefits, like routine vision or dental services, routine hearing services, membership in fitness programs, and more. Limitations, copayments, and restrictions may apply. My recommendation is not to choose your plan based on these extras.
Medigap vs Medicare Advantage
Without question, Original Medicare with a Medigap plan gives you comprehensive coverage. The primary difference in a Medigap plan, you have the freedom to see any doctor that accepts Medicare. You don’t have to ask your doctors if they are in your Medigap insurance company’s network. The network is Medicare, which has over 1 million contracted providers across the nation.
Some Medigap plans also have more coverage on the back end. Medicare pays 80% and your Medigap plan can pay some or all of the other 20%, depending on which Medigap plan you choose. This leaves you with little out of pocket. This is the benefit of a Medigap plan.
Medigap plans will not include Part D coverage, so you will need to buy a separate Part D policy. Your agent will help you go through the Part D carriers to see which plan will be best for the medications you are taking.
These two options come down to what your preferences are and what best meets your healthcare needs. There’s no right or wrong answer.
Other Things to Consider about Medicare Advantage
Be sure to carefully consider these things before joining a plan:
Not all hospitals and doctors accept Advantage plans. Review each year to make sure your healthcare providers still participate in that carrier’s network. As you may know, your Medicare Advantage plan is allowed to change network providers (doctors and hospitals) throughout the plan year – meaning that your plan can add or drop doctors at any time. Your Medicare Advantage plan must provide you with a 30-day written notice of any plan changes.
Advantage plan benefits may change every year. In September, you will receive a packet from your Part C insurance company telling you what is changing. The plan’s benefits, formulary, pharmacy network, provider network, premium and/or co-payments and co-insurance may change on January 1 of each year. Please make sure your review this document every year. It’s never a good thing to get a surprise after the fact.
Your enrollment is generally for the entire year. You may only dis-enroll from an Advantage plan during certain times of the year. If you decide in April that you don’t like the plan, you will have to wait until the following annual election period begins in October in order to change your plan unless you qualify for a special election period.
If you enroll at age 65, you need to be sure you want this coverage long-term. Your open enrollment window to get a Medigap plan with no health questions ends at 6 months past your Part B effective date. You might not be able to get a Medigap plan later if you have health conditions. Applying for a Medigap plan then will require you to answer medical questions to see if the carrier will accept you. Too many health conditions will get you declined. So, make sure a Medicare Advantage plan is what you are looking for in the coverage for your healthcare.
Do you pay Part B premium with Medicare Advantage?
Yes, you must first enroll in both Medicare Parts A and B before you are eligible to enroll in an Advantage plan. This is true even if the Advantage plan itself has a $0 premium. You will still pay your Part B premium to Medicare every month.
How can Medicare Advantage plans be free?
Medicare Advantage plans are definitely not free. Some plans have what are called a $0 premium. Even though you may pay no premium for the plan itself, you will still pay the Part B premium to Medicare. Not only will you pay the Part B premium, you are still responsible to pay your deductibles, copays, and coinsurance as you use your benefits.
When you enroll in an Advantage plan, Medicare pays the plan a monthly fee to take on all of your medical risk. That is the reason why some plans can offer you a $0 premium. They are already getting paid by Medicare on your behalf. As you see, a Medicare Advantage plan is NOT free!
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