Medicare Advantage was created out of the Medicare Modernization Act of 2003. In short, Medicare Advantage was designed to allow private carriers like Anthem Blue Cross, United HealthCare, Humana and others to create health care plans designed for individuals using Original Medicare. The plans would be uniformed to cover what is offered by Original Medicare along with enhanced benefits such as preventive care, dental, vision and even hearing.
These Medicare Advantage Plans come with additional supports for seniors to help minimize overall medical expenses. Medicare Advantage is approximately a 17 percent subsidy on top of the 80 percent paid by Original Medicare.
To be eligible for Medicare Advantage Plans the below listed requirements must be met:
- Must have Part A Original Medicare
- Must continue to pay for Part B Original Medicare
- Must live in a plan service area
- Can Not have End Stage Renal Disease at the time of enrollment
To help you understand the difference let us assume that you are 68 years of age and you require a Hip Replacement. After the initial doctor's visit, the specialist visit, the surgery and about 6 months of rehabilitation, you have amassed $68,000 in medical bills.
Under Original Medicare:
- Medicare will pay 80 percent or $54,400
- You are responsible for the outstanding 20 percent or $13,600 out of your pocket
So how do you plan to cover the $13,600 in expenses? For most, that is a huge expense especially if you only have Original Medicare. If you are fortunate enough to have an affordable Medicare Supplement this may not be a big issue. However, for millions of Americans, paying for a supplement is not an option on a fixed income. This is one of the reasons why the Medicare Advantage System exists.
Under Medicare Advantage:
- Original Medicare will cover 80 percent or $54,400
- With Medicare Advantage covering another 17 percent (roughly) or $11,500
- Your total out of pocket expenses are roughly $2100
I'm sure you're thinking, Medicare Advantage can save me a lot of money on my medical bills. Sign Me Up! Well, before you sign it's important to understand the different types of Plan Networks. This is where seniors tend to make a mistake, buying an Advantage Plan just based on price. If you choose the wrong network, you will be spending more money for medical services.
In general, there are 3 different types of Medicare Advantage Plan "Networks" available. They are as follow:
- Health Maintenance Organizations (HMO Plans)
- Preferred Provider Organizations (PPO Plans)
- Private Fee for Service (PFFS Plans)
HMO Medicare Advantage Networks have the smallest network of providers. HMO Networks are small because they have a limited number of doctors, hospitals, and other facilities. PPO Medicare Advantage Network has a wider number of doctors, hospitals, and facilities so it will allow more choices for individuals who may need care which may not be offered within the smaller HMO Network. Privat Fee For Service represents the largest number of doctors, hospitals and facilities available to treat senior for medical conditions.
Health Maintenance Organizations (HMO):
- There will be copayments and coinsurance
- You must receive care from a doctor in the HMO Network
- You must receive hospitalization from within the HMO Network
- You must use the facilities within the HMO Network
- You must have prior authorization in order to see a specialist
- You must see a specialist in the HMO Network
- If you get services outside of the HMO Network you will be subject to full Out of Network Charges - Some HMO Networks have their own prescription drug program (ie; Medicare Part D)
The HMO Medicare Advantage Networks are probably the most restrictive but they are effective if you do not mind switching doctors, hospitals, and other facilities.
Preferred Provider Organizations (PPO):
- There will be copayments and coinsurance
- You can see any doctor that participate in the network
- You must receive hospitalization from hospitals in the network - You must use the facilities accepting Medicare
- You must have prior authorization in order to see a specialist
- You will be subject to a percentage of Out-of-Network charges (usually up to 30 percent) if you seek services outside the PPO Network.
- Some PPO Networks have their own prescription drug program (ie; Medicare Part D)
Choosing a Medicare Advantage PPO Network is less of a hassle because you can generally get services all over the State but often from only one hospital provider network. If you go south for the winter you must find services in that local network.
Private Fee for Service (PFFS):
- Copayments and Coinsurance will apply
- Can see any Medicare approved doctor
- Can go to any Medicare approved hospital
- Can go to any Medicare approved facility
- Can seek services outside of service areas
- Don't need referrals or prior authorization to see a specialist
- Generally they have individual Medicare Prescription Drug Plan but there are plans that include Prescription Drugs
If you choose this type of Medicare Advantage Plan it provides an individual with the greatest amount of freedom. There are no network restrictions for hospitals, doctors or other facilities.
Now that you understand the difference and different plans you must determine if this is the right plan for you. You must determine if it makes more sense to pay now or pay later but choose wisely and know the details of your specific plan and if your doctors are in the network. Sometimes the wellness benefits like dental and hearing are the key to making a choice. Certainly if you cannot afford the premiums of a traditional Medicare Supplement then this is a good option. If you know of someone who isn't happy having an Advantage Plan they most likely didn't look into the network.
Carlotta Katra has been helping seniors and their families with eldercare issues for years. She developed http://www.AgingAvenues.com to empower families with information on all issues to help them make informed choices.
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