Medicare Advantage Plans: An Alternative to Traditional Medicare
By: David K. Carboni, Ph.D., CFP©
Consumers enrolled in Medicare have the option of buying Medicare Supplemental Insurance Plans to fill in the gaps Medicare leaves in co-pays and deductibles. These plans, along with a Medicare Prescription Drug plan (Plan D), provide Medicare recipients with significant health coverage. However, there is another alternative for health care coverage for those eligible for Medicare: Medicare Advantage Plans (MAP). With MAPs, insurance companies contract with the federal government to offer Medicare benefits through their own policies. They are different types of MAPs, including: Health Maintenance organizations (HMOs), Preferred Provider Organization (PPOs), Medicare Private Fee for Service (PFFS) plans, Medical Savings Account (MSA) plans, and others. Costs, extra benefits, and rules vary by plan. With MAPs theres no need to buy a Medicare Supplemental Plan.
MAPs are required to provide the same services as traditional Medicare. But theres a catch: they can do so in different amount: that is, they can offer different copayments, coinsurance, and deductibles for these services. With MAPs, you continue to pay Medicares Part B premium ($99.90 in 2012), and then pay an addition premium. MAPs commonly offer services Medicare does not, such as: vision coverage, hearing aids, and even dental care. Drug coverage is also common in MAPs. This eliminates the need to buy a separate Plan D prescription drug plan. In fact, the Center for Medicare Advocacy concedes that its possible for consumers to have lower out-of-pocket costs with MAPs.
Though less common, another type of MAP is a Medical Savings Account (MSA) Plan. MSA, plans have two parts: a high deductible health plan and a bank account. Medicare gives the plan dollars each year for your health care, and the plan deposits a portion of this money into your account. You can draw money from the account to pay for your care. After you reach your deductible, your plan pays for your Medicare-covered services. MSA plans do not provide prescription drug coverage, so youll have to buy a Medicare Prescription Plan (Plan D) separately for this coverage.
Never the less, there are caveats with MAPs. Some plans add benefits that may have little value (e.g., health club memberships), while paying less than traditional Medicare for hospital stays or nursing care. Hospitalizations and nursing care expenses represent the real financial risks you face later life. Unfortunately, MAP coverage limits can be obscure or buried in footnotes not readily apparent to the consumer. Therefore, its imperative to carefully scrutinize the deductibles and co-pays for doctor and hospital care and compare these with traditional Medicare (with Supplements).
Medicare Supplemental Plans used in concert with Traditional Medicare are portable, that is, a plan holder may receive care from any Medicare authorized provider. In contrast, MAPs typically run like HMOs or preferred provider organizations, with networks of providers. If you want the freedom to see any provider (or if your current providers dont participate), you should probably not enroll in a MAP. Likewise, if you expect to travel a lot (or spend time outside the service area), you should likewise think twice before enrolling in a MAP. In the recent past, aggressively marketed MAP private fee for service (PFFS) plans were said to offer the freedom of choice of providers while providing the savings of MAPs. These freedoms can be illusory, as providers can refuse to accept patients in such plans, and recent legislation has further restricted their use.
MAPs present other problems as well. If your doctor leaves the plan during the year, youll be faced with higher medical charges, as he would then be considered an out of network provider. Your other choice would be to find a new in network doctor. Also, a serious illness could prompt you to seek care from non-participating specialists or hospitals. These could be at potentially much higher charges, or you may be forced to pay the entire cost of the covered service. So a MAPs seemingly lower premium could come at the price of less flexibility in seeking and paying for needed care. Likewise, if you are on a prescription drug regimen, its a good idea to check the formularies offered by the MAPs you are considering. If a MAP charges significantly more for the drugs you require, the lower premiums may be offset by your higher out-of-pocket prescription costs.
You can join a MAP or other plans when you first become eligible for Medicare-called your initial enrollment period. You may also enroll during prescribed enrollment periods. Likewise, you may only switch plans during certain time periods. For example, each year an Annual Election Period (AEP) occurs from October 15 to December 7, and the plan you elect becomes effective January 1. MAP open enrollment periods (MA-OEP), Jan. 1 to March 31, are also available to allow you to switch plans. There are restrictions on what changes youre allowed to make among plans during MA-OEPs. For example, you cant add or drop Medicare prescription drug coverage during OEPs unless you already have Medicare prescription drug coverage. Refer to www.Medicare.gov for other change limitations during MA-OEPs. In addition, there are special enrollment periods (SEP) which allow consumers to switch MAPs if:
Medicare websites tool, The Medicare Options Compare (www.medicare.gov/mppf) displays the MAPs in your area. By clicking on estimated annual cost for people like you you receive out of pocket estimates based on your general medical condition. Two other excellent websites with tips for comparing plans are: Medicare Rights Center (www.medicarerights.org) and Medicare News Watch (www.medicarenewswatch.com). This latter site also displays estimates of out-of-pocket estimates for MAP HMOs and MAP preferred provider organizations (PPOs). Your State Health Insurance Assistance Program (SHIP), easily accessed through www.medicare.gov., can provide access to health insurance counselors who can offer guidance on selecting MAPs available in your state.
As with many areas of financial planning and retirement planning, retire health care planning is a dynamically changing area. MAPs offer one strategy to help keep costs down and quality high. Never the less, health care and how its financed remains a major challenge facing the USA, and new plans and approaches will no doubt emerge. Therefore, you must remain informed on this changing landscape as you plan for your health care needs in retirement.