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 possibility 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, there no need to buy a Medicare Supplemental Plan.
MAPs are required to provide the same services as traditional Medicare. But the catch is they can do so in different amounts: that is, they can offer different copayments, coinsurance, and deductibles for these services. With MAPs, you continue to pay Medicare’s Part B premium ($110.50/mo. for all but higher income folks in 2010), and then pay an addition premium. MAPs commonly offer services Medicare does not, such as: vision coverage, hearing aids, annual physicals, and even dental care. (At the moment, Medicare only covers one physical exam for your life-time). 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 it’s 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 you’ll 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. One problem is that MAP coverage limits can be obscure or buried in footnotes not readily apparent to the inexperienced. Therefore, it’s 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 local providers. If you want the freedom to see any provider (or if your current providers don’t 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 were often illusory, as providers often refused 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, you’d 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 have to pay the entire cost of the covered service. So a MAP’s seemingly lower premiums could come at the price of less flexibility in seeking and paying for needed care. Likewise, if you are on a prescription drug regimen, it’s 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 the “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 November 15 to December 31, and the plan 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 you’re allowed to make among plans during MA-OEPs. For example, you can’t 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:
they move out of the plans service area
they move to an area that has no MAP or Plan D options available
their plan leaves the Medicare program
other special situations
Medicare website’s 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 it’s 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.