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Medicare Advantage

What is Medicare Advantage

The Medicare Advantage program was created by the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) which was passed in 2004. The program was designed to bring more affordable healthcare and prescription drug coverage to Medicare beneficiaries, expand health options and preventive care services and improve health access for those living in rural areas. Medicare Advantage plans replaced “Medicare + Choice” plans, an alternative to Original fee-for-service Medicare, and that is why Medicare Advantage plans are also known as Medicare Part C. An important aspect of Medicare Advantage plans is a mandatory maximum out-of-pocket amount for all Original Medicare services. After a beneficiary reaches the maximum out-of-pocket limit in a given coverage year, the plan must cover 100% of your remaining Original Medicare-covered costs for the remainder of the year. The mandatory maximum out-of-pocket limit for 2014 Medicare Advantage plans is $6,700 or less.

A Medicare Advantage Plan is a Medicare health insurance policy offered by a private insurance company. Medicare reimburses the insurance companies a fixed monthly amount for each member according to factors such as Medicare Advantage risk scores. Medicare enrollees often decide to receive healthcare coverage through a Medicare Advantage plan because many of these Medicare Part C plans can include more benefits (such as vision, dental, hearing, and health/wellness plans) than Original Medicare and most Medicare Advantage Plans provide prescription drug coverage.1 Medicare Advantage beneficiaries may have to pay a monthly premium for their additional benefits and most Medicare Advantage plans require copays for services. Some copays are lower than what a beneficiary would have to pay if they were enrolled in Original Medicare but copays for certain services can cost more.

Medicare Advantage Plan Types

The Medicare Modernization Act authorized private insurance companies to offer the following products to consumers:

  • Local Health Maintenance Organization (HMO), Preferred Provider Organization (PPO), Point of Service (POS), and Private Fee-For Service (PFFS) products
  • Standalone Medicare Part D (prescription drug program) plans
  • Regional and National Part D pharmacy products
  • Regional and National PPO products

Medicare Advantage HMO – With Health Maintenance Organization (HMO) plans, you typically must receive your healthcare services within that plan's network of doctors and medical facilities. In some exceptions, such as emergency care or dialysis treatments received out of area, you can receive services out of network. Some Medicare Advantage HMO Plans [those with a point-of-service option (POS)], allow you to go out-of-network, usually at a higher cost.2 Out-of-Pocket Costs for Medicare Advantage HMOs are usually lower than POS & PPO plans.

Medicare Advantage PPO - In a Preferred Provider Organization (PPO) plan, you can typically receive services from any doctor or hospital but will pay less if they are part of the plan's network. Services received from out-of-network doctors and medical facilities come with an additional charge.3 Out-of pockets costs are generally higher than HMO and POS plans.

Medicare Advantage PFFS – With Medicare Advantage Private Fee for Service Plans, the plan determines how much it will pay for healthcare services. As long as the doctor or hospital agrees to treat you and agrees to the terms of payment, you can typically receive services from any doctor or hospital. However, not all healthcare providers will accept beneficiaries using a Medicare Advantage PFFS.4 Monthly premiums for PFFS are typically lower than most Medigap plans.

Medicare Advantage SNPs – Medicare Advantage Special Needs Plans (SNP) only accept beneficiaries meeting certain eligibility criteria. There are three categories of plans: those serving people enrolled in both Medicare and Medicaid (dual eligible), those serving people living in institutions like a nursing home, and those serving people with particular chronic diseases like diabetes. The private insurance company adapts the plan in order to best meet the beneficiaries’ special needs. Like Medicare Advantage HMO Plans, you typically must receive your healthcare services within that plan's network.5

Medicare Advantage Plans 2016

The average premium nationwide for 2016 Medicare Advantage plans is $64.92. This average premium is 4% higher than the $62.69 average for 2015. The 2016 average is also 99% higher than the average of $32.60 reported by the government since the government weighted the average premium by projected plan enrollment rather than averaging premiums across all Medicare Advantage plans available in the market.

The least expensive Medicare Advantage premium is still $0 a month. The number of $0 Medicare Advantage plans in 2015 has decreased 19% since 2014.

The most expensive 2016 Medicare Advantage plan, at $388 a month, is the EmblemHealth VIP High Option plan in the state of New York. In 2015, the most expensive Medicare Advantage plan was the HealthPartners Freedom Ultimate with Enhanced Rx in the state of Minnesota. It cost $347.10 per month, 11% lower than the highest premium in 2016.

The average drug deductible for 2016 Medicare Advantage plans with drug coverage (MA-PD plans) is $162.67. This is 25% higher than the 2015 average deductible of $129.87. The maximum allowable MA-PD drug deductible in 2016 is $360, $40 higher than the maximum allowable deductible of $320 for 2015 MA-PD plans.

Medicare Advantage Trends

The Department of Health and Human Services projected that enrollment in Medicare Advantage plans is expected to increase for the fourth straight year in 2014. Since the passage of the Affordable Care Act in 2010, average Medicare Advantage premiums have fallen by 9.8 percent. For 2014 the average Medicare Advantage premium is expected to increase just $1.64 from last year, to $32.60. For comparison the average monthly premium for a basic prescription drug plan (Medicare part D) in 2014 is projected to be $31. This is slightly higher than the average Medicare part D monthly premiums of $30 projected for 2011, 2012, and 2013.6

Over half of Medicare Advantage enrollees are enrolled in plans with CMS quality ratings of four or more stars on a scale from 1 to 5 (with a CMS rating of 5 being the best/highest rating).7 A HealthPocket study of 2014 Medicare Advantage plans found that plans rated at least 4 stars are available to residents in over half of U.S. counties. Another HealthPocket study found that 38% of star-rated 2014 Medicare Advantage plans had at least 4 stars, while only 28% of 2013 Medicare Advantage plans had at least 4 stars.

Analysis by the Kaiser Family Foundation found that on average beneficiaries can choose from 18 Medicare Advantage plans in 2014, down from 20 plans last year. According to the same study the average cap on out-of-pocket costs for 2014 Medicare Advantage plans is $4,797 in 2014, up from $4,333 in 2013.8

An April 2014 HealthPocket study found that almost all 2014 Medicare Advantage plans offered at least one benefit out of the following: vision, dental, and hearing. Refer to the table below to compare percentages of the four Medicare Advantage plan types:

Percentages of the four Medicare Advantage plan types offered the benefit of vision, dental or hearing.

How we can help

At Healthpocket, we provide you the tools to find Medicare Advantage coverage. We’ll help you find the right plan and save on your out of pocket Medicare Advantage costs:

  • Compare Medicare Advantage Plans (including those with Prescription Drug Coverage)
  • See Ratings & Reviews
  • Estimate Your Annual Out of Pocket Medicare Advantage Costs

Frequently Asked Questions (FAQ)

What are the requirements to enroll in a Medicare Advantage Plan?

You must be enrolled in Original Medicare (Parts A & B) to qualify for Medicare Advantage. You cannot be denied enrollment in a Medicare Advantage plan due to a pre-existing condition unless you have permanent kidney failure, also known as end-stage renal disease. However, if you develop the condition while you are enrolled in Medicare, your plan cannot drop you.

When can I enroll in a Medicare Advantage Plan?

You can enroll in a Medicare Advantage plan during your initial enrollment period, also known as your initial coverage election period, which is the 7-month period when you are first eligible for Medicare. You can also enroll during Medicare’s open enrollment period, also known as annual election period, from October 15th to December 7th of each year. Outside of those two periods, if you meet certain requirements you may qualify for a special enrollment period, also known as a special election period, which allows you to enroll or disenroll from a Medicare Advantage plan.

If you are currently enrolled in a Medicare Advantage plan because prices and coverage differ among Medicare Advantage plans within a state and can change annually, it is important to review your current plan as well as your other plan choices during Medicare’s open enrollment period.

When can I drop/disenroll from a Medicare Advantage Plan?9

You can disenroll during the open enrollment period, special election periods if you qualify, and also during the Medicare Advantage Disenrollment period from January 1st to February 14th of each year.

During the open enrollment period or special enrollment period, if you want to return to Original Medicare you must send a written request to your plan or call 1-800-MEDICARE during the enrollment period. However, if you wish to switch from one MA plan to another, you will be automatically disenrolled from your current plan once your application for the new plan is accepted. The same rules apply if you wish to change or disenroll in your Medicare Part D prescription drug plan.

During the Medicare Advantage Disenrollment Period:

  • If you are enrolled in a MAPD you can either enroll in a Part D plan which will automatically disenroll you from your current MAPD or you can submit a request for disenrollment and then enroll in a Part D plan
  • If you are enrolled in a MA plan without prescription drug coverage, you must submit a request for disenrollment to trigger a special enrollment period to enroll in a Part D plan

Keep in mind that if your current Medicare Advantage plan is an HMO or SNP plan you must continue to seek services in-network until the date your disenrollment becomes effective, or you will have to pay out-of-pocket for rendered services. If your current Medicare Advantage plan is a PFFS plan and you wish to disenroll in the plan you must make sure providers that you see accept the plan’s payment terms and conditions until the date your disenrollment becomes effective.

Is Medicare Advantage a better choice for me compared to other Medicare options?

A March 2014 HealthPocket study compared costs for three different Medicare plan combination scenarios for a 65 year-old beneficiary who makes two primary care visits and four specialist visits per year and takes three common prescription drugs. Results of the study indicated that Medicare Advantage was the best choice in terms of total costs for a typical new Medicare enrollee:

Estimated costs for typical healthcare usage

Despite the results of the study it is important to remember that every individual is different and it is important to compare plans while taking into consideration factors such as your healthcare usage and prescription drug needs. For example, the value of Medigap Plan F improves as a beneficiary uses more services covered by Medicare Part A and Part B since the plan covers 100% coinsurance and deductibles for Original Medicare.