What is Medicare Advantage and How Does it Work?

Medicare Advantage refers to plans that are given by private health organizations, approved by Medicare, as an option to the traditional Medicare program. A person who chooses to become a beneficiary of a Medicare Advantage Plan continues to receive all the benefits provided under Medicare Parts A and B. Medicare Advantage Plans are also referred to as MA Plans or Part C.

There are specific eligibility rules to apply for Medicare Advantage Plans, and a person who lives out of the plan’s service network or with an existing life-threatening illness may be excluded. Under these plans, an enrollee needs to have access to a certain number of medical practitioners for 26 medical specialties, in addition to health care facilities, within a specific driving time and radius of where they live. This is to ensure that they get medical care when they need it.

How do Medicare Advantage Plans Work?

Medicare Advantage Plans vary in the way they offer services, and patients can be charged for individual costs that are not covered by the plan. Each plan may also have a different set of rules that can change annually. Usually, a monthly premium, along with Medicare Part B premium, is paid to avail the benefits of a Medicare Advantage Plan. Costs can vary between plans, and a comparison of the available policies in a particular area is recommended before deciding on one that is apt for your medical needs.

What do Medicare Advantage Plans Cover?

These plans typically offer everything that traditional Medicare provides for, including emergency services within the U.S. While Medicare Advantage Plans can decide not to cover specific services that aren’t deemed essential by Medicare, many cover additional health services. These can include dental treatment, medical care for vision, and hearing, as well as the cost of wellness programs. Some plans also cover Medicare Part D, prescription drug coverage. A few services, such as clinical research costs, additional new benefits, and hospice care, however, are covered by Medicare.

What are the different kinds of Medicare Advantage Plans?

There are several kinds of Medicare Advantage Plans that are outlined below:

  1. Health Maintenance Organization (HMO) – Typically, under this plan, an enrollee can only visit specific doctors, medical personnel, and medical organizations that are listed in the plan. Emergencies, however, are usually treated as an exception to this rule. Also, it may be necessary for the patient to obtain a referral from their primary care doctor if they want to seek treatment with a specialist, other doctors, or get specific tests done. If they don’t get a referral, they run the risk of breaking the plan rules by doing this on their own.
  2. Preferred Provider Organization (PPO) – In this kind of a plan, patients are charged a lesser amount if they choose to be treated by health care providers that are part of the plan. In other words, they can incur more expenses if they choose to visit doctors or medical facilities of their own choice.
  3. Private Fee-for-Service (PFFS) plans – This is a plan that has some similarities with traditional Medicare. Plan enrollees are allowed to visit any doctor or medical facility of their choice, but they need to comply with the payment terms of the Medical Advantage Plan. This means that the plan has rules that state how much a patient is required to pay when they receive medical care and how much health service providers will be paid by the plan for the same.
  4. Special Needs Plans (SNPs) – This kind of a medical plan covers treatment and care for specific groups of people. These include people who are covered under both Medicare and Medicaid, nursing home residents, or those who have been diagnosed with a chronic illness.
  5. HMO Point-of-Service (HMOPOS) plans – In this kind of a plan, if a person pays a greater copayment or coinsurance amount, they may be able to access medical services that are not listed under the plan.
  6. Medical Savings Account (MAS) – In this case, a high-deductible health plan is linked with a bank account. This allows a person to afford annual medical services as Medicare puts a certain sum of money into the account which they can use. Typically, Medicare drug coverage may not be included under this plan.

Medicare Payments to Medicare Advantage Plans

Every month, organizations that offer Medicare Advantage Plans receive capitated payments from Medicare towards each plan enrollee. These payments cover Medicare Part A, and Part B. Payment is also made towards Medicare Part D. All of these payments are made based on several factors, including an enrollee’s health status. As the payment model has changed over the years, it has served different purposes including to increase Medicare savings, attract a greater rural population or to add on new benefits.

Medicare decides what to pay plans depending on their bid. There are specific requirements to make a bid and plans brings their proposals to Medicare based on what it costs for an enrollee to get services under Medicare Parts A and B. A comparison is made between the bid and a benchmark amount using a formula, passed by law, that differs by county. In counties where the Medicare costs are high per person, the benchmark is 95% of original Medicare costs, and in counties where it is lower per person, the benchmark is 115%.

In a plan where the bid is more than the benchmark, the enrollee bears the cost of the difference via a monthly premium, together with the Medicare Part B premium. In plans where the bid is lower than the benchmark, the difference is divided between the plan and Medicare. The amount the policy pays is known as a “rebate” and offered back to the enrollee as benefits. Every payment made to the plan is then calculated based on individual risk profiles of the enrollees.

Plans with high-quality ratings of 4 or more stars also qualify for bonuses under the Affordable Care Act and are allowed to have a larger share of the rebate. According to the Medicare Payment Advisory Commission, in 2019, all Medicare payments to Medical Advantage Plans were tending to almost equal per capita costs in traditional Medicare.

With Medicare policy changes over the years, several plans have now been made available, and many more people have been signing up for Medicare Advantage Plans across the country. If you are still deciding on what plan to choose, compare different kinds of plans that you are eligible for, both in terms of costs and returns, to see which one helps your individual needs best.

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