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Medicare Advantage: An Alternative to Original Medicare
We've all heard about managed care, and many of us have first-hand experience with this health care arrangement. Managed care is a strategy to reduce health care costs by discouraging providers from performing unneeded services and by promoting preventive medicine.
The basic idea of managed care is that a health plan is paid a flat monthly fee for each patient under its care. If the plan's costs in caring for that patient are less than the fixed fee, the plan makes money. But if the patient is quite sick and requires many costly medical services, then the plan may lose money on that particular patient. In this way, plans have an investment in keeping costs down.
When Medicare costs started skyrocketing along with the rest of the health care sector, Congress looked to managed care as a partial remedy. As a consequence, the Medicare program contracts with managed care plans to provide services to Medicare beneficiaries who choose the managed care option (now called Medicare Advantage). The managed care plan receives a fixed monthly fee to provide services to each Medicare beneficiary under its care.
Medicare recipients can still opt for coverage under the original Medicare program, but if you choose to be covered by a Medicare Advantage plan you receive all the coverage you would receive under original Medicare, except without the large copayments and deductibles you would normally pay (unless you have a separate Medigap plan that covers them). In addition, you often receive coverage for products and services that original Medicare doesn't cover or charges extra for, such as prescription drugs or custodial care. Generally, you do not need a supplemental Medigap policy if you join a managed care plan. Sound too good to be true? In some ways, it is.
Restrictions on providers and services
First, managed care plans keep their costs down by limiting a patient's freedom to choose which doctors and other providers the patient can see. The most prominent type of managed care plan, the health maintenance organization (HMO), maintains a list or network of health care providers (doctors, hospitals, etc.) that their patients are allowed to use. The plan has negotiated special rates with these network providers. If you see a provider who is not in the network, the plan will not pay the bill, and neither will Medicare. Other forms that Medicare Advantage plans can take include preferred provider organizations (PPOs), private fee-for-service plans, Special Needs Plans, and Medicare medical savings account plans. (For more on these different options, click here.)
If a Medicare Advantage plan you are considering joining restricts access to providers, it is important to determine whether your doctors and other providers are in the plan's network. But bear in mind that managed care plans drop providers from their networks if they start costing the plan too much money. So just because your doctor is a member of the network now doesn't guarantee that he or she will be part of the network later.
Another way plans strive to reduce costs is to require that all care be funneled through a primary care physician. This doctor makes all decisions about whether or not to refer you to a specialist. You cannot make an appointment with a specialist on your own. The primary care physician is strongly encouraged to take care of all medical problems and refer you to a specialist only when absolutely necessary. Medicare does require, however, that Medicare Advantage plans allow patients with serious conditions, such as heart disease, kidney failure and cancer, to see specialists without referrals from their primary care physicians. Also, routine preventive women's health care screening must be available without a referral.
For many, managed care's most disagreeable cost-cutting strategy is the common requirement that your primary care physician obtain the plan's approval before you can receive certain medical services. If the plan administrators disagree with your physician that a procedure is medically necessary, the plan may refuse to pay for it. Plans also attempt to reduce costs by allowing their members shorter periods of hospital and nursing home care than Medicare beneficiaries generally receive. In addition, managed care plans provide fewer rehabilitative services like home health care and outpatient therapies than does traditional Medicare.
Not all managed care plans are so restrictive, but the less restrictive plans are more expensive. Some offer what's known as a "point of service" option that allows you to see physicians or other providers that are not in their network. If you go outside of the network, however, you will pay a higher portion of the bill than if you saw an in-network physician.
In addition, a report by the Medicare Rights Center finds that Medicare Advantage plans have serious disadvantages over original Medicare. The report, based on thousands of beneficiary calls to the Medicare Rights Center, lists nine common problems with Medicare Advantage plans, including problems getting emergency or urgent care, problems getting care while away from home, and problems getting continuity of care. To read more about the report, click here.
Given the restrictions of managed care, if you are considering joining a particular Medicare Advantage plan, it is a good idea to talk with your doctor about his experiences with the plan. How is the plan about approving treatments, referring patients to specialists or allowing patients to remain in the hospital if they are not ready to leave? Does the plan frequently overrule the doctor? You might also want to ask the same questions of the doctor's billing staff.
The true cost of Medicare Advantage
While many managed care plans charge you no premium over and above your Medicare Part B premium, others, such as those offering a "point of service" option or unlimited prescription drug coverage, charge a small additional premium.
In addition, you may be responsible for copayments. These are charges plan members must pay out of pocket when they receive certain kinds of care, such as an office visit or a prescription drug. If you see a lot of doctors or take an array of prescribed medications, the costs can add up. The plan may also only cover medications listed in its "formulary" -- the list of drugs it approves. For drugs not in the formulary, the copayment may be higher or the plan may pay nothing at all. Bear in mind that Medicare Advantage plans often change the drugs in their formulary, so a medication covered now may not be covered later.
Another consideration is the extent of the plan's service area. If your plan's service area is limited, you may lack access to a broad range of providers. If you travel frequently and need care while away, you may find yourself out-of-network for your plan.
On the plus side, managed care plans may offer coverage that goes well beyond regular Medicare coverage, including:
- Short-term custodial care
- 100 percent coverage of needed medical equipment
- Chiropractic care, acupuncture and acupressure
- Foreign travel coverage
- Eye examinations
- Dental work
- Hearing tests and hearing aids
- After-hours care
Comparison shop online
Medicare operates a helpful Web site that allows you to compare health insurers that offer Medicare managed care plans in your area. You can see how the plans stack up according to such useful indices as premium, prescription drug coverage, doctor and hospital choice, estimated health costs, and much more. To go to the site, click here.
Another great source of information for those trying to negotiate the managed care maze is the Health Insurance Counseling and Advocacy Program (HICAP). This independent group, which is funded by state agencies on aging and by private donations, counsels seniors about Medicare managed care and Medigap policies available to them in their area. HICAP offices have a different (usually toll-free "800") main number in each state.
You can also contact your State Health Insurance Assistance Program (SHIP), which offers one-on-one counseling for people with Medicare and their families. The telephone number for the SHIP in your state is available by calling 1-800-MEDICARE (1-800-633-4227). SHIP volunteers are available to discuss your individual situation and provide information on options available to you.