Americans turning 65 become eligible for health insurance benefits through Medicare. There are two ways seniors can receive benefits, so-called “traditional Medicare” and the Medicare Advantage (MA) program. MA plans are also known as “Medicare Part C.” Traditional Medicare Parts A and B cover hospital and doctor visits, respectively, while Part D covers prescription drugs. The MA program is a way for seniors to obtain Medicare Parts A and B benefits and often Part D as well from a Medicare-approved commercial insurance carrier instead of directly from the government. MA plans are growing rapidly, and there are good reasons for their popularity.
Some third-party payers offer MA plans with no premiums. The plans that have premiums tend to be less expensive than those of Medicare Supplemental Insurance (Medigap) plans that are often combined with traditional Medicare. Many MA plans come with caps on out-of-pocket expenses. Once the beneficiary meets the cap, for the remainder of the year they do not have to pay for covered expenses. This is a substantial advantage over traditional Medicare, in which there is no out-of-pocket maximum. Nevertheless, all beneficiaries should read their policies carefully, because out-of-pocket expenses may actually be greater with MA depending on the beneficiary’s particular situation.
In addition to prescription drug coverage, some MA plans cover services that traditional Medicare does not cover, including hearing and dental services. Some plans charge a premium for these extras, but many do not. Beginning in 2019, many non-skilled home-based services will be covered by MA plans. This move opens the door for ever more services to be provided in the home, from skilled nursing to shopping and house cleaning aid. Widespread adoption of “gig economy” applications may soon cheaply and efficiently displace older more expensive models of care, while preserving safety and quality.
One advantage of MA plans is their similarity to standard employment-based health insurance. There is only one insurance card to keep in the wallet, instead of three (one for each part of traditional Medicare.) MA plans usually include prescription drug coverage, deductibles, co-insurance and other familiar features of employment-based plans. Just as in the HMO-based model, MA plan recipients have their care overseen by a primary care provider (PCP). Older patients tend to accumulate chronic medical problems, so coordination by a PCP can be invaluable.
As with familiar employment-based health plans, the member can change plans during open enrollment periods. MA plan holders can switch to traditional Medicare and back again if they are dissatisfied with their coverage or service.
Some of the trade-offs of employment-based plans apply to MA plans as well. Specific coverages may vary from one year to the next. Sometimes MA plan members will have to pay more to see a specialist out of network. Participants are encouraged to pay close attention to the details of the plans.
The Future of Medicare Advantage
According to the consulting firm Deloitte, the advantages of Medicare Advantage may generate sufficient market demand to persuade the government to provide even more home-based care services, particularly for beneficiaries with complex medical conditions. Deloitte also observed that the population boom among seniors may drive adoption of technology-driven solutions beyond the imaginings of the creators of traditional Medicare.
The advantages of Medicare Advantage plans are substantial. Beneficiaries and policymakers should take a close look at these plans and consider them seriously.