FAQ - Medicare Private Insurance Plans: Medicare Advantage

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"[Medicare Advantage] offers beneficiaries new insurance options that broaden the ways in which they can receive health care. Importantly, that also includes the option to stay right where they are. If beneficiaries are happy with the way they get their health care now, they don't have to do anything."

              Nancy-Ann Min DeParle,
              Former Administrator of the Centers for Medicare & Medicaid Services
              (The agency that administers the Medicare program.)

In addition to the original Medicare "fee-for-service" program, Medicare offers beneficiaries the option to receive care through private insurance plans. These private insurance options are part of Medicare Part C, which has also been known as Medicare+Choice plans, and is now called Medicare Advantage. The most common type of Medicare Advantage plans are health maintenance organizations (HMOs), Because, to date, most Medicare beneficiaries who participate in Medicare Advantage receive managed care through health maintenance organizations, this discussion will focus on Medicare HMOs.

Medicare Advantage is a means of receiving health care and Medicare coverage. The beneficiary must specifically opt to receive Medicare coverage and care through an HMO, or other private plan insurance. Once the choice is made, the beneficiary must generally receive all of his or her care through the plans providers in order to receive Medicare coverage. The main premise is that through preventive care and the use of a primary physician who acts as a "gatekeeper" to specialized care, health care costs can be reduced while beneficiary health can be maintained.

Private insurance plans are generally paid a fixed rate per beneficiary by Medicare, regardless of how many or how few services the beneficiary actually requires. While many Medicare beneficiaries in Connecticut can choose a Medicare Advantage plan, the number of plans available has diminished as some companies, maintaining that their reimbursement rates were too low, have withdrawn from the market in many areas of the state. Because Congress decided in 2003 to pay Medicare Advantage plans more on average than is paid under traditional Medicare, it is anticipated that the number of Medicare Advantage plans will increase.

HMOs and the private insurance plans are required to provide the full range of Medicare benefits to each enrolled beneficiary for a fixed payment per enrollee. Medicare HMOs are also required to provide additional services, over and above those available through the traditional Medicare program, without additional charge to Medicare enrollees. The HMO not only provides or arranges for direct medical services, but also, at initial decision stages, decides what care is reasonable and necessary. Enrollees are generally "locked in" which means they can receive Medicare coverage only for services provided through the HMO's providers.

HMOs are required to provide those services and supplies that are covered under Parts A and B of Medicare. In addition, they must generally provide "additional" benefits to enrollees beyond those covered by Medicare. These additional benefits may take the form of either or both a reduction in the premiums, deductibles and coinsurance payments ordinarily required or the provision of health benefits or services beyond the required Part A and B coverage.

HMOs can, with the approval of the Center for Medicare & Medicaid (CMS), require Medicare enrollees to accept and pay for "supplemental" services which are above and beyond both the basic Part A and Part B services and the "additional" services referred to in the previous paragraph. The HMO's charge to the enrollee for these services may not exceed the premium that non-Medicare Advantage enrollees would be charged for a similar benefit package.

Generally, all substantive coverage rules under the regular Medicare benefit must also be met by a Medicare HMO enrollee. In addition, time limitations on coverage that exist in the regular Medicare benefit, such as 100 days of skilled nursing facility care, apply to HMO services. The Medicare Advantage plan should not have its own additional rules or criteria which further limit coverage.

Treating sources outside of the geographic area are covered when it is common practice to refer patients outside of the area for these services. Otherwise, services received by enrollees outside the HMO provider network, will generally not be paid for by Medicare and the beneficiary will be personally liable for the charges. Exceptions to this rule are emergency services, urgently needed services, and services denied by the HMO and found upon appeal to be services the enrollee was entitled to have furnished by the HMO.

Emergency services means services furnished by an out-of-plan treating source because they are needed immediately due to a sudden illness or injury and the time required to reach an in-plan treating source would mean risk of permanent damage to the patient's health. Emergency status continues for as long as transfer to an in-plan treating source is precluded due to risk to health or is unreasonable given the distance and nature of the medical condition.

Urgently needed services means services required to prevent serious deterioration of the patient's health resulting from an unforeseen illness or injury if the patient is temporarily absent from the HMO geographic area and the medical care cannot be delayed until the patient's return to the geographic area.

Many advocates involved in representing Medicare Advantage plan care enrollees find that the system is fraught with difficulties. Beginning with the absence of clear explanations, and thus clear understandings on the part of enrollees, as to what services may be covered under what circumstances, to the concern of advocates that economic issues, rather than quality of care, guide some coverage determinations, the Medicare Advantage system can present great problems for enrollees. The requirements that enrollees use only the HMO's providers and that specialty care must be approved in advance are often viewed as disadvantages to the Medicare Advantage program. This difficult situation is compounded by an appeals system that is often vague and can involve frequent delays.

Another problematic area has been private insurance marketing activities. Although certain marketing techniques are prohibited, including the prohibition of activities that would mislead, misinform, confuse, or defraud Medicare beneficiaries, abuse by some companies has been an ongoing problem. Unfortunately, the regulations provide no direct remedies that the beneficiary subjected to prohibited marketing activities may pursue.

On the other hand, there are some advantages for HMO enrollees. For many enrollees, deductibles or coinsurance payments are reduced or eliminated. In addition, there are no claim forms to be filled out and some plans offer benefits not covered by Medicare.

Each year, many Medicare Advantage plans have decided to withdraw entirely from the Medicare market due to insufficient profits. Under current law, HMOs may decide each year whether to offer a Medicare plan and may discontinue the plan after providing their enrollees with written notice 60 days prior to termination. The closing of plans in many areas of Connecticut and the nation has been frightening and confusing for enrollees.

These uncertain circumstances, variations in the services that a plan may offer, and the charges that plans may impose point out how important it is for a prospective enrollee to examine carefully the benefits and costs of the services offered by the HMOs. A comparison of these benefits and costs with the original Medicare program, combined with coverage from a Medicare supplemental policy (Medigap), should be conducted before enrolling in a Medicare Advantage plan.

Medicare beneficiaries of modest means should also carefully review eligibility for the Qualified Medicare Beneficiary Program (QMB) and Connecticut's prescription drug program (ConnPACE) as a possible alternative to Medicare Advantage enrollment.

THE MEDICARE ADVANTAGE PROGRAM (MEDICARE PART C) — LOOK CAREFULLY BEFORE YOU LEAP

Since its inception in 1965, Medicare has provided a set of coverage and due process protections so that all beneficiaries could expect the same basic level of health insurance. As a consequence, all beneficiaries - rich or poor, well or sick, articulate or silent - had a common interest in making the program work. This system resulted in the evolution of an imperfect, but functional, basic health insurance program for all.

The Balanced Budget Act of 1997 (BBA), signed into law on August 5, 1997, divided the Medicare program into multiple financing and delivery systems. The BBA accomplished this by creating a new Medicare Part C, also called the Medicare+Choice program. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 changed the name of the Medicare+Choice Program to Medicare Advantage. Medicare Advantage expands options for receiving Medicare coverage through a variety of private insurance plans, including health maintenance organizations (HMOs) and preferred provider organizations (PPOs), and through new mechanisms such as medical savings accounts (MSAs).

While the government issues a great deal of information about making new Medicare choices, the traditional Medicare program continues to be the choice of most beneficiaries. It is important to remember that beneficiaries do not have to choose to move out of their current Medicare system - whether they are in traditional Medicare or a Medicare Advantage plan.

Beneficiaries should be cautious about switching from the traditional Medicare program to a Medicare Advantage plan. Many beneficiaries have experienced difficulties with Medicare Advantage plans and appeals, and many plans have pulled out of the Medicare market entirely.

In addition, the methods for delivering and financing health care are in flux. Medicare Advantage plans are changing their benefit packages, some increase with payments, some may join the system while others will leave. We do not know how the new Medicare Advantage options will work or what limitations will unfold:

Under Medicare Advantage, a Medicare beneficiary may choose to remain in the traditional Medicare program or their current managed care plan, or to receive Medicare covered services through any of the following types of health insurance plans. The Medicare Advantage program is designed to provide access to a wider array of private health plan choices than under the M+C program and to increase the number of areas in which private health care options are available to Medicare beneficiaries.

The Medicare program makes capitated payments to private fee-for-service plans just as it does to HMOs. These plans do not have to follow the usual Medicare fee limitations. They establish their own rates, without reference to the Medicare Part B reasonable charge or limiting charge restrictions. The rates set by these plans may be substantially higher than those in the traditional Medicare program.

Providers under contract with a private fee-for-service plan are required to accept an amount not to exceed 115% of its contracted rate as payment in full for covered services (including any permitted deductibles, coinsurance, co-payments, or balance billing). The plan is to establish procedures to enforce its billing limits. If the plan fails to adhere to its billing limits, the plan may be subject to sanctions.

Private fee-for-service plans are to provide beneficiaries with an appropriate explanation of their benefits and liabilities. The plans will also be required to provide Medicare beneficiaries with advanced balance billing information before they incur expenses for inpatient hospital services, (and for certain other services for which balance billing amounts could be substantial).

Medicare Advantage organizations offering private fee-for-service plans can choose to offer qualified Part D prescription drug coverage meeting the requirements in §423.104 in that plan.

Medicare beneficiaries can now also enter into agreements with some providers, who offer "private contracts." These contracts are totally outside the Medicare program and no Medicare payment is made under these arrangements. The beneficiary must pay all costs in accordance with a private contract made with the provider. Moreover, the provider of services must agree in writing not to bill Medicare for any services for a period of 2 years.

The provider must warn the beneficiary that the Medicare limits on balance billing will not apply and that Medicare Supplemental Insurance (Medigap) policies may not pay benefits on such claims. Importantly, the contract must make clear that beneficiaries may seek medical care from other providers who have not entered into private contracts and who are, therefore, permitted to bill Medicare.

The Centers for Medicare & Medicaid Services (CMS) must inform beneficiaries about all their Medicare options. The CMS Medicare Handbook includes this information. CMS has a toll free telephone information system (1-800-Medicare) and a web site to describe the programs and to provide comparative information (www.medicare.gov).

At the time of enrollment, and every year thereafter, Medicare Advantage plans must disclose certain information to enrollees in their service area including: the number and mix of participating doctors, emergency service options, out-of-service coverage, procedures for obtaining emergency services, optional supplemental coverage and costs, prior authorization rules, grievance and appeals procedures, quality assurance mechanisms, the number of grievances and appeals that plans have received and their dispositions, and a summary of the method of compensating doctors.

Medicare Advantage plans (except for MSAs) must provide coverage for the services currently available under Medicare Parts A and B. Plans must inform their enrollees about the availability of hospice care, including whether a Medicare participating hospice program is located within their service area or whether it is common to refer outside the area. Plans must pass on to beneficiaries any cost-savings achieved through efficient plan administration, in the form of additional benefits.

Medicare Advantage plans may offer supplemental benefits for which a separate premium is charged, but the separate premium may not vary among individuals within the plan and must not exceed certain actuarial and community rating requirements.

The Balanced Budget of Act 1997 required the Secretary to establish standards, regulations, and rules for Medicare Advantage that are consistent with existing standards and regulations governing the Medicare program.

Every November CMS conducts an "annual, coordinated election period" during which time all Medicare beneficiaries are able to choose between "original" Medicare program (the traditional Medicare fee-for-service program) and a Medicare Advantage plan.

Beneficiaries who fail to make an election who are in the traditional Medicare program remain in original Medicare. Those who do not make an election, but are already in a Medicare Advantage plan, remain in that plan.

Beneficiaries can enroll and disenroll from Medicare Advantage plans at anytime during 2005. In 2006, there will be a six-month lock-in and in subsequent years beneficiaries will be locked in to a Medicare Advantage Plan for the entire year.

A Medicare Advantage plan may not deny enrollment to an eligible individual based upon health status or certain other factors. Individuals who enroll in MSA plans, must remain in that plan for a year, although those choosing MSAs for the first time have until the December 15th after their election to disenroll.

To be eligible to enroll in a Medicare Advantage plan the individual must be entitled to benefits under Part A and enrolled under Part B of the Medicare program. Persons with end-stage renal disease are excluded; however, an individual who develops end-stage renal disease while enrolled in a Medicare Advantage plan may continue to be enrolled in that plan and may not be required to disenroll.

An individual is eligible to elect a Medicare Advantage Plan if the plan serves the geographic area in which the individual resides. If, after enrolling in a plan, the individual leaves the geographic area, the plan can offer the individual the option of staying in the plan so long as the plan provides the individual with reasonable geographic access to all basic plan benefits.

Certain Medicare beneficiaries are prohibited from enrolling in Medical Savings Accounts. Federal Employee Health Benefit Plan members (FEHBP) are not eligible to enroll in an MSA until the Director of the Office of Management and Budget (OMB) certifies to the Secretary that the Office of Personnel Management (OPM) has adopted policies which will ensure that the enrollment of FEHBP individuals in such plans will not result in increased expenditures for the federal government for health benefits under FEHBP. Similar rules may be applied to the Veterans Administration and the Department of Defense.

Persons eligible for the Qualified Medicare Beneficiary Program (QMB), qualified disabled and working individuals eligible for Medicaid, or persons otherwise entitled to have Medicare cost-sharing amounts paid by a state Medicaid plan are also ineligible to enroll in an MSA plan.

With the advent of Medicare Advantage, the Medicare program and its beneficiaries are divided into different systems. Before beneficiaries move into the various Medicare Advantage options they need to be certain that the plans meet their particular needs. This takes study and consideration.

Beneficiaries should approach HMO plans cautiously. They, and their advocates, need to be careful in order to ensure that the basic goals of the Medicare program are met for all beneficiaries and that they continue to be met over time.

Not all Medicare beneficiaries belong in Medicare Advantage plans and beneficiaries should make informed decisions before enrolling. Following some simple rules before enrolling in a plan can avoid problems and disappointment later. These guidelines will help to ensure that beneficiaries make wise decisions about Medicare Advantage. After careful evaluation, some Medicare beneficiaries will choose a private insurance plan while others may determine that the original Medicare "fee-for-service" program better suits their needs. Beneficiaries should consider the following:

Option	What is it?	Things to Consider
Original Medicare Plan	The traditional pay-per-visit (also called fee-for-service) arrangement available nationwide.	You can go to any provider that accepts Medicare. Some services are not covered and you have to pay some out-of-pocket costs.
Original Medicare Plan With Supplemental Medigap Policy	The Original Medicare Plan plus one of up to ten standardized Medicare supplemental insurance policies (also called Medigap insurance) available through private companies.	Depending on the standardized policy you buy, you will have coverage for at least some deductible and coinsurance costs. There may be coverage for extra benefits not otherwise covered by Medicare. You will have to pay a premium for your supplemental policy.
Medicare Coordinated Care Plan For comparative information on plans in your area, call 1-800-318-2596.	A Medicare approved network of doctors, hospitals, and other health care providers that agrees to give care in return for a set monthly payment from Medicare. A coordinated care plan may be any of the following: a Health Maintenance Organization (HMO), Provider Sponsored Organization (PSO), local or regional Preferred Provider Organ. (PPO), or a Health Maintenance Organization with a Point of Service Option (POS).	An HMO or a PSO usually asks you to use only the doctors and hospitals in the plan’s network. If you do, you may have little or no out-of-pocket cost for covered services. A PPO or a POS usually lets you use doctors and hospitals outside the plan for an extra out-of pocket cost. Some managed care plans may provide extra benefits. Some plans may charge you a premium.
Private Fee-For-Service Plan (PFFS) For comparative information on plans in your area, call 1-800-318-2596.	A Medicare-approved private insurance plan. Medicare pays the plan a premium for Medicare-covered services. A PFFS Plan provides all Medicare benefits. Note: This is not the same as Medigap.	The PFFS Plan (rather than Medicare) decides how much to pay for the covered services you receive. Providers may bill you more than the plan pays (up to a limit) and you must pay the difference. It is likely that you will pay a premium for a PFFS plan.

*Adapted from Medicare & You, U.S. Dept. H.H.S., Pub No. HCFA-02119 (August 1998).