More Choices May Mean More Headaches


Much of the focus of Medicare’s upcoming annual coordinated election period, which begins November 15th and continues through December 31st, has been on Medicare Part D.  It is also important to remember that the annual coordinated election period also provides an opportunity for beneficiaries to enroll in or disenroll from a Medicare Advantage (MA) plan.  In 2007, beneficiaries will have more health plan choices than ever, and it is incumbent on them to make informed health care decisions.  This is especially important because, with a few exceptions, once a beneficiary makes a choice for 2007, he will be locked into that choice until the next year’s enrollment period.[1]

Before You Choose

Enrollment in a Medicare Advantage plan is voluntary.  Beneficiaries need to do their homework to understand the types of plans that are available. They also need to consider the pluses and minuses of joining a Medicare Advantage plan.  Most importantly, beneficiaries need to make sure that the doctors and hospitals they use are in the plans’ network or are willing to accept payment from the plan.  Otherwise neither their health plan nor traditional Medicare will pay for the services they receive from these providers.

Before enrolling in a Medicare Advantage plan, beneficiaries should carefully consider the benefits offered and cost-sharing associated with those benefits.  MA plans that have low cost-sharing for doctors’ visits, for example, may have high deductibles for hospitalizations and/or greater cost sharing than traditional Medicare for services such as skilled nursing facility stays or home health services.  In addition, there is no private insurance available to cover the cost-sharing in MA plans as Medigap insurance does for traditional Medicare.

Beneficiaries who want prescription drug coverage may be limited in their MA options.  If a beneficiary chooses to join a Medicare Medical Savings Account Plan or a Private Fee-for-Service Plan that does not offer prescription drug coverage, he will be able to purchase prescription drug coverage separately through a private prescription drug plan (PDP).  This is an additional expense that needs to be considered when making health care decisions.

Medicare Advantage Choices for 2007 Include

Health Maintenance Organization Plans (HMOs), which use a network of providers to deliver needed care.  In most cases, beneficiaries must designate a primary care doctor who is part of the plan’s network who must make referrals for specialty care. Generally, with few exceptions, the plan is not required to pay for care outside its network of providers.  If the plan has a Point-of-Service (POS) option, beneficiaries can receive care outside the network, but will pay more for these services.  HMOs may or may not offer prescription drug coverage. 

Preferred Provider Organizations (PPOs) also use a network of providers but allow self-referral to out-of-network care, usually for a higher cost.  Beneficiaries should investigate the costs of both in-network and out-of-network care as the difference can be substantial.  Regional PPOs, which serve an entire state or multi-state region, may have a higher deductible and/or premium than other PPOs.  Regional PPOs have a combined Part A and Part B deductible which result in greater out-of-pocket expenses up front before the plan covers anything. 

Private Fee-for-Service Plans (PFFS) allow beneficiaries to go to any provider who will accept its payment rates.  Providers who accept the PFFS payment rate for one service are allowed to refuse it for other services.  Beneficiaries are generally responsible for a percentage of the accepted payment rates, which may be higher than the payment rates in traditional Medicare, which could result in higher out-of-pocket expenses for beneficiaries.  If the provider does not accept the PFFS payment rates, the beneficiary will be responsible for the entire bill balance above what the PFFS pays.

Special Needs Plans (SNPs) are designed to meet the needs of beneficiaries who are dually eligible for Medicare and Medicaid, who live in a nursing home, or who have one or more chronic illnesses. There is limited experience with these plans but they tend to try to manage and coordinate care to avoid costly hospitalizations.  These plans may also enroll beneficiaries who do not fall into one of the three groups listed above, although such beneficiaries should very carefully consider their choice because SNPs are not necessarily designed to meet their needs.  Beneficiaries should carefully scrutinize the SNPs network of providers to make sure it is an appropriate choice.

Medicare Savings Account Plans (MSAs) are similar to Health Savings Account Plans.  They have two parts.  The first part is a Medicare Advantage Health Plan with a high deductible which varies from plan to plan.  The second part is a Medical Savings Account into which Medicare deposits money that can be used to pay health care costs.  Health Savings Account Plans are often touted as ideal for young, healthy people who have few health care expenses.  Studies show that people with Health Savings Accounts pay more out-of-pocket for health care and are more likely to avoid, skip, or delay health care because of cost considerations.[2] 

There are also three additional Medicare health plan options that are not part of Medicare Advantage.  Medicare Cost Plans are a type of HMO that beneficiaries can join even if they only have Medicare Part B.  Medicare Cost Plans utilize network providers, but if a beneficiary goes to a non-network provider the services are still covered by traditional Medicare.  Beneficiaries can join a Medicare Cost Plan anytime it is accepting new members and can disenroll at anytime and return to traditional Medicare.

Medicare has also approved several Demonstration/Pilot Programs, which are special projects that test changes in Medicare coverage or payment.  They are usually for a specific group of people and/or are offered only in certain areas.  For example, there is a Demonstration Program currently being offered to beneficiaries diagnosed with End Stage Renal Disease.

Finally, Programs of All-inclusive Care for the Elderly (PACE) combine medical, social, and long-term care services for frail elderly people who live in and get health care in the community.  PACE is a joint Medicare and Medicaid program and is only available in some states that have chosen to offer PACE as an optional Medicaid benefit.


Considering the dizzying array of health plan options available to Medicare beneficiaries, and the potentially harmful result of an uninformed choice, it is extremely important that beneficiaries carefully explore all the options available to them and make the best decision for them.  Information regarding MA plans can be obtained from the MA plans themselves, from your State Health Insurance Assistance Program (SHIP), from the Medicare & You Handbook, from advocacy organizations, and from doctors.

[1] For a fuller discussion of MA enrollment periods and the lock-in rule, please see our CMA Weekly Alert for September 22, 2005, entitled “Medicare Advantage: Timely Choices for 2006 & Beyond.”
Hopkins, Catherine and Jennifer Tolbert, Health Savings Accounts and High Deductible Savings Plans: Are They An Option For Low-Income Families? (Kaiser Family Foundation, October 2006); available at


Copyright © Center for Medicare Advocacy, Inc. 09/04/2013