Benefits of Medicare Advantage
What is Medicare Advantage? I saw an ad for Humana's Medicare Advantage plan that said you can use any doctor or hospital. I thought Medicare Advantage plans were just HMOs.
A Medicare Advantage plan is health insurance coverage administered by a private insurer instead of the government. In the past, most of these private plans had been Medicare HMOs. But now there are several types of plans -- including regional preferred-provider organizations, which provide coverage for a network of doctors within a region of several states, and private fee-for-service plans, which let you use any doctor that accepts Medicare.
Medicare Advantage generally provides prescription drug coverage and fills the holes in Medicare all in one plan, so you don't have to buy a separate Part D prescription drug plan and a medigap policy in addition to signing up for Medicare. The premiums tend to be lower than you'd pay for buying all three policies separately, although you may have some more out-of-pocket expenses than you'd have with the three separate plans, such as deductibles and copayments for doctor's visits and hospital stays. And if you're in a Medicare HMO, which tends to have the lowest premiums -- often just the cost of Medicare Part B -- your coverage is restricted to certain doctors and hospitals. This is not a good option for snowbirds and people who travel frequently.
The costs are low because the insurers get generous subsidies from the government to offer these plans, which is the biggest difference between today's versions and the ones in the 1990s. Private plans -- mostly Medicare HMOs at that time – got a bad rap in the late 1990s after the government reduced their subsidies, and many insurers fled the business or raised premiums and slashed benefits. Insurers returned to the business after Congress raised those subsidies in 2003, but there's no guarantee that Congress won't reduce those subsidies again. If that happens, you could always return to the government's Medicare, although you may not be eligible for some medigap plans.
Medicare Advantage plans are now available throughout the country. Even rural areas that never had Medicare HMOs now tend to have at least one private fee-for-service plan. To find out about the plans available in your area, go to the government's Medicare Options Compare tool. When searching for a policy, see if your doctors are included, and compare your total costs -- premiums plus potential out-of-pocket expenses -- for both types of plans.
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