Medicare That Works to Your Advantage

Joe Cameron, 78, pays $93.50 a month for health insurance through a Medicare Advantage HMO. That's the same premium he would pay for Medicare Part B alone -- and he doesn't need to buy a Medicare-supplement policy and separate prescription-drug coverage.

Five years ago, Cameron, who lives in Fort Worth, suffered a massive heart attack and was flown to Dallas for a bypass operation. His medical bills totaled more than $1.3 million -- but he paid only $2,300 out of pocket.

Cameron now requires medications that could cost him more than $900 per month. But with generic substitutes and the coverage provided by his UnitedHealth SecureHorizons plan, his monthly cost is about $120.

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Cameron, who is back to playing golf twice a week, says that with all the complications, he's glad he didn't have to submit claims to multiple insurers. "You don't have to deal with anybody but the one plan. And I've been very happy with their service and the way they treat claims."

Many Medicare Advantage plans, which are private health plans that are heavily subsidized by the federal government, bundle medical and drug coverage for no more than the cost of Medicare Part B alone ($93.50 to $161.40 per month in 2007, depending on your income). To get comparable coverage with traditional Medicare, you'd have to pay for Part B as well as a separate medigap policy (the average cost for plan F, the most popular, is $140 per month) and a prescription-drug plan (average cost: $24 per month). That adds up to $2,000 more each year.

Three versions. The least-expensive Medicare Advantage plans tend to be traditional HMOs, which limit you to in-network doctors and hospitals. But many people have the option to enroll in preferred-provider plans, which allow you to go outside the network. Your premiums and co-pays will probably be higher than with an HMO, especially if you use a doctor or hospital that's not a preferred provider. A still more flexible -- but more expensive -- option is the new, private fee-for-service Advantage plan, which lets you use any doctor or hospital that accepts Medicare throughout the country.

To find out your options and calculate your potential out-of-pocket costs for both Medicare Advantage and traditional Medicare plus medigap and Part D coverage, use the Medicare Options Compare tool at www.medicare.gov/mppf. Most insurers also have calculators on their Web sites.

If you are already covered by Medicare with Part D prescription-drug coverage, you have until March 31 to choose a Medicare Advantage plan with drug coverage. If you are turning 65 this year, you have a seven-month window -- three months before and three months after the month you turn age 65 -- to sign up, regardless of the time of year.

What's the catch? Medicare Advantage premiums are so low because of those generous government subsidies. In fact, since the passage of Medicare Part D, the government pays more per Advantage beneficiary than it does for each traditional Medicare recipient.

Congress may try to reclaim the money paid to private insurers, which Rep. Pete Stark (D-Cal.), chairman of the House Ways and Means Health Subcommittee, considers an "overpayment." But for now, says Dr. Robert Berenson, a senior fellow with the Urban Institute, "this is a good deal for many people."

Bottom line: If you sign up now, you're assured a good deal for the coming year. If the government does lower subsidies, insurers might leave the business. And if that happens, you can enroll in traditional Medicare.