Making Sense of Medicare Advantage

I saw an ad for a Humana Medicare Advantage plan that says you can use any doctor. I'm confused -- I thought that Medicare Advantage plans were all HMOs. Which is correct?

This year, you'll see many new Medicare Advantage options. The Medicare Modernization Act of 2003 offered private insurance companies generous subsidies to get into the Medicare Advantage business, and more than 140 new plans were introduced in 2005 -- bringing the total to more than 400.

Most Medicare Advantage plans are still medicare HMOs, where you deal with a private company rather than medicare, must work within a network of doctors and hospitals and must go through a gatekeeper before you can see a specialist.

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But there are two newer types of Medicare Advantage plans that provide a lot more flexibility and are becoming more popular.

The one you've heard about is a private fee-for-service plan. Like a medicare HMO, you deal with a private insurance company rather than with medicare. But that's where the similarities end. Instead of being limited to an HMO's network, you can use almost any doctor or hospital that accepts medicare. (A few rural providers don't accept these plans; be sure to check with your doctor and hospital first.) You don't need preauthorization to see a specialist, and you can go to doctors in any part of the country -- a much better choice for snowbirds and frequent travelers.

These plans tend to cost more than medicare HMOs. A medicare beneficiary in Pinellas County, Fla., for example, would pay $104 per month for Humana's private fee-for-service plan (in addition to the Medicare Part B premium of $88.60 per month in 2006). However, the company's medicare HMO costs $0 in addition to the Part B premium. These plans were first introduced in the late 1990s and have been available in some rural areas that didn't work well for an HMO. But they've expanded significantly over the past year.

And there's also another new Medicare Advantage option that falls in between the two: a regional PPO. Just like an employer's PPO, you get the most coverage if you work with preferred doctors or hospitals, but you'll still get coverage if you go out of that list -- you'll just have to pay a larger share of the bill (often 30%). The PPO's region is either a full state (Florida is one, for example) or several -- there are 26 regions in the country. Humana charges $39 per month for its regional PPO in Pinellas County, Fla. and charges $10 copayments for visits to an in-network primary care provider, or 30% for doctors who aren't on the list. The HMO, on the other hand, charges $10 for in-network copayments to see a primary care doctor, while the private fee-for-service charges $15.

All of these Medicare Advantage plans provide medical care as well as prescription drug coverage, so you can sign up for one plan instead of having a combination of medicare, plus a medicare supplement policy, plus a stand-alone Part D prescription drug plan. But you need to assess which plan will cost you less over the year -- both in premiums as well as out-of-pocket expenses.

If you have medicare plus a medicare supplement plan, you'll generally have fewer out-of-pocket expenses (the medigap policy fills in many of the deductibles and copayments) but will generally pay higher premiums. And with regular medicare, you won't have the restrictions on which doctors you can see.

You can see a detailed list of the options in your area, including a break-down of the copayments and deductibles for all kinds of coverage, at the Personal Plan Finder at Medicare.gov.

Because it still is open enrollment season for medicare prescription drug coverage, you have until May 15 to sign up for a new Medicare Advantage plan or a stand-alone Part D plan (also the deadline for avoiding a penalty if you don't already have better prescription drug coverage). After that, open enrollment season usually starts on November 15 for coverage to begin on January 1 of the following year.

For more information about picking a medicare prescription drug plan, see Straight FAQs on the Medicare Drug Plan. For more information about shopping for a medicare supplement policy, see my Fill the Gaps in Medicare column.