How Does Medicare Advantage Work?

Before the 2003 Medicare Modernization Act, seniors didn’t have the option to enroll in Medicare Advantage. There was no choice between Original Medicare vs Medicare Advantage.

There was only Original Medicare for people who didn’t have retiree coverage through a former employer.

Now, however, Medicare Advantage is a popular alternative. What is a Medicare Advantage plan? Well, it’s very similar to group health insurance that you’ve had during your working years. These plans have networks and you pay for medical services as you go along.

Medicare Advantage is also known as Medicare Part C. It is technically still a part of Medicare, but it is not sold or managed by the federal government. The government sets rules and guidelines, but private insurance companies sell and administer the plans.

Medicare pays the insurance company to administer your Part A and B benefits through the Medicare Advantage plan. While all plans must cover the same services as Parts A and B, different Medicare Advantage plans will have different networks, copays, and drug formularies.

Although most seniors are enrolled in Original Medicare, the number enrolled in Medicare Advantage plans has tripled since 2003 to 19 million. This represents about one-third of all Medicare beneficiaries.

Most Common Types of Medicare Advantage Plans

There are several different types of Medicare Advantage plans. The two most popular are:

• Health Maintenance Organizations (HMOs). HMOs have closed provider networks and you generally must get all but emergency care within your plan’s network. You choose a primary care doctor who oversees all your medical care. Your plan may require you to get a referral for specialist care and prior authorization for certain tests and procedures. HMO plans almost always include Part D prescription drug coverage.
• Preferred Provider Organizations (PPOs). These plans also have provider networks, but you can still use any provider that accepts Medicare. You’ll pay a lot less out-of-pocket if you stay in your network, however. You don’t have to choose a primary care doctor or need a specialist referral. Most PPO plans also include Part D coverage.

All Medicare Advantage plans have to offer the same benefits you’d get under Original Medicare. However, many go beyond and offer other coverage like routine vision and dental care to their members. Some even have wellness programs, gym membership discounts, and 24-hour nurse hotlines.