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Medicare Advantage (MA) is a United States health insurance program of managed health care (Preferred Provider Organization(PPO) or Health maintenance organization(HMO)) that serves as a substitute for "Original Medicare" Parts A and B Medicare benefits. Medicare Part A provides payments for in-patient hospital services excluding those of physicians and surgeons. Part B provides payments to physicians and surgeons, as well as for medically necessary outpatient hospital services (such as ER, laboratory, x-rays and diagnostic tests) and certain durable medical equipment and supplies. Original Medicare claims payments are processed through the Centers for Medicare and Medicaid Services ("CMS"). In contrast, Medicare Advantage is offered by commercial insurance companies and HMO and PPO corporations, who receive compensation from the federal government, but do not process claims through the CMS.
Most Medicare Advantage plans (sometimes referred to as "Part C") include the Part D prescription drug benefit plan, and are known as a Medicare Advantage Prescription Drug plan or "MAPD."
Medicare Advantage originated with the passage of the Balanced Budget Act of 1997, which offered Medicare beneficiaries this option, instead of receiving these benefits through the original Medicare plan (Parts A and B). These programs were first known as Medicare+Choice or Part C plans. Pursuant to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the compensation and business practices changed for insurers that offer these plans, and "Medicare+Choice" plans became known as Medicare Advantage plans.
Medicare has a standard benefit package that covers only medically necessary health care services. A person qualifies for Medicare coverage by reaching age 65 if they have earned the requisite number of credits for working and paying into the Medicare system through payroll deductions. American citizens, nationals, and legal residents (who have been in the U.S. at least five years) who are "fully insured" (or whose spouse is fully insured) under the Social Security program receive Medicare Part A benefits without a monthly premium. Persons who are not so qualified pay a premium for Part A. All Medicare beneficiaries who enroll in Part B pay a monthly premium.
For people who choose to enroll in a Medicare Advantage plan, Medicare pays the private health plan a set amount every month for each member ("capitation"). Enrollees may have to pay a monthly premium in addition to the Medicare Part B premium, but in areas with strong younger population demographics, many companies offer Medicare Advantage plans with no monthly premium in addition to the Medicare Part B premium which the beneficiary pays directly to Medicare. Medicare Advantage subscribers generally pay a fixed amount (a copayment of $20, for example) every time they see a doctor as opposed to meeting a deductible and paying a coinsurance (typically 20%) under Original Medicare. The copayment can be higher to see a specialist with a Medicare Advantage plan. Under Original Medicare the coinsurance remains 20%, but the actual amount out of pocket can be higher since specialists generally charge more for services.
The Medicare Advantage plans are required to offer a benefit “package” that is at least equal to Medicare’s and cover everything Medicare covers, but they do not have to cover every benefit in the same way. Plans that require higher out-of-pocket costs than Medicare for some benefits, like skilled nursing facility care, can balance their benefits package by offering lower copayments for doctor visits. A private plan may use some of the excess payments they receive from the government for each enrollee to offer supplemental benefits.
Not only do most Medicare Advantage plans significantly reduce the out-of-pocket cost of health care to just a few thousand dollars annually, compared to tens of thousands of dollars an extended hospital stay could cost under Original Medicare, they also offer greatly expanded benefit packages, including dental, hearing, podiatry, chiropractic, acupuncture, and vision coverage, as well as health club memberships and other services which are also not covered by Medicare, such as transportation to and from clinic appointments. Once the out of pocket maximum is reached for an individual, the plan will pay 100% of services for the remainder of the calendar year, with no lifetime maximum, so long as individuals use in-network providers. Persons who enroll in a Medicare Advantage HMO cannot use certain specialist physicians or out-of-network providers without prior authorization from the HMO, except in emergencies. This can be a problem for people who need to use specialists or who are hospitalized and are forced to use out-of-network doctors while in the hospital. Enrolling in a PPO, if available, can help solve this dilemma, because PPO plans permit a subscriber to use any physician or hospital without prior authorization, but at somewhat higher expense.
By law, however, if a patient's in-network physician orders tests or procedures that are not available or provided by any in-network facility or specialist's office, the Medicare Advantage plan must pay for the patient's procedures or services at an out-of-network location at no additional cost to the patient, so long as the necessary services are normally covered by Medicare.
Most Medicare Advantage plans typically do not have annual deductibles, offering members "first-dollar" coverage instead. Original Medicare has a potentially recurring (more than once per calendar year) deductible for each hospital admission under Part A and an annual deductible for Part B.
In 2006, enrollees in Medicare Advantage Private Fee-for-Service plans were offered a net extra benefit value (the value of the additional benefits minus any additional premium) of $55.92 a month more than the traditional Medicare benefit package; enrollees in other Medicare Advantage plans were offered a net extra benefit value of $71.22 a month more.
Enrollment in Medicare Advantage plans grew from 5.4 million in 2005 to 8.2 million in 2007. Enrollment grew by an additional 800,000 during the first four months of 2008. This represents 19% of people with Medicare. A third of those with Part D coverage are enrolled in a Medicare Advantage plan. Medicare Advantage enrollment is higher in urban areas; the enrollment rate in urban counties is twice that in rural counties (22% vs. 10%). Almost all Medicare beneficiaries have access to at least two Medicare Advantage plans; most have access to three or more. The number of organizations offering Fee-for-Service plans has increased dramatically, from 11 in 2006 to almost 50 in 2008. Eight out of ten beneficiaries (82%) now have access to six or more Private Fee-for-Service plans.
According to research by the Kaiser Family Foundation, 11.1 million people (approximately 25% of all Medicare beneficiaries) were enrolled in Medicare Advantage plans as of March 2010, up from 10.5 million in March 2009. In their report, Kaiser noted that while some Medicare beneficiaries have dozens of private Medicare Advantage plans available in their communities, enrollment is highly concentrated among a small number of firms in nearly all states. The March 2012 Medpac Report to Congress Medicare Advantage status chapter reported an enrollment increase of 6% in 2011 to 12.1 million, 25% of all Medicare beneficiaries.
There is some evidence that Medicare Advantage plans design benefits so that they are unattractive to people with costly conditions or high risks of needing expensive treatments and steering them into traditional Medicare. This insulates Medicare Advantage plans from financial risk while shifting costs to the federal government. Medicare makes risk adjusted payments to private plans to avoid this, but it is unclear how effective that policy is.
There is considerable confusion about what the Patient Protection and Affordable Care Act (or ACA) of 2010 did with respect to Medicare Advantage. As part of a broad set of reforms aimed to control the cost of Medicare, the ACA eliminated certain subsidies which the federal government first used to establish the Medicare Advantage program. The Obama administration launched an $8.35 billion demonstration project to postpone the majority of Medicare Advantage program cuts. According to the Government Accountability Office (GAO) this demonstration project will cost more than the combined previous 85 demonstration projects beginning in 1995. As of 2008, the federal government spent 12 percent more on Medicare Advantage than it did for comparable care under traditional Medicare. These subsidies (which added an additional $14 billion to the Medicare program in 2009) will gradually be reduced until payments to Medicare Advantage are in line with the cost of traditional Medicare.
The Medicare Advantage Plan Star Ratings system rates Medicare Advantage (MA) plans on a scale of 1 - 5 stars. There are different domains for MA plans versus Prescription Drug Plans (PDPs).
For plans covering health services, the overall score for quality of those services covers 36 different topics in 5 categories:
For plans covering drug services, the overall score for quality of those services covers 17 different topics in 4 categories:
For plans covering both health & drug services, the overall score for quality of those services covers all of the 53 topics listed above.
For quality of health services, the information comes from sources that include:
For quality of drug services, the information comes from sources that include: