Question:
Is it true that these Medicare Advantage plans are free and offer all the benefits that I see in the commercials? How does it work?
My Response:
Good questions. Here is a simplified explanation.
Medicare pays a monthly reimbursement rate to the insurance company that offers the Advantage plan, which is called a capitation fee. The insurance company receives approximately $10,000 or more per year for each individual it enrolls in its plan. The insurance company is additionally compensated for those individuals who have more treatment-intensive conditions, so there is little risk of the insurance company losing money.
If the plan achieves a high-quality rating, the insurance company can qualify for a bonus. This makes it even more lucrative for the insurance company and provides them with the incentive to enroll as many individuals into their plan as possible, even with zero premium.
The insurance company can also charge a monthly premium for the plan itself. And don’t forget, in most cases, you will still need to pay your Medicare Part B premium.
Many of the commercials are misleading about the additional benefits the Medicare Advantage plans provide. While most Advantage plans offer some additional benefits such as dental, vision, hearing and more, no single plan offers all the benefits as one might mistakenly conclude from the commercials.
Few things in life are free, so one may ask what is the catch when we choose a Medicare Advantage plan over a Medigap plan? Here is what the commercials do not mention:
- Medicare Advantage plans are managed care plans. They have networks which are like the networks often found in group health plans. Contrast that with Medigap plans which have no networks. If the doctor accepts Medicare assignment (over 95 percent of doctors do), he or she must accept your Medicare Supplement plan.
- Medicare Advantage plans often require prior authorization for certain tests and procedures (check the plan’s Evidence of Coverage) whereas Medigap plans do not.
- With Medicare Advantage plans, your medical bills are approved or denied by the insurance company’s claims department. Translation: The insurance company becomes part of the decision-making process. Medigap insurance carriers have no say in your care. Medicare tells the insurance company how much to pay and when to pay it. That means that your medical treatment is between you and your doctor, not an insurance company.
- Medicare Advantage plans are an alternative to Original Medicare (Parts A and B). Medicare Supplement plans help fill in the gaps inherent in Original Medicare, thereby enhancing it.