9 Ways to Compare Medicare and Medicare Advantage - dummies

9 Ways to Compare Medicare and Medicare Advantage

By Lisa Yagoda, Nicole Duritz, Joan Friedman

Copyright © 2014 AARP. All rights reserved.

By Patricia Barry from AARP’s Medicare For Dummies

So how do traditional Medicare and the Medicare Advantage program stack up generally in delivering healthcare? You have a range of issues to consider: overall costs; premium; copay; long-term stability of costs, benefits, and care; choice of providers and whether care is coordinated; extra benefits; geographical service areas; and quality of care.

Thinking through these issues and applying your personal preferences makes gravitating toward one system over the other easier for you. Look at the details of traditional Medicare and the different types of Medicare Advantage plans to refine your thoughts and settle on the system that works best for you. Don’t be afraid to get down to the nitty-gritty of comparing individual plans.

Overall costs

On the whole, MA plans offer lower out-of-pocket costs than traditional Medicare. In fact, they were originally intended to provide a lower-cost alternative for people who can’t afford Medigap supplemental insurance. Here’s how it happens:

  • Managed care plans, such as HMOs (health maintenance organizations) and PPOs (preferred provider organizations), keep costs relatively low by limiting access to doctors, hospitals, and other providers within their own provider networks and service areas or by charging enrollees more if they go outside them. They may also require enrollees to ask for prior authorization before covering certain kinds of treatment.

  • A change in the law in 2003 allowed Medicare to pay the private plans far more on average for enrollees’ care than it pays for people enrolled in the traditional system. The extra payments allowed the plans to charge enrollees less or to offer better benefits than traditional Medicare.

  • But another law, the Affordable Care Act of 2010 (ACA for short), is gradually reducing those overpayments, which may cause the plans to cut back on their benefits or raise charges — or may prompt the plans to become more efficient and competitive.

  • MA plans must set an annual limit on their enrollees’ total out-of-pocket expenses (deductibles and copays). The law sets the limit, although individual plans can choose to set a lower cap. Traditional Medicare has no out-of-pocket limit.

However, Medicare Advantage’s private plans may not be the less expensive option for everyone. Several studies have suggested that people with greater healthcare needs may ultimately pay more for their care in MAs than if they were in traditional Medicare, although these reports don’t reflect recent developments in the law.

Premium costs

Many people in traditional Medicare pay three monthly premiums — one for Part B, one for prescription drug coverage (Part D), and one for a Medigap supplemental insurance policy. In contrast, most people in Medicare Advantage plans pay, at most, two premiums — one for Part B and one for the plan itself, which may or may not include Part D drug coverage.

However, some plans offer routine vision, hearing, or dental care as separate packages for an additional premium. And some plans charge no premiums of their own, even if they include all those extras.

Copay costs

Medicare Advantage plans usually charge fixed dollar copays for doctor visits, which may be less expensive and more convenient than the percentage of the cost (typically 20 percent) that traditional Medicare charges.

A flat copay is also more predictable: If your plan charges $20 this year to see your primary care doctor, you know in advance that this amount will be your payment for every visit throughout the year; however, you can’t be certain what 20 percent means in dollar terms when the total cost on which it’s based may fluctuate.

Stays in the hospital are also charged quite differently under traditional Medicare and MA plans — but whether one costs more than the other depends mainly on how long your stay is.

Cost and benefit stability

MA plans can change their costs and benefits each calendar year, increasing or reducing them as they choose. Traditional Medicare is more stable, but it increases the Part A and Part B deductibles slightly each year. The 20 percent coinsurance it charges for most Part B services also tends to rise as healthcare costs in general go up.

Services that traditional Medicare covers (and that, by law, MA plans must cover, too) generally don’t change much from year to year, although sometimes new ones are added.

Care stability

Traditional Medicare is there year after year. Medicare Advantage plans can choose annually whether to stay in Medicare or withdraw, or whether to enter or exit a particular service area. Occasionally, Medicare doesn’t renew a particular plan’s contract. If any such changes occur, affected enrollees are notified in advance and can switch to another private plan or to traditional Medicare, but this change can be a disrupting experience.

Provider choice and care coordination

The main reason people give for choosing or staying in traditional Medicare is that they can go to any doctor or hospital they please — or, at least, any that accepts Medicare patients, and most providers still do.

In contrast, the majority of Medicare Advantage plans — ones that provide managed care through HMOs — limit the choice of providers to their networks and service areas. However, this arrangement may be considered a benefit instead of a restriction if care is properly coordinated.

Because a single local system handles and monitors your medical needs, you’re more likely to be encouraged to get tests and screenings early enough to prevent serious health problems later and less likely to be prescribed drugs that may interact badly with each other.

Traditional Medicare relies on the fee-for-service system and has therefore never coordinated care. Nonetheless, that may change in the future. Many studies have shown that properly coordinated care improves health outcomes — especially for people with chronic conditions such as diabetes and heart disease — and saves tons of taxpayer money, mainly because fewer patients need expensive hospital care.

As a result, Medicare has set up a series of pilot programs in which providers get rewarded not for the number of services they bill to Medicare, but for the outcomes of their patients’ care. This new approach goes by various names, including patient-centered medical homes and accountable care organizations.

Extra benefits

All MA plans must provide the same medical services as traditional Medicare. But they can also offer extra benefits that may be well worth having. Some plans with these extras don’t charge higher premiums, but many do — often quite a lot more. Carefully look at the coverage details of extra benefits when comparing plans; some are significant, whereas others are very limited.

Geographical area

Geography is a key consideration if you travel a lot or live in another state for part of the year. Traditional Medicare covers you anywhere in the United States, whereas most MA plans require you to either see providers in their service area or pay more to go outside the network.

However, all plans must cover emergency treatment or urgently needed care anywhere in the country. Some Medigap policies and MA plans also cover emergency care abroad.

Quality measures

Medicare has an elaborate system of testing the quality of services that MA plans and stand-alone Part D plans provide, using feedback from customers, complaints, surveys, undercover spot checks, and so on. Based on this info, Medicare gives each plan a quality rating that it then posts on the Medicare plan finder website for all to see.