Medicare Advantage Plans Explained (2020)
This Medicare Advantage Plans Explained Video is produced to help you better understand Medicare HMO’s and Medicare PPO’s. When choosing a Medicare Advantage Plan you give up some very important features of Original Medicare. We detail all this and more.
Medicare Advantage Plans Explained
If you’re researching Medicare and looking for a video to help you understand Medicare Advantage plans and if they are the right choice for you, this is the video you need to see.
Hi, I’m Matthew Claassen with Medigap Seminars Insurance Agency. We are an independent insurance broker helping people with their Medicare and retirement needs from Hawaii to Virginia and Alaska down to the Florida Keys. We represent our client’s best interest, not that of an insurance company, and our services are free to you the consumer. All you need to do, is ask.
While most of our business is with Medicare supplement plans, we do work with and may recommend a Medicare Advantage plan, but only when appropriate. This video is different than other videos you may have seen on Medicare Advantage Plans. I am not going to simply describe an Advantage Plan. Rather, the intent of this video is to give you the information you need to decide for yourself if a Medicare Advantage plan is right for you.
As you know from my Medicare Explained video, before you make any other decisions with Medicare you must first be enrolled in both Medicare Part A (inpatient services) and Medicare Part B (outpatient services). This is referred to as Original Medicare. Medicare Part A and Medicare Part B. From there you can make one of three choices. But keep in mind, no matter which choice you make from here, you must always pay your Medicare Part B monthly premium.
Your first choice is to do nothing. Just keep Medicare Part A and Medicare Part B as your insurance coverage and add Medicare Part D prescription coverage. Of course, with just Medicare Part A and Medicare Part B and no other coverage, a person still has unlimited financial risk should you get sick or injured. Your portion of the medical cost could still result in financial hardship.
Most people are justifiably uncomfortable with having unlimited financial risk in the case of a medical event.
If you want to limit you’re your financial risk, you can either purchase additional coverage via a Medicare supplement plan or replace your Original Medicare with a Privatized version of Medicare Part A and Part B managed by a private, for profit insurance company. That is a Medicare Advantage Plan.
Now, there are many different types of Medicare Advantage plans. But literally 98% of all Medicare Advantage plans are constructed as either an HMO or a PPO. In this video we will just be discussing HMOs and PPOs and not other types of Medicare Advantage plans.
To be clear, a Medicare Advantage Plan is not a Medicare supplement. It does not supplement your Original Medicare, it replaces it. You still must pay your Medicare Part B monthly premium to Medicare, but you are no longer using Original Medicare. You don’t use your red, white and blue Medicare card. The insurance company you choose for a Medicare Advantage plan will issue you their own insurance card for the plan you enrolled in.
As you may know Original Medicare has a lot of copay’s and deductibles. Each Medicare Advantage Plan has its own copay’s and deductibles and by law must be designed as an Actuarial Equivalent to Original Medicare. Actuarial Equivalent. It’s an interesting term. What exactly does it mean? It means that the average person on any Medicare Advantage plan must have roughly the same annual out-of-pocket expense as they would have if they had simply kept their Original Medicare Part A and Part B and NOT added a Medicare supplement.
Unlike a Medicare supplement, every Medicare Advantage plan is different. Each has different coverage, uses different doctors and hospitals and every Medicare Advantage plan can change its benefits and costs each calendar year. But, by law, they must remain an actuarial equivalent to Original Medicare.
However, as I mentioned earlier, Medicare Advantage plans have maximum limit on a policy holder’s annual financial risk, also called your maximum out-of-pocket expense.
Your Medicare Advantage Plan MOOP
If you have a pen and paper handy this is an important Medicare insurance term you should be aware of as you research different Medicare choices. That term is your annual Maximum Out-of-Pocket expense, fondly referred to as your MOOP. Your MOOP is the most money you will be liable for in medical bills for in-patient or outpatient services during any calendar year. It’s a great way to measure the coverage of one health insurance plan versus another. The plan with your lowest MOOP has the most insurance coverage because your financial risk is the lowest. Once your out-of-pocket expenses has reached your MOOP you have 100% coverage for the remainder of the calendar year. Your MOOP resets every January 01.
It’s important to know that your MOOP never includes your premium to purchase the a plan and the cost of prescriptions drugs. Prescription drugs are always separate.
This next concept is, I believe, THE most important concept to understand when considering a Medicare Advantage Plan versus your other choices. If a private for-profit insurance company is going to provide you roughly equivalent healthcare coverage to Original Medicare but add a cap to your financial risk. Cover 100% after you reached your MOOP, what do you have to give-up to receive this added benefit?
You must give up something. Nothing is for free and I have never known an insurance company to be philanthropic with its business. What you give up are the unique benefits of Original Medicare.
There are two unique benefits to Original Medicare that you give up when you enroll in a Medicare Advantage plan.
The first is that with Original Medicare you can see any doctor, go to any hospital in the US or its territories. If they accept Medicare assignment your cost will be the same.
With a Medicare Advantage Plan, you are either restricted to just local doctors that accept your insurance plan and have no insurance coverage outside of those doctors, or you see doctors outside of the network but only at higher cost and significantly higher MOOP. Second is that Original Medicare intends to cover every medical procedure or service that is medically necessary, and it relies on your doctor’s opinion and diagnosis to define medical necessity. You and your doctor control your healthcare. With a Medicare Advantage plan the insurance company gets to define medical necessity and they do not even ask your doctor. Every procedure must first be approved by the insurance company.
Now, if you are still with me and following, there are two very important pieces of information you should have if you are deciding if a Medicare Advantage Plan is right for you.
In 2018, on a witness stand in Southern California a former medical director for a major insurance company stated that per his employer’s guidelines he never looks at a patient’s medical records when deciding to approve or deny medical services. In addition, in this particle case for the lawsuit testimony he admitted he had no knowledge of the symptoms or treatment for the disorder that he had denied authorization for treatment.
As you let that sink in;
Also, in 2018 the Inspector General for the Department of Health and Human Services, the government department that overseas Medicare, released a report on Medicare Advantage plans. He researched three years of Medicare Advantage plans, from 2014 through 2016. He found that each year between 51% and 56% of the people on a Medicare Advantage plan were denied necessary medical services and harmed in the process. In addition, he found that insurance companies regularly failed to inform the policy holders that they had a right to appeal and failed to provide them with the material and information they needed to launch an appeal. After statistical analysis, he concluded that insurance companies denied necessary medical services purely to increase profit margin.
Like all my other source material for this video, I have a link to the Inspector General’s actual report below.
The Medicare Advantage PPO
Next let’s look at who, what kind of person chooses or needs a Medicare Advantage plan.
What I would like to do is first define and compare HMO versus a PPO. Then let’s look at the demographic; who typically chooses a Medicare Advantage plan and then go over your Medicare rights and the three enrollment periods for Medicare Advantage plans?
Let’s start by reiterated that all Medicare Advantage plans are different. Most insurance companies in this market have multiple Medicare Advantage plans. Each of them are different. I often hear people say I have Humana, or I have AARP / United Healthcare. Those are insurance companies, not plans. Each of those companies has multiple HMOs, PPOs, Special Needs Plans, Fee for Service Plans, Medicare Part D Prescription Drug Plans, Medicare supplement plans and so on.
Instead of thinking of these plans by insurance company, first think of them as either an HMO or PPO, then by the insurance company managing the plan.
Let’s start with a PPO.
PPO stands for Preferred Provider Organization.
This is type of health plan that contracts with medical providers, such as hospitals and doctors, to create a local network of participating providers. You pay less if you use providers that belong to the plan’s network. You can use doctors, hospitals, and providers outside of the network for an additional cost. These plans are typically local with a network that includes doctors and hospitals in your county or surrounding area. There are also Regional PPOs that might encompass an entire state or group of state.
You will likely have a Primary care physician with a PPO, but you can see any doctor or specialist you choose and do not have to ask permission or get a referral to see another doctor. These plans have one set of fees and a MOOP if you only use in-network providers. Then they have a higher set of fees and MOOP if you use out-of-network providers.
For example; maybe your plan charges you a $25 copay to see an in-network doctor and a $50 copay to see an out-of-network doctor. Or you pay something like $50 for an in-network lab test, but 50% of the medical bill if you go out of Network.
Those are made up number just to illustrate the difference.
What is not made up is the 2020 MOOP set by Medicare. For 2020 the annual maximum out-of-pocket threshold for a Medicare Advantage PPO is $6,700 for in-network services and $10,000 for out-of-network services. That is a maximum. Some plans have voluntarily set their MOOP lower. This maximum is set by Medicare each year. That number can change, but it has held at that rate since 2010.
For 2020 the annual maximum out-of-pocket threshold for a Medicare Advantage PPO is $6,700 for in-network services and $10,000 for out-of-network services.
Now, understanding the network is important when shopping Medicare Advantage plans. Linked below is a report by the Kaiser Family Foundation that found, on average, only 46% of doctors accept Medicare Advantage plans. Many doctors will just accept PPOs or HMOs. But understand, just because they accept Medicare Advantage plans doesn’t mean they will accept your Medicare Advantage Plan.
In addition, when you enroll in a Medicare Advantage plan you are committed to staying in that plan until December 31 of whatever year it is. The doctor can drop your insurance company at any time. They can stop accepting your Medicare Advantage Plan in the middle of the year. Your only recourse is to find another doctor. There is an exception to this in that if Medicare finds there was a significant disruption in a Medicare Advantage Plan’s network, they may provide you with a Special Enrollment Period to find another plan. Unfortunately, I cannot find a specific definition for the term “significant disruption”, but I am sure one or two doctor changes isn’t it.
The Medicare Advantage HMO
HMO stands for Health Maintenance Organization.
A Medicare Advantage HMO will typically have a much lower MOOP than a PPO. A typical HMO will have a $3,400 MOOP in 2020. Some will have less. However, the maximum MOOP for a Medicare ADvantage HMO in 2020 is $6,700. Some HMOs have $6,700 as the maximum annual out-of-pocket for in-network services.
But most don’t. A lower MOOP means more insurance, right?
If you have learned anything from this video it should be that if an insurance company is going to give you something there is a cost for it somewhere. There is no free lunch. What price do you pay for a lower MOOP?
There are two extra limits they place on HMO policy holders to help pay for the lower MOOP and lower copay’s.
First, with an HMO you have no insurance coverage outside of the network. None other than emergency treatments, and I will get to that in a moment. Understanding their definition of Emergency treatment is important. If you see a doctor not in the HMO network or go to a hospital not in an HMO network, you pay the full cost. You have no insurance coverage. Some very small HMOs that do not have all the required specialty care provider contracted with them may offer out-of-network care for that specialty. But that is an exception to the rule.
With an HMO you have no insurance coverage outside of the network.
Second, like a PPO you must have a Primary Care Physician. But unlike a PPO your HMO Primary Care Physician controls your healthcare. The HMO Primary Care Physician is likely to be payed a bonus for controlling insurance costs. They control insurance costs by limiting your care. If you want to see a specialist, you must have a referral. You are not allowed to see a doctor without your Primary Care Physician’s approval.
Your lower MOOP comes with a lot of restrictions.
Breaking Bad TV Show – an HMO example
I don’t know how many of you have seen the hit TV show Breaking Bad. It first aired in 2008. The entire premise of the show is this high school chemistry teacher is diagnosed with Stage 3 Lung cancer. His insurance through the school system is an HMO. The doctors that can save his life are not in his tiny HMO network. His life depended on him getting enough money to pay for treatment on his own. His insurance, his HMO sucked.
So, he turned to manufacturing meth to make enough money to get the cancer treatment he needs.
That’s an HMO.
Alright, last thing about an HMO. It has to do with the emergency services coverage. All your HMOs will have coverage for emergency services when you are traveling to other states or places where the network doesn’t reach. But even most insurance agents don’t know the definition of “emergency services” these HMOs use. An emergency is when your life is threatened. Once you are stabilized and your life is not at risk, all other services are non-emergency and not covered.
The Medicare Advantage HMO and Emergency Services Out-of-Network
I was told a story once by a gentleman who I was helping switch from a Medicare HMO to a Medicare supplement. As he told it, he was vacationing in Las Vegas when he got into a very serious car accident. The HMO he had was based in Florida. Nevada was most definitely out-of-network. Well, his HMO paid for his medical services when they pulled him out of the car and while he was in ICU. But when he got out of ICU and they wheeled him up to his room in a body cast, his insurance stopped paying.
In order for his insurance to continuing covering his recovery cost he was told he would need to find a way home to Florida and stay in an in-network hospital. He was in a body cast.
He had no insurance. The MOOP only applies to in-network medical costs. Out of network medical bills are 100% the patient’s responsibility, with no maximum limit. No MOOP. A PPO would have been a bit better. With a typical PPO he would have paid about 50% of the non-emergency costs up to his $10,000 out-of-network MOOP.
Medicare Advantage Plans and Medicare Part D Coverage
This is important. There are Medicare Advantage plans that include a bundled Medicare Part D prescription drug plan and those that don’t. You cannot get a stand-alone Medicare Part D plan with your Medicare Advantage HMO or Medicare Advantage PPO. If you attempt to purchase a stand-alone Medicare Part D plan when you have a Medicare Advantage HMO or Medicare Advantage PPO Medicare will kick you out of your Medicare Advantage Plan.
If you need a Medicare Part D plan you must get a Medicare Advantage Plan that has a bundled Medicare Part D prescription drug plan.
The Medicare Advantage Plans that do not include prescription drug coverage can be a viable option for veterans who have prescription drug coverage through the Veteran’s Administration.
Because all of the plans are different, if you have a lot of prescriptions you may be placed in a position where you can either choose a plan that includes your doctors but overpay for your prescriptions, or get a plan with that charges less for your prescriptions but you have to change doctors.
Warning – do not get a Medicare Advantage Plan HMO or PPO and then enroll in a stand-alone Part D. You will be booted from your Medicare Advantage Plan.
Who Chooses a Medicare Advantage Plan?
In my opinion there are four groups of people who end up in a Medicare Advantage plan.
The first is those who qualify for Medicare and are under age 65. In most states, Medicare supplement plans are either not available or are way overpriced for people under 65. There is no Federal law requiring Medicare supplement plans be offered to people under 65, so unless your state has specific rules to the contrary, they are simply not available. That leaves Medicare Advantage Plans as the only option for most people under 65 and on Medicare. According to CMS (Center for Medicare and Medicaid Services) 16% of the people on a Medicare Advantage Plan are under 65 years of age.
Fortunately, they get a new initial enrollment period the month they turn 65 and can get any plan they choose at that time.
The next group is based on income and health. 48% of the people who choose a Medicare Advantage Plan are people whose income is less than 200% of the Federal Poverty Level. For a single individual the 2019 Federal Poverty Level is an income of $12,490 a year. It’s slightly more in Alaska and Hawaii. Of these, about one third have serious health problems.
48% of the people who choose a Medicare Advantage Plan are people whose income is less than 200% of the Federal Poverty Level.
The third group is are those whose employers have penned a deal with a Medicare Advantage insurer to offer Medicare Advantage plans to their retirees. This is the fastest growing group of Medicare Advantage plan enrollee’s.
As you may know, pension plans in the US are underfunded and many large employers find they do not have the funds to offer promised employee benefits. By contracting with a Medicare Advantage plan insurance company, they can offer health benefits at a lower cost and reduce their expenses. These are group Medicare Advantage plans. But they still have all the characteristics I have described earlier in this video. If you are offered one of these plans as an option, at least you will now make a decision with open eyes.
The last group of people choosing a Medicare Advantage plan when they enroll in Medicare is one I have witnessed most often. I speak with them on the telephone, read their posts in forums and on the Facebook Medicare page. These are people who do not do their research when they first enroll in Medicare.
Typically, they invite some agent to their home. Often, it’s a captured agent who is employed by an insurance company or one who claims to be independent but in practice isn’t. The agent shows up, opens a few glossy brochures and shows the local HMOs or PPOs and never even mentions Medicare supplement plans.
You see, Medicare Advantage Plan commissions are set by Medicare and are typically two to five times more than what an agent will earn offering a Medicare supplement. Even more, the commissions on Medicare Advantage plans continue every year as long as you have a Medicare Advantage plan and also increase each year with inflation. Medicare supplement commissions last only six years in most states and never increase.
As I mentioned in one of my other videos on using an independent insurance broker; you should first consider the various Medicare supplement plans and only if one does not fit both your needs and your budget should you then look at Medicare Advantage plans. If an agent shows you a Medicare Advantage plan before even discussing Medicare supplement plans, they are more interested in their commissions than your well being.
In this situation the consumer is never educated on their options and has no idea what other options were available to them or the pros and cons and consequences of their choices. They were not an informed or educated consumer.
If you are considering a Medicare Advantage plan please feel free to reach out to my office. We will make certain you make an informed decision and get into the right plan for your needs and budget. 800-847-9680
Last, but not least, Star Ratings.
Medicare Star Ratings
Every year Medicare interviews consumers, doctors and pharmacists and asks them certain questions about their experience with various Medicare Advantage Plans and Medicare Part D plans. They then compile the results into a Star rating so that you can determine which plans may provide you a better experience.
The Star Ratings are ranked from one, the poorest, to five the best.
When shopping Medicare Advantage plans it is strongly advised that you consider the star rating. It can change each year. But it can be a great tool to filter out insurance companies or plans that are not up to par in how they treat their customers.
All About Medicare Advantage Plans
This 22-minute video was produced in 2016 but is still relevant today. It goes over all you need to know about Medicare Advantage plans. You learn the primary types of Medicare Advantage plans (i.e. Medicare Advantage HMO’s & Medicare Advantage PPO’s) and who Medicare Advantage plans are best for. We talk about why there are Medicare Advantage plans without prescription drug coverage and why some have bundled prescription drug plans. You also learn what to watch out for when selecting a plan.
With the information in this video, you have all the information you need to start shopping for your own Medicare Advantage plan. This is on-demand webinar # 5 of the All About Medicare series. See the rest of the videos here: All About Medicare.
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If you are new to Medicare by just turning 65 or simply new to Medicare Part B, or if you have an existing Medicare plan you are not happy with, we can help.
When you start Medicare you have the choice of keeping your Original Medicare or switching to a Medicare Advantage plan managed by a private, for-profit insurance company. This is the most important decision you have to make when new to Medicare. It’s important because it will define how you get your health insurance coverage as well as the amount of coverage, the flexibility of your coverage, the doctors you can see and both your premium and out-of-pocket costs.
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Watch the other videos in this series here: All About Medicare
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