Medicare Advantage Plans are health plan options that are subsidized by the government to provide additional health coverage to Medicare Part A and Part B. Medicare Advantage Plans include HMOs, PPOs, PFFS and Medicare Special Needs Plans. Generally, Medicare Advantage Plans have little or no monthly premiums. Instead, seniors pay co-payments for doctor visits, hospitalization and other medical services.
With the passage of the Balanced Budget Act of 1977, Medicare beneficiaries were given the option to receive their Medicare benefits through private health insurance plans, instead of through the original Medicare plan (Parts A and B). These programs were known as "Medicare+Choice” or "Part C" plans. Pursuant to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, "Medicare+Choice" plans were made more attractive to Medicare beneficiaries by the addition of prescription drug coverage and became known as "Medicare Advantage" (MA) plans.
Traditional or 'fee-for-service' Medicare has a standard benefit package that covers medically necessary care members can receive from nearly any hospital or doctor in the country. However, future ‘fee-for-service’ plans will also be required to have a network. For people who choose to enroll in a Medicare Advantage health plan, Medicare pays the private health plan a set amount every month for each member. Members typically also pay a monthly premium in addition to the Medicare Part B premium to cover items not covered by traditional Medicare (Parts A & B), such as prescription drugs, dental care, vision care and gym or health club memberships. In exchange for these extra benefits, enrollees may be limited on the providers they can receive services from without paying extra. Typically, the plans have a 'network' of providers that you can use. Going outside that network may require permission or extra fees.
Medicare Advantage plans are required to offer coverage that meets or exceeds the standards set by the original Medicare program, but they do not have to cover every benefit in the same way. If a plan chooses to pay less than Medicare for some benefits, like skilled nursing facility care, the savings may be passed along to consumers by offering lower co-payments for doctor visits. Medicare Advantage plans use a portion of the payments they receive from the government for each enrollee to offer supplemental benefits. Some plans limit their members’ annual out-of-pocket spending on medical care, providing insurance against catastrophic costs over $5,000, for example. Many plans offer dental coverage, vision coverage and other services not covered by Medicare Parts A or B, which makes them a good value for the health care dollar, if you want to use the provider included in the plan's network or 'panel' of providers.