By Chris Freyder
Medicare is the federal health insurance program started in 1965 that is provided for individuals who meet certain criteria. Those who are over the age of 65, younger people who have certain disabilities, or anyone who has End-Stage Renal Disease (ESRD) qualify for Medicare insurance. In 1997 Medicare Advantage (at that time called Medicare+Choice) was signed into law which gave Medicare eligible beneficiaries more options when choosing their health insurance. Medicare has 4 different parts, Part A (Hospital Insurance) and Part B (Medical Insurance) which are the Traditional Medicare, Part C (Medicare Advantage), and Part D (Prescription Drug):
Part A (Hospital Insurance) – Covers hospital stays, skilled nursing facility care, hospice stays, and some home health care. Part A is free to most Americans who have worked in the U.S. for many years.
Part B (Medical Insurance) – Covers certain doctors’ services, outpatient care, medical supplies, and preventive services. Beneficiaries must pay a monthly premium for Part B Insurance.
Part C (Medicare Advantage) – All in one alternative to Parts A, B, and (most times) D. These plans are offered by private insurance companies approved by Medicare. A Medicare Advantage (MA) plan will cover all of traditional Medicare services and may offer extra coverage like dental, hearing, and vision. Generally, one monthly premium covers all Parts A, B, D and additional extra coverage.
Part D (Prescription Drug) – Provides prescription drug coverage on top of the Traditional Medicare. Part D plans are offered by private companies that are approved by Medicare.
When a beneficiary is eligible for Medicare, they can choose to enroll in a Part C plan that is offered by a private insurance company. Currently, about 1/3 of Medicare enrollees are in a Part C plan, and this number has been increasing year over year. As MA becomes a bigger piece of the Medicare world, it is important to understand the difference between Traditional Medicare and Medicare Advantage.
Payments: Traditional Medicare Vs Medicare Advantage
A major difference between the types of Medicare is the way that payments are made from the government for the services rendered to the patients enrolled in each Medicare type. Medicare Fee for Service (FFS), pays a standard rate for each service that is rendered from a provider, regardless of the appropriateness of the service. This construct rewards providers for the number of services they prescribe, and not the clinical appropriateness or outcomes of services prescribed. More recently, the Centers for Medicare and Medicaid Services (CMS) has begun working with providers to create Accountable Care Organizations (ACO) within the Medicare FFS population. ACO’s allow groups of physicians to take on gain-share/risk-share while managing their population of beneficiaries for better outcomes at lower cost.
When a member enrolls in an MA plan, the insurer that offers the plan receives a monthly premium from CMS to care for the beneficiary based on the beneficiary’s health status. The insurer is responsible for beneficiary’s payment for the services they receive throughout the year. This payment model incentivizes two things over the FFS model. First, it incentivizes plans to have their beneficiaries only receive clinically appropriate care. Since the insurer receives the same monthly reimbursement regardless of the type of services the patient receives, eliminating low value care and medical waste benefits the plan. Since the beneficiary generally has out of pocket costs such as deductibles and coinsurance, expensive low value care can be very costly to an individual beneficiary. Secondly, since the reimbursement is based off of the patient’s health status, MA plans encourage the insurer to make sure that there is proper coding of beneficiary’s diagnosis. For beneficiaries, having correct diagnosis can be instrumental in understanding complete care pathway and treatment options.
Why should you consider Medicare Advantage?
If you are currently or are about to become a Medicare beneficiary, you may want to consider a MA plan. Overall there is no one “best” choice for an insurance product, as each individual has unique healthcare needs. There are some considerations that should be evaluated when trying to decide if MA is the best option. First, consider some of the benefits that MA plans offer:
- Often offers supplemental coverages like hearing, vision, and dental
- Could potentially cost you less
- Traditional Medicare can have high out of pocket costs with no stop-gap
- MA plans generally have an out-of-pocket maximum
- As competition grows, many areas offer no or low premium plans
- Medicare rates plans via STAR ratings for easy navigation of low/high quality plans
While MA plans have many advantages, there are also some potential disadvantages to keep in mind when exploring your options, below are some examples:
- Might have limited provider availability compared to traditional Medicare
- Plans can change from year to year
- Some plans may have rules for services (e.g. getting referrals for specialist care)
Lastly, if you are considering a MA plan, you should understand when you are able to sign up for MA:
- Initial Enrollment Period: When you first become eligible for Medicare (based on the criteria above) you can elect to join a MA plan instead of Traditional Medicare
- Open Enrollment Period: Every year there is an Open Enrollment Period for the next calendar year. During this time, you can elect to join, switch, or drop a MA plan
- General Enrollment Period: If you already have Part A coverage, and are enrolling into Part B for the first time, you can also elect to enroll into a MA plan
Medicare Advantage plans have been rising in popularity over the past few years. The CMS recently released MA encounter data for the years 2015 and 2016 in the CMS’s Virtual Research Data Center (VRDC), which CareJourney has access to through a VRDC innovator license. The release of this data will allow analytics to be run on MA members and MA plans to assess quality of care provided at different levels. If you are interested in Medicare Advantage, explore what analytical insights CareJourney has to offer.
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