Does Medicare Advantage Replace Original Medicare?
Individuals who choose Medicare Advantage over Original Medicare have a fundamental difference. The federal government directly provides the benefits used for Medicare Parts A and B. On the other hand, private insurance companies cover the medical expenses for those who are enrolled in a Medicare Advantage plan.
So, does Medicare Advantage essentially replace Original Medicare? Let's find out.
How Medicare Advantage Plans Work
In order for a private insurance company to offer a Medicare Advantage plan, it must first obtain approval from the Medicare program. To get approval, the plan must offer the same benefits as Medicare Parts A and B - at a minimum.
Once approved, the private insurance company gets paid by the federal government to offer Advantage plans. This explains why some insurance companies offer Advantage plans for a very low (even $0 in some instances) monthly premium.
Now we understand how Medicare Advantage plans are funded. That's the first step in understanding how these plans work. Obviously, these insurance carriers make money as all insurance companies do. How do they keep their expenses incurred by beneficiaries low? They employ provider networks.
The most popular Medicare Advantage plans are HMO, HMO-POS, and PPO plans. These three types of plans utilize networks and benefits differently. HMO (Health Maintenance Organizations) only allow benefits if the member uses an in-network provider. HMO-POS (Health Maintenance Organization Point of Service) plans are similar but offer some out-of-network coverage. PPO (Preferred Provider Organizations) offer in and out-of-network benefits within a much larger provider network than those seen in HMO plans.
That is an extremely brief description of Medicare Advantage plans, but it's enough for you to now understand the second part of how Medicare Advantage plans work. Let's look at an HMO plan. These are considered managed care plans. Providers are paid a set amount to provide care for all HMO plan members they see. The type of service doesn't necessarily matter - the provider will get paid the same amount. This is how the insurance company keeps its costs low. One benefit of this kind of plan is that providers have an incentive to keep their patients healthy. Preventive visits are much less costly than specialized treatment.
Additional Benefits with Medicare Advantage Plans
We said that Medicare Advantage plans must offer at least the same amount of benefits as Original Medicare Parts A and B. Virtually all Advantage plans offer more than that. They usually offer some benefits for routine, dental, vision, and hearing services, as well as prescription drug coverage. Some even offer gym memberships. These extra benefits are a huge advantage when compared to Original Medicare.
So, do Medicare Advantage plans replace Original Medicare?
Yes and no. It depends on why you're asking and how you look at the question. Yes, they do replace Parts A and B, and you'll receive benefits from a private insurance company rather than the federal government. However, it does not mean that the government has been removed from the picture, and you'll still be responsible for paying for Medicare Part B (and Part A if you haven't met the requirements to receive premium-free Part A).
There are many working parts to Medicare, and it's difficult to understand them all. Fortunately, all you really need to do is find a knowledgeable, trustworthy agent! We will talk with you to understand your situation and steer you in the right direction in regards to your Medicare coverage.
