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Health & Fitness

First Look: What's Up with Medicare Advantage for 2014--Part 1

On July 3, I wrote that the rules are out for Medicare Part D drug plans for 2014. They have been sent to insurance companies and the details for your plan in 2014 and your other 2014 drug-plan options will be released by the insurers around October 1. The same process is in progress for Medicare Advantage. (The formal name for Medicare Advantage is Part C and in fact Medicare Advantage is only one of the types of Part C Medicare health plans available.)

In Part 2 of this Medicare Advantage First Look, I comment on what is new in Part C for 2014. But first a little history because the politicians have completely misrepresented Medicare Advantage for some dubious political advantage.

Beginning in the 1980s, as part of a trend having nothing to do with seniors or Medicare, academics began theorizing  that uncoordinated, lifetime-limited fee for service health care insurance like Parts A and B of Medicare was a bad idea for everyone in the U.S., both seniors and non-seniors.  The argument was that coordinated care paid for per head -- rather than fee for service -- and with no lifetime limits would be a better approach in terms of lower overall total costs and better health. People of all ages were offered such programs and millions of people began to sign up.

This type of coordinated care was offered within Medicare as a demonstration project. But -- unlike with younger people at the time -- there was not a lot of uptake among Medicare recipients of the early and mid 1980s (people born before 1930). To the extent the then Medicare recipients had ever even had any insurance at all (almost no one that age had had it during their whole lifetime), they preferred the uncoordinated fee for service approach of Original Medicare because it was just like the Blue Cross/Blue Shield Master Medical coverage that almost everyone felt was the best healthcare insurance available. 

By 1997, however, things began to change. Enough people were now reaching retirement age with 10 or 20 years of experience with coordinated care paid for on an unlimited basis per head. Therefore the 1980s-era demonstration projects of coordinated care paid for per head were formalized into Part C of Medicare.   Because of the demonstration projects providing a head start, about 2% of those eligible signed up for a public Part C coordinated Medicare health plan that first year (some of these plans were called Medicare Advantage beginning in 2004).  In 2013, the percentage is close to 30% of the eligible beneficiaries, up from the 2% 15 years earlier.

The public Part C idea in other words is wildly -- but not universally -- popular. There are some good reasons to choose uncoordinated lifetime-limited fee for service Original Medicare and then supplement it with private insurance rather than the public Part C option. Not the least of these reasons is that a former employer -- where a plurality of us seniors still get our supplemental healthcare insurance -- might not offer a Part C alternative. Snowbirds also prefer uncoordinated lifetime-limited fee for service Original Medicare plus private supplemental insurance because most Part C plans are networked and can be used outside the plan's network only in emergencies. The best reason to go the private supplement route is that your favorite doctor does not accept a public Part C Medicare health plan or other doctors you need to see are not part of his Part C network.

Part C rules have changed twice since the program was created in 1997 but the changes basically affect the plan's administrators, not seniors. The Part C fundamentals have pretty much remained the same for the senior: 

  • Unlike Original Medicare (and most private supplemental insurance), public Part C health plans have no lifetime limits and do have annual out of pocket (OOP) limits. As a result, Part C provides true financial protection to the senior (which is kind of why you buy insurance after all).
  • Public Part C health plans at a minimum cover every health care service that Parts A and B cover and often cover many additional health care services (e.g., they often include an annual physical exam, which is not covered by Original Medicare). 
  • Public Part C health plans almost always cover prescription drugs (Original Medicare does not, which is why the Part D Standalone Prescription Drug Plan program was created in 2003). 
  • Part C plans are designed for each region of the country, down to the county level (Original Medicare is one size fits all everywhere although some of the private insurance companies that run Original Medicare can make local decisions if need be). 
  • Public Part C health plans are administered by private insurance companies  just like Original Medicare (but mostly by non-profit insurers, unlike Original Medicare). In fact, typically the same insurance company administers both public Original Medicare and public Part C Medicare health plans as well as offering private insurance through employers and direct to seniors.
  • Public Part C plans often -- but not always -- cost the senior less than the combination of Original Medicare and a private Medigap or retiree supplement.   

Essentially, Part C health plans are the public Medicare supplement option.

(A Part C beneficiary also has to be a member of both Parts A and B just like a senior signing up for a private supplement option or -- usually -- retiree supplement insurance. It is not true -- as is often stated -- that you lose Original Medicare if you sign up for Medicare Advantage.)  
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