Since it began in 1965, Medicare has provided a basic level of health insurance for the vast majority of seniors. That system evolved into Medicare Part A, which includes hospitalization and rehabilitative care after hospitalization and Part B, which includes doctors’ visits, durable medical equipment and certain home healthcare services.
The Medicare system is not perfect, but it is a functional and predictable basic health insurance program for everyone. Since Medicare Parts A and B have been around a long time, medical care providers generally know what they are going to be reimbursed for Medicare.
With the Balanced Budget Act of 1997, the government attempted to privatize Medicare with the creation of Medicare Part C plans, called Medicare+Choice, which would be the private insurance versions of original Medicare Parts A and B.
These private insurance health plans for Medicare did not catch on very well until after January 1, 2006, the effective date of the Medicare Prescription Drug Improvement and Modernization Act of 2003. With that Act, the government mandated Medicare Part D prescription coverage and changed the name of Medicare+Choice to Medicare Advantage. At that time, many individuals who signed up for Medicare Part D prescription coverage also unknowingly signed up for a Medicare Part C Advantage plan.
Basically, Medicare Part C is privatized medical insurance that replaces original Medicare Parts A and B. If you have a Medicare Part C Advantage plan, you do not have original Medicare Parts A and B, even if you have a Medicare card that says you do. Look at your health insurance card. If it says “Advantage,” you most likely have Medicare Part C and do not have original Medicare Parts A and B.
If you have signed up for a Medicare Part C Advantage plan, your Medicare coverage is now governed by the private health insurance contract you entered into with the insurance company. There are numerous Medicare Part C Advantage plans around and coverages vary from state to state, county to county and plan to plan, even within the same insurance carrier. Medicare Part C programs are often times PPOs, preferred provider organizations with which if you incur non-provider or out-of-network medical expenses, you may have higher co-pays or no coverage at all.
When Part C Advantage plans first came out, they were very popular with insurance companies because of generous government subsidies used as an incentive to privatize Medicare and there was little regulation of the benefits provided. Many insurance companies found that they could make lots of money by sponsoring inferior plans. And because of generous sales commissions, there were many abuses by overly aggressive sales people.
However, it was determined that the subsidies were not making it down to the Medicare participants. In response to this, provisions in the Patient Protection and Affordable Care Act, aka Obamacare, severely cut these subsidies. As a result, it was reported that many insurance companies increased co-pays and/or premiums and/or limited coverages.
Medicare Part C plans are supposed to be actuarially equivalent to original Medicare Parts A and B. So if you have a Part C Advantage plan that offers benefits not included in original Medicare Parts A & B, such as optical and dental, it is made up elsewhere. It is usually made up in higher co-pays and deductibles and/or reductions in other coverages.
Because of this disparity in coverages, the Obamacare health care legislation included specific provisions to address this issue. It prohibits Medicare Part C Advantage plans from imposing higher cost-sharing requirements for certain Medicare covered benefits, including chemotherapy, dialysis services and skilled nursing care, than those charged under original Medicare Parts A and B.
The legislation also requires Medicare Part C Advantage plans that provide extra benefits to give priority to cost-sharing reductions, wellness and preventive care, and lastly to these extra benefits not covered under original Medicare Parts A and B.
Another downside of Medicare Part C Advantage plans is that if you have one, you cannot purchase a Medicare supplement/Medigap policy. So if you have a Medicare Part C Advantage plan which is the actuarial equivalent of original Medicare Parts A & B, by definition, it will have less coverages than a combination of original Medicare Parts A and B along with a Medicare supplement/Medigap policy.
Usually the best combination of coverage for those on Medicare will be original Medicare Parts A & B with a Medicare supplement/Medigap policy. In some cases, it may cost a little more than a Medicare Part C Advantage plan, but will generally provide better coverage, have no networks, and have lower co-pays and deductibles than the Medicare Part C Advantage plans.
So why would you want to enroll in a Medicare Part C Advantage plan with less coverage than original Medicare Parts A and B with a Medicare supplement/Medigap policy? The answer is, you would not, unless you are required to do so because you are a member of some retiree group which forces you into a Medicare Part C Advantage plan. There are a number of union, state, school and municipal retiree health care plans that are Medicare Part C Advantage plans.
Another reason you may want to enroll in a Medicare Part C Advantage plan is that the focus of the plan benefits is a particular condition or ailment from which you suffer. If you have or are contemplating a Medicare Part C Advantage plan, you should contact the health insurance carrier and ask for a copy of the insurance contract, including a listing of all covered expenses, to review.
Since Medicare Part C Advantage plan coverage is generally less than original Medicare Parts A and B with a Medicare supplement/Medigap policy or if you have some sort of condition or ailment which is not covered by your existing Medicare Part C Advantage plan, you should seriously consider changing or dropping your existing Medicare Part C Advantage plan. This can be done during the annual enrollment period which in 2012 is October 15 through December 7. The monthly cost of Medicare Part A (usually free), Part B (usually $99) and a Medicare supplement/Medigap policy (can be at least $121), may be less than the co-pays and deductibles under your Medicare Part C Advantage plan.
There is also a special period for making changes to your Medicare Part C Advantage plan coverage after December 31. Between January 1 and February 14, 2011, if you are in a Medicare Part C Advantage plan, you can leave your plan and switch back to original Medicare Parts A and B. If drug coverage was part of your Medicare Part C plan that you dropped, you will also have until February 14 to join a Medicare Part D prescription drug plan.
Health care costs are often times the largest expenses for seniors today. You owe it to yourself to review your options. Don’t short change yourself. Make sure you have adequate Medicare health care coverage.
By: Matthew M. Wallace, CPA, JD
Published edited October 28, 2012 in The Times Herald newspaper, Port Huron, Michigan as: Medicare Part C: Where’s the advantage?