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Life Health > Health Insurance > Medicare Planning

19 things to know about Medicare Advantage

By Joseph F. Stenken

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Medicare Advantage (formerly known as Medicare+Choice) permits contracts between the Centers for Medicare & Medicaid Services (CMS) and a variety of different private managed care and fee-for-service entities. Most Medicare beneficiaries may choose to receive benefits either through the original Medicare fee-for-service program (Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance)). Main types of Medicare Advantage plans include:

  • Coordinated care plans, including Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Provider-Sponsored Organizations (PSOs).
  • Private fee-for-service plans which reimburse providers on a fee-for-service basis.

1. What is a Health Maintenance Organization (HMO)?

A Medicare HMO is a type of managed care plan that provides to its enrolled Medicare beneficiary members, either directly or through arrangement with others, at least all the Medicare-covered services that are available to Medicare beneficiaries who are not enrolled in the HMO and who reside in the geographic area serviced by the HMO. Some HMOs also provide services not covered by Medicare, either free to the Medicare enrollee (that is, funded out of the payment Medicare makes to the HMO) or for an additional charge to the enrollee. HMOs typically charge a set monthly premium and nominal copayments for services instead of Medicare’s coinsurance and deductibles.

Each HMO has its own network of hospitals, skilled nursing facilities, home health agencies, doctors, and other professionals. Depending on how the plan is organized, services are usually provided either at one or more centrally located health facilities or in the private practice offices of the doctors and other health care professionals who are part of the HMO. A beneficiary generally must receive all covered care through the HMO or from health care professionals referred to by the plan.

Most HMOs allow an enrollee to select a primary care doctor from those who are part of the HMO. If the beneficiary does not make a selection, a primary care physician will be assigned. The primary care doctor is responsible for managing the beneficiary’s medical care, including admitting the beneficiary to a hospital or referring the beneficiary to specialists. The beneficiary is allowed to change his or her primary care doctor as long as another primary care doctor affiliated with the HMO is selected.

Before enrolling in an HMO, the beneficiary should find out whether the plan has a “risk” or a “cost” contract with Medicare. There is an important difference:

Risk Plans. These plans have “lock-in” requirements. This means that the beneficiary generally is locked into receiving all covered care through the HMO or through referrals by the plan. In most cases, if the beneficiary receives services that are not authorized by the HMO, neither the plan nor Medicare will pay. The only exceptions recognized by all Medicare-contracting plans are for emergency services, which the beneficiary may receive anywhere in the United States, and for services the beneficiary urgently needs when temporarily out of the HMO’s service area.

Cost Plans. These plans do not have lock-in requirements. If a beneficiary enrolls in a cost plan, the beneficiary can either go to health care providers affiliated with the HMO or go outside the plan. If a beneficiary goes outside the plan, the plan probably will not pay, but Medicare will. Medicare will pay its share of charges it approves. The beneficiary will be responsible for Medicare’s coinsurance, deductibles, and other charges, just as if receiving care under the regular Medicare program.

2. What is a Medicare Advantage Private Fee-for-Service (PFFS) plan?

A Medicare Advantage Private Fee-For-Service (PFFS) plan is defined as a plan that reimburses doctors, hospitals, and other providers on a fee-for-service basis, does not place them at risk, does not vary payment rates based on utilization, and does not restrict which doctor or hospital the member can use. Subject to some limits and review by the Centers for Medicare & Medicaid Services (CMS), the private insurance company, not CMS, decides how much to reimburse for services received by the beneficiary. The beneficiary pays the Part B premium ($104.90 in 2014 for most beneficiaries), any additional monthly premium the private fee-for-service plan charges, and any deductible or coinsurance required by the plan, including any copayment required per visit or service. < 

3. What is a Medicare Advantage Provider-Sponsored Organization (PSO)? 

For purposes of Medicare Advantage, PSOs are public or private entities established by or organized by a health care provider (such as a hospital) or a group of affiliated health care providers (such as a geriatric unit of a hospital) that provide a substantial proportion of health care items and services directly through that provider or group. Affiliated providers share, directly or indirectly, substantial financial risk and have at least a majority financial interest in the PSO.

4. What is the enrollment/disenrollment process for Medicare Advantage? 

Beneficiaries entitled to Part A (Hospital Insurance) and enrolled in Part B (Medical Insurance) are eligible to enroll in any Medicare Advantage plan that serves the geographic area in which they reside, except beneficiaries with end-stage renal disease (although beneficiaries who develop end-stage renal disease may remain in the plan if already enrolled) and beneficiaries receiving inpatient hospice care. Part B only enrollees are ineligible.

The Centers for Medicare & Medicaid Services (CMS) have established procedures for enrollment and disenrollment in Medicare Advantage options. Newly eligible enrollees who do not choose a Medicare Advantage plan are deemed to have chosen the original Medicare fee-for-service option (in other words, Medicare Parts A and B). Individuals generally remain enrolled in the Medicare option of their choice unless and until they choose another plan. CMS retains the power to implement “passive enrollment” in cases where a Medicare Advantage plan terminates or CMS determines that remaining in the Medicare Advantage plan poses a risk to the members. Under passive enrollment, CMS treats beneficiaries as enrolled in whatever plan CMS chooses unless the beneficiaries affirmatively elect otherwise.

5. What are the enrollment periods for Medicare Advantage plans? 

Beneficiaries can choose a Medicare Advantage plan at initial Medicare eligibility or during one of the enrollment periods described in the subsequent list:

  • The annual coordinated enrollment period runs from October 15 through December 7 of each year. Enrollments at this time are effective the following January 1. Beneficiaries may switch from one Medicare Advantage plan to another during this period.
  • From January 1 through February 14 of each year, a person enrolled in a Medicare Advantage Plan can leave that plan and switch to the original Medicare fee-for-service program (Medicare Part A (Hospital Insurance) and Part B (Medical Insurance)). If a person switches to Medicare Parts A and B during this period, he or she will have until February 14 to also join a Medicare Part D (Prescription Drug Insurance) plan to add drug coverage
  • Special election periods are available in which a beneficiary can disenroll if the Medicare Advantage plan in which that beneficiary was enrolled terminates, the beneficiary moves out of the plan’s service area, the beneficiary demonstrates that the plan has violated its contract or misrepresented the plan in marketing, or any other conditions specified by the Centers for Medicare & Medicaid Services (CMS).
  • Newly eligible beneficiaries who elect a Medicare Advantage option may also disenroll into original Medicare fee-for-service program (Part A (Hospital Insurance) and Part B (Medical Insurance)) any time during the first 12 months of their enrollment.

Medicare Advantage plans must accept all beneficiaries on a first-come, first-served basis, subject to capacity limits.

Plans may disenroll beneficiaries only for cause (i.e., failure to pay premiums or disruptive behavior) or plan termination in a beneficiary’s geographic area. Beneficiaries terminated for cause are enrolled in the original Medicare fee-for-service program. Others may have a special election period.

6. How is enrollment information provided to Medicare beneficiaries? 

At least 15 days before the required November coordinated election period, the Centers for Medicare & Medicaid Services (CMS) must mail to each beneficiary general information on Medicare and comparative information on Medicare Advantage plans available in their area. General information includes information on covered benefits, cost sharing, and balance billing liability under the original fee-for-service program (Medicare Part A (Hospital Insurance) and Part B (Medical Insurance)); election procedures; grievance and appeals rights; and information on Medigap insurance and Medicare SELECT. Comparative information includes extensive information on benefits and beneficiary liability; premiums; service areas; quality and performance; and supplemental benefits. A sophisticated search engine is available at www.medicare.gov to assist beneficiaries in making a decision between Medicare Advantage and traditional Medicare Parts A and B. and in locating a Medicare Advantage plan in a beneficiary’s area. Beneficiaries may also call CMS at 1-800-772-1213.

7. What basic benefits are provided by Medicare Advantage plans? 

All Medicare Advantage plans are required to provide at least the same benefits available under traditional Medicare Part A (Hospital Insurance) and Part B (Medical Insurance), with the exception of the Part A hospice benefit. If a beneficiary requires hospice services, those benefits are provided through Part A (Hospital Insurance).

Medicare Advantage plans may also offer mandatory and optional supplemental benefits, subject to approval by the Centers for Medicare & Medicaid Services (CMS). Mandatory supplemental benefits must be approved unless CMS determines that offering such benefits would substantially discourage enrollment in the Medicare Advantage plan. Medicare Advantage plans may also offer optional supplemental benefits. Optional supplemental benefits are benefits – such as vision, dental and wellness care – that a beneficiary chooses to add to his or her Medicare Advantage plan coverage. Beneficiaries who enroll in Medicare Advantage plans offering either mandatory or optional supplemental benefits (or both) pay the cost of such benefits through additional premiums or cost-sharing obligations such as copayments or coinsurance.

8. What standards must Medicare Advantage plans meet for protection of beneficiaries? 

In general, Medicare Advantage plans must offer similar protections to Medicare beneficiaries enrolled in traditional Medicare Part A (Hospital Insurance) and Part B (Medical Insurance), including disclosure, access, quality of care, grievance and appeals procedures, confidentiality, and information on advance directives.

9. What are the rules regarding nondiscrimination for Medicare Advantage plans? 

Medicare Advantage plans cannot screen potential enrollees based on their health status, nor can a Medicare Advantage plan discriminate with respect to participation, payment, or indemnification against any provider acting within the scope of the provider’s license or certification. Medicare Advantage plans may, however, selectively contract with providers based on a provider’s willingness to accept the provisions of the Medicare Advantage plan’s contract.

10. What are the rules regarding disclosure to enrollees? 

A Medicare Advantage plan must provide in a clear, accurate, and standardized form, certain plan information to each enrollee, including the plan’s: service area; benefits; number, mix and distribution of providers; out-of-area coverage; emergency coverage; supplemental benefits; prior authorization rules; appeals and grievance procedures; quality assurance program; and disenrollment procedures. Upon request, enrollees must be provided comparative information, information on the plan’s utilization control mechanisms, information on the number of grievances and appeals, and compensation arrangements.

11. What are the access-to-services requirements for Medicare Advantage plans?

Medicare Advantage plans are permitted to select the providers who may furnish benefits to enrollees, as long as benefits are available and accessible to all enrollees with reasonable promptness and assured continuity, 24 hours a day, 7 days a week. The plan must also cover services provided other than through the organization for (1) non-emergency services needed immediately because of an unforeseen illness or injury, if it was not reasonable to obtain the services through the plan, (2) renal dialysis services for enrollees who are temporarily out of the plan’s service area, and (3) maintenance or post-stabilization care after an emergency condition has been stabilized, subject to guidelines established by the Centers for Medicare & Medicaid Services (CMS).

Medicare Advantage plans are required to pay for emergency services without regard to prior authorization or whether the provider has a contractual relationship with the plan. An emergency medical condition is defined using a “prudent layperson” standard (including conditions that may be manifested by “severe pain”).

Private fee-for-service plans must demonstrate that the plan includes a sufficient number and range of providers willing to furnish services. This requirement is presumed to have been met if the plan has established payment rates that are not less than payment rates under Medicare, and/or has contracts or agreements with a sufficient number and range of providers.

12. Is there a quality assurance program for Medicare Advantage plans? 

Medicare Advantage plans must have an internal quality assurance program. There are numerous requirements for internal quality assurance programs, including that such programs include chronic care improvement plans, conduct certain types of quality improvement projects, and encourage contracted providers to participate in various government quality improvement initiatives. Medicare Advantage plans are deemed to have satisfied certain of the Medicare quality assurance requirements by receiving accreditation (and having periodic review and re-accreditation) from a private organization approved by the Centers for Medicare & Medicaid Services (CMS). CMS may also deem Medicare Advantage plans – generally, organizations with good track records – to have satisfied certain of the quality assurance program requirements.

13. How are grievances handled by Medicare Advantage plans? 

Medicare Advantage plans must maintain meaningful procedures for hearing and resolving grievances. Medicare Advantage plans also must have a procedure for making determinations regarding whether an enrollee is entitled to receive services and the amount the individual is required to pay for such services. Determinations must be made on a timely basis. The explanation of a plan’s determination must be in writing and must explain the reasons for the denial in understandable language and describe the reconsideration and appeals processes. The time period for reconsiderations will be specified by the Centers for Medicare & Medicaid Services (CMS) but must not be greater than 60 days after the request by the enrollee. Reconsiderations of coverage determinations to deny coverage based on lack of medical necessity must be made by a physician with expertise in the field of medicine that relates to the condition necessitating treatment.

Plans are required to have an expedited review process in cases where the normal time frame for making a determination or reconsideration could seriously jeopardize the life or health of the enrollee or the enrollee’s ability to regain maximum function. Either the beneficiary or the physician can request an expedited review. Requests for expedited reviews made by physicians (even those not affiliated with the organization) must be granted by the plan. Expedited determinations and reconsiderations must be made within time periods specified by CMS, but not later than 72 hours after the request for expedited review, or such longer period as CMS may permit in specified cases.

CMS is required to contract with an independent, outside entity to review and resolve plan reconsiderations not favorable to the beneficiary. If the independent review is unfavorable to the beneficiary, the beneficiary has the right to the same appeals process (e.g., Administrative Law Judge, judicial review) as under existing HMO procedures.

14. How do Medicare Advantage plans submit proposed premiums? 

All Medicare Advantage plans must submit to the Centers for Medicare & Medicaid Services (CMS) information on enrollment capacity. Managed care plans must submit Adjusted Community Rate (ACR) proposals for basic and supplemental benefits, the plan’s premium for the basic and supplemental benefits, a description of the plan’s proposed cost-sharing requirements, the actuarial value of cost sharing for basic and supplemental benefits, and a description of any additional benefits and the value of these benefits. Private fee-for-service plans must submit ACRs for basic and additional benefits, the premium for the basic and additional benefits, a description of the plan’s proposed cost-sharing requirements and the actuarial value of the cost sharing, a description of additional benefits and the actuarial value of these benefits, and the supplemental premium.

In general, the CMS must review ACRs, premiums, and the actuarial values and approve or disapprove these rates, amounts, and values. CMS does not review premiums of private fee-for-service plans.

Organizations cannot contract to enroll Medicare beneficiaries under the Medicare Advantage program until they have met standards published by the CMS.

15. What other Medicare Advantage premium rules should a beneficiary know about? 

  • A Medicare Advantage plan can terminate an enrollee for failure to pay premiums, but only under specified conditions.
  • A Medicare Advantage organization cannot offer cash or other monetary rebates as an inducement for enrollment or otherwise.
  • Premiums cannot vary among plan enrollees in the same Medicare Advantage plan.
  • No state can impose a premium tax or similar tax on premiums of Medicare Advantage plans or the offering of these plans.

16. How does a plan become part of the Medicare Advantage program? 

A Medicare Advantage plan must generally be organized and licensed under state law as a risk-bearing entity to offer health insurance or health benefits coverage.

New regional Preferred Provider Organizations (PPOs) are also eligible for temporary waiver-of-state-licensure requirements. This is intended to facilitate the introduction of these multi-state plans. The Centers for Medicare & Medicaid Services (CMS) has indicated that it will grant these waivers only in cases where the organization is licensed in one state and has submitted applications in the other states. The length of the waiver will typically be for less than one year, but will depend on how long states take to process applications.

A plan cannot receive payment from Medicare unless it has a contract with CMS. The contract period is for one year and may be automatically renewed in the absence of notice by either party of intention to terminate.

CMS can terminate a contract if (1) the organization has failed to substantially carry out the contract, (2) the organization was carrying out the contract in a manner substantially inconsistent with the efficient and effective administration of the Medicare Advantage program, or (3) the organization no longer substantially meets Medicare Advantage conditions. CMS generally may not contract with a plan that has been terminated within the last five years.

Medicare Advantage plans must meet minimum enrollment requirements: 5,000 for plans in urban areas, 1,500 for plans in rural areas. These requirements can be waived in the first three contract years.

Medicare Advantage plans must provide prompt payment to noncontracting providers and to enrollees in the case of private fee-for-service plans. If CMS determines (after notice of an opportunity for a hearing) that a plan has failed to pay providers or enrollees promptly, CMS can provide for direct payment. In these cases, CMS will reduce Medicare Advantage payments accordingly.

CMS may impose sanctions if a plan (1) fails to provide medically necessary services required under law or the contract, and the failure adversely affects or has the substantial likelihood of adversely affecting the enrollee, (2) imposes premiums in excess of the premium permitted, (3) acts to expel or refuses to re-enroll an individual in violation of the Medicare Advantage requirements, (4) engages in practices that effectively deny or discourage enrollment, (5) misrepresents or falsifies information to CMS or to others, (6) violates rules regarding physician participation, (7) employs or contracts with individuals who are excluded from participation in Medicare, or (8) performs any other actions that are grounds for termination and, in the case of private fee-for-service plans, does not enforce balance billing limits. The remedies may include civil money penalties, suspension of enrollment, or suspension of payment.

Medicare Advantage plans must assume full financial risk for the provision of Medicare services, except that plans can (1) obtain insurance or make other arrangements for costs in excess of amounts periodically determined by CMS, (2) obtain insurance or make arrangements for services needing to be provided other than through the plan, (3) obtain insurance or make other arrangements for not more than 90 percent of the amount by which its fiscal year costs exceeded 115 percent of its income for the year, or (4) make arrangements with providers or health institutions to assume all or part of the risk on a prospective basis for the provision of basic services.

17. What rules apply regarding Medigap insurance and Medicare Advantage plans? 

As a general matter, a Medigap insurance policy cannot be sold or issued to a Medicare beneficiary or an individual with the knowledge that the policy duplicates health benefits to which the individual is already entitled under Medicare, including under a Medicare Advantage plan.

A Medicare Advantage plan is not considered a Medigap insurance policy. Medigap insurance policies supplement original fee-for-service Medicare coverage (Medicare Part A (Hospital Insurance) and Part B (Medical Insurance)). As an alternative to original Medicare Parts A and B, Medicare Advantage plans offer at a minimum the same basic coverage as traditional fee-for-service Medicare. Medicare Advantage plans may also offer additional benefits, subject to payment of additional premiums by enrollees (if the Medicare Advantage plan so requires). The additional benefits often duplicate what would otherwise be available through a private Medigap policy. 

18. What are the special rules regarding Medigap protections under the Medicare Advantage program? 

If an individual described below seeks to enroll in a Medigap policy within 63 days of the events described below, the issuer may not (1) deny or condition the issuance of a Medigap policy that is offered or available, (2) discriminate in the pricing of a policy because of health status, claims experience, receipt of health care, or medical condition, and (3) impose a preexisting condition exclusion. 

There is guaranteed issuance of Medigap Plans A, B, C, F, K or L for:

(1) Individuals enrolled under an employee welfare benefit plan that provides benefits supplementing Medicare if the plan terminates or ceases to provide all benefits.

(2) Persons enrolled with a Medicare Advantage organization who discontinue under circumstances permitting disenrollment other than during an annual election period. These include (1) the termination of the entity’s certification, (2) the individual moves outside the entity’s service area, or (3) the individual elects termination due to cause.

(3) Persons enrolled with a risk or cost contract HMO, a similar organization operating under a demonstration project authority, a health care prepayment plan, or a Medicare SELECT policy, if enrollment ceases under the same circumstances that permit discontinuance of a Medicare Advantage election. In the case of a SELECT policy, there must also be no applicable provision in state law for continuation of the coverage.

(4) Individuals enrolled under a Medigap policy, if enrollment ceases because of the bankruptcy or insolvency of the issuer, or because of other involuntary termination of coverage (and there is no provision under applicable state law for the continuation of coverage), or the issuer violated or misrepresented a provision of the policy.

There is guaranteed issuance of Medigap Plans A, B, C, F, K, L, or the Medigap insurance policy that the individual most recently previously enrolled in, if the individual (1) was enrolled under a Medigap policy, (2) subsequently terminates enrollment and enrolls with a Medicare Advantage organization, a risk or cost contract HMO, a similar organization operating under a demonstration project authority or a Medicare SELECT policy, and (3) terminates the Medicare Advantage enrollment within 12 months, but only if the individual was never previously enrolled with a Medicare Advantage organization.

There is guaranteed issuance of any Medigap plan to an individual who, upon first becoming eligible for Medicare at age 65, enrolled in a Medicare Advantage plan and disenrolled from the plan within 12 months of the effective date of enrollment.

19. What are the rules about the marketing of Medicare Advantage plans? 

Significant restrictions apply to marketing of Medicare Advantage plans to Medicare beneficiaries. These restrictions include:

  • Prohibiting “cold calls” and other unsolicited contact. This prohibition includes door-to-door sales and unsolicited telephone calls. The rules do not prohibit plan mailings, but the final regulations prohibit calling to confirm that the beneficiary received the mailing. Agents may call in response to specific requests by beneficiaries to be contacted.
  • Prohibiting sales activities at educational events. Events designed to provide the public with objective information about Medicare must be free of any marketing materials or enrollment information for a specific plan or organization. Plans and agents may hold sales events that are clearly labeled as such, but they may not be disguised as educational events.
  • Prohibiting plans and agents from providing meals at Medicare sales meetings. Light refreshments and “snacks” are permissible.
  • Prohibiting sales activities in settings where individuals receive health care services. This rule permits marketing in common areas such as waiting rooms, but prohibits marketing in treatment rooms. Plans may arrange meetings with residents in long-term care facilities as with any other private residence.
  • Prohibiting marketing any non-health insurance product (such as life insurance or annuities) during a Medicare marketing or sales meeting.

Agents are also required to document that, prior to making an appointment, beneficiaries agree to the scope of products to be discussed at the meeting. Appointments made in person require written documentation; appointments made over the phone require recorded documentation. At a meeting in an agent’s office or on the phone, additional products may not be discussed unless the beneficiary requests the information. In a meeting at a beneficiary’s home, an agent may not discuss any product not within the originally-identified scope of the meeting. They must schedule a separate appointment at least 48 hours later.

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