Medicare is critical health insurance coverage, used by tens of millions of Americans today -- and it will be critical for most of the rest of us one day, too. Thus, it's smart to understand how it's set up and how it changes over time. Here's a quick review of a relatively new part of it, Medicare Advantage, and how it's changing in 2017.
When you're a Medicare enrollee, you'll need to choose a plan, and you have two main choices: "original" Medicare or a Medicare Advantage plan.
Meet Medicare Advantage
Original Medicare includes Part A (hospital coverage) and Part B (physician/medical insurance). Part D is optional and provides prescription drug coverage. In addition, many enrollees opt to add on a private Medigap plan to pay for more of what Medicare doesn't pay.
Medicare Advantage plans, which made their debut in 1995, are sometimes referred to as Part C. Offered by private insurers but regulated by the U.S. government, they're required to offer at least as much coverage as original Medicare, but many go well beyond that. Prescription drug coverage is often included, for example, and vision, dental, and/or hearing coverage may be offered, as well. As of last year, more than 17 million Americans had enrolled in Medicare Advantage plans, up from about 7 million in 1999.
The upside of Medicare Advantage
Medicare Advantage plans can sometimes be your best bet, as they may cost less and provide more coverage. Original Medicare will often have you footing 20% of many bills with no limit on how much you might have to pay out of pocket. (Paying only 20% can seem OK until you get a bill for $50,000 and suddenly have to cough up $10,000.) A Medicare Advantage plan might charge you a certain copay per doctor visit or service, and many services will simply be paid for through your premium. Medicare Advantage plans also feature out-of-pocket spending caps. (The average out-of-pocket cap was recently $5,223, but many plans feature caps below $3,000 and the limit for 2017 is $6,700.) Once you hit the limit, the plan will pay all further costs. Better still, many plans charge the enrollee nothing in premiums. The average monthly premium for Medicare Advantage plans was recently $33.
While original Medicare can't be used outside U.S. borders, some Medicare Advantage plans offer coverage abroad.
The downside of Medicare Advantage
Of course, Medicare Advantage plans are not perfect. A Medicare Advantage plan could cost you more, overall, than original Medicare would. It all depends on the services and products you need and the terms of the plan. While original Medicare lets you see any healthcare provider in the country who accepts Medicare, Medicare Advantage plans, often operating as HMOs or PPOs, will typically limit you to a network of doctors -- though these networks are sometimes very big. But even with a big network, if you travel frequently, you may find yourself far from service providers in your network.
It can be hard to compare Medicare Advantage plans, too, because of their different costs and fee structures and the different kinds of coverage they offer. Fortunately, the Medicare system rates Medicare Advantage plans (and Part D plans), so look for ones with higher star ratings, as they will likely serve you best. (The top score is five stars.) Medicare Advantage plans earn their stars by being evaluated on measures such as how well they're keeping their members healthy (via screenings, checkups, and more), how well they're managing members' chronic conditions, and how good their customer service is. You'll find the star ratings of plans available to you by using the Medicare Plan Finder at the Medicare website. (Another nifty thing about five-star plans is that they don't limit you to the usual enrollment period. If you're switching into a five-star plan, you can do so throughout most of the year, from December 8 through November 30.)
What's changing in 2017
So how are Medicare Advantage plans changing in 2017? Here are a few key changes to note:
- The Centers for Medicare and Medicaid Services (CMS) had planned to increase the rates it pays insurers offering Medicare Advantage plans by 1.35% in 2017, but the increase turned out to be just 0.85%. Other charges are increasing, too: The initial deductible for Medicare Advantage plans is rising from $360 to $400 for 2017, and the initial coverage limit for prescription drugs is jumping by $390 to $3,700.
- The average Medicare Advantage monthly premium is expected to drop by about 4% in 2017, from an average of $32.59 in 2016 to $31.40. The folks at CMS note,"This would be 13% lower than the average Medicare Advantage premium prior to passage of the Affordable Care Act. The majority of Medicare Advantage enrollees (67 percent) will experience no premium increase."
- Remember those star ratings? Well, the rating system has been improved to better permit plans to get higher ratings when they improve their service and coverage to enrollees.
- Medicare Advantage plans will, in 2017, be requiredto cover the expense of treating substance abuse and have to offer the same Medication Assisted Treatment coverage (designed to reduce the overuse of opiods) that's offered by original Medicare.
Changes to Medicare Advantage plans in 2017 don't make them any less attractive, so consider them when you're deciding which Medicare plan is best for you. Do the math, comparing premiums, copays, deductibles, and so on -- to see which plan is likely to cost you the least and/or offer more coverage.