Medicare coverage is available to most Americans 65 or older, but what many people don't know is that there's an alternative to traditional Medicare. Medicare Advantage plans, also known as Part C plans, involve private health insurers offering health maintenance organization or preferred provider organization models for providing healthcare to those who are eligible for Medicare. Over the years, Medicare Advantage plans have gotten more popular, but they also tend to change from year to year. Here are some of the key changes to Medicare Advantage plans for 2016 that participants in the program should know about, courtesy of a Kaiser Family Foundation study done late last year.
Insurers will offer more than 2,000 Medicare Advantage plans nationwide.
Medicare Advantage plans are tailored to specific locations, so people in various areas have access to only a subset of the total number of plans in the marketplace. Nevertheless, the number of plans available nationwide will rise about 3% from 2015. On average, the typical American will have access to 19 plans, but outside metropolitan areas, that number drops to just 11. Both figures are up slightly from 2015.
However, the number of different insurers offering those plans is inconsistent. The average number of companies offering coverage is six. But a quarter of counties nationwide have three or fewer companies offering plans, with the top quarter offering eight or more. The trend in 2016 continues to be toward growth in HMOs, which make up more than two-thirds of the available plans. By contrast, PPOs and other platforms will stay relatively stable this year.
Premiums for Part D prescription drug coverage through Medicare Advantage plans will rise on the plans that people choose.
Statistics can tell two different stories with Medicare Advantage. On one hand, the average monthly premium for Medicare Advantage plan prescription drug coverage has fallen slightly in 2016. But most of that decline comes from unpopular PPO plans that have high costs and low enrollment.
When you take a weighted average of costs taking into account the number of people enrolled in each plan, costs are expected to rise 8% to $41 per month. HMOs will rise 9% to $31, while local PPOs are slated to climb 8% to $68. Interestingly, though, availability of zero-cost prescription drug plan coverage will rise in 2016. Plans are available to 81% of all participants this year, compared to 79% in 2015.
Limits on out-of-pocket spending will go up on many plans.
One trait of Medicare Advantage is that it offers an out-of-pocket maximum on spending on hospital and medical services. That maximum is $6,700 for 2016, but many plans offer lower maximums on out-of-pocket spending. Unfortunately, the number of plans with lower out-of-pocket maximums has fallen in recent years.
In 2016, more than half of all Medicare Advantage plans that include drug coverage will charge out-of-pocket maximums of more than $5,000, and 39% will charge the maximum of $6,700, up from 34% last year. At the other end of the spectrum, only 23% of plans will charge $3,400 or less in out-of-pocket maximums, down from 30% in 2015. PPOs in particular have dramatically increased out-of-pocket maximums over the past five years.
Deductibles for prescription drugs are rising.
Many Medicare Advantage plans charge deductibles for drug coverage. This is a big change historically. In 2010, 90% of plans had $0 deductibles. In 2016, that number fell to just 55%. By contrast, 16% charge the maximum $360 deductible, and the average for 2016 is $118, up from $90 in 2015.
As bad as that sounds, those who get their drug coverage through a Medicare Advantage plan still are more likely to pay a $0 deductible. Among stand-alone Part D plans, only a third charge no deductible.
Different companies will keep offering different types of plans.
It's natural to assume that most insurers would take similar approaches to Medicare Advantage, but that turns out not to be the case. Some providers focus on certain types of plans to get an edge.
For example, UnitedHealth (UNH 0.99%) concentrates on HMO-based plans, which make up 84% of its total offerings. By contrast, Humana (HUM) has only about half of its plans in HMOs, with local PPOs and private fee-for-service plans making up the bulk of the rest. Humana has also continued its trend of narrowing the number of plans it offers, with about a 10% reduction between 2015 and 2016.
Finally, with major mergers in the industry pending, there could be further changes in the Medicare Advantage landscape in the future. In particular, the announced Humana acquisition by Aetna could have major implications for the industry, because the two companies combined are now responsible for more than one in four Medicare Advantage plans.
Medicare Advantage plans are a solid alternative to traditional Medicare, but it's important to keep up with changes in the marketplace. Only by doing so can you make the best choice available about which healthcare option to choose.