Medicare Part C (Medicare Advantage Managed Care Plans): A Beginner's Guide

Quick summary

Your parents might want to consider a Medicare Part C managed care plan as an alternative to traditional Medicare Part A and Part B coverage. In addition to providing the same coverage as Parts A and B, a Medicare Part C plan also provides some of the extra coverage of a medigap insurance policy. Medicare Part C managed care coverage is provided by private insurance companies through what are known as Medicare Advantage plans.

Why look at managed care plans? The main benefit is cost. Your parents' total out-of-pocket expenses with a Medicare Part C plan are probably lower than with traditional Medicare Parts A and B plus a medigap insurance policy. The other benefit is usually slightly broader coverage than regular Medicare provides.

The main disadvantage of a Medicare Part C Advantage plan is that your parents' choice of doctors and other healthcare providers is limited. Other restrictions on access to care may apply as well. Finally, a Medicare Part C plan may drop out of a geographic area at any time, leaving your parents with only a few options for switching coverage.

Here's what you need to know about how Medicare Part C Medicare Advantage plans work:

Who's eligible for Medicare Part C coverage?

If your parents are eligible for Medicare Part A and Part B, they can join a Part C Medicare Advantage plan instead. To join one, though, the plan's insurance company must be offering it in the region -- usually a county or group of counties -- where your parents live. And that particular plan must be accepting new enrollees.

What types of plans are included in Medicare Part C?

Medicare Advantage plans come in four types. All of them operate under the same rule: Your parents get full coverage only if they see healthcare providers who are members of the plan's network. The most common, least expensive, but most restrictive managed care plans are the Medicare health maintenance organizations (HMOs). An HMO with a point-of-service (POS) option, a preferred provider organization (PPO), and a provider-sponsored organization (PSO) are also available. These add certain variations to basic HMO rules.

How does a Medicare Advantage HMO work?

With a Medicare Advantage HMO, your parents are covered for the same healthcare as they would be under Medicare Parts A and B. And many Medicare HMOs add care that isn't covered by Part B. But a Medicare Advantage HMO also has important restrictions. These are:

• To get coverage, your parents must obtain care only from doctors, hospitals, and other healthcare providers who belong to the HMO's network -- meaning they're under contract with the HMO.
• The HMO won't pay for care by a specialist unless referred by your parents' HMO-network primary care physician.
• Your parents may not be covered for certain kinds of care unless the HMO approves that care in advance.
• Your parents have very limited rights to appeal a decision made by the HMO.

Are there Medicare Part C plans other than basic HMOs?

Three types of Medicare Advantage plans are available in addition to the basic HMO. But these are less common than the standard Medicare HMO and might not be available where your parents live. They include:

• HMO with point-of-service (POS) option. With one of these plans, your parents may see a provider outside the plan's network, or see a specialist without first getting a referral, but the plan will pay a smaller amount of the bill.
• Preferred provider organization (PPO). Under a PPO, again, your parents may see a doctor or other provider outside the plan's network, but the plan will pay a lower amount.
• Provider-sponsored organization (PSO). A PSO is a group of healthcare providers -- including doctors, a lab, and a hospital -- that provides coverage without any insurance company middleman. Your parents must get care from the members of the PSO.

Do Medicare Part C plans offer broader coverage than Medicare Parts A and B?

With most Medicare Part C managed care plans, your parents can get slightly broader coverage than with basic Medicare Part A and Part B. For example, almost all Medicare Advantage plans cover routine physical exams. Some offer short-term custodial care -- meaning nonmedical help with activities of daily life -- in a nursing facility or at home, which traditional Medicare doesn't cover. Some plans provide coverage for eye and hearing care, chiropractic, and preventive care. A few even include some partial dental coverage.

What would my parents pay for coverage by a Medicare Part C plan?

Some Medicare Advantage HMOs charge no premium, though your parents would still pay the Medicare Part B monthly premium. Other HMOs and most other managed care plans charge their own added monthly premium. The monthly premium total, though, is usually less than what your parents would pay for Medicare Part B plus a medigap supplemental insurance policy.

With a Medicare Advantage plan, your parents don't have to pay Medicare Part A and B deductibles and copayments. But the Medicare Advantage plan has its own deductibles and copays. So, when considering a plan, your parents should investigate these payments as well as the monthly premiums.

What are the disadvantages of Medicare Advantage plans?

Although Medicare Advantage plans have cost and coverage benefits, they also have serious drawbacks. A limit on which providers your parents can see may be the most important. If your parents want to consult a doctor who's not in the plan's network, they'd have to pay some or all of the cost themselves. This is less of a problem with large managed care companies, especially in urban areas. That's because most doctors participate in the networks of the big managed care insurance companies. If your parents are considering a Medicare Advantage plan, one of the first steps is to see if their regular doctors are in the plan's network. If not, and they want to stay with their doctors, it may not be the right plan for them.

Another problem can arise if your parents want to see a specialist. If their HMO primary care physician or the HMO itself decides it isn't necessary, your parents would have to pay for the visit out of their own pocket. Likewise, if the HMO decided certain care -- for example, extensive physical therapy or home healthcare -- wasn't necessary, the HMO wouldn't pay for it even if your parents' doctor wanted to prescribe the care.

There might be a problem, too, if your parents often spend time in more than one place -- traveling, at a second home, or staying with you or other family. Coverage by a Medicare Advantage plan is usually limited to the region where your parents live. Outside the region, your parents are responsible for some or all of any nonemergency bills.

Being dropped from a Medicare Part C plan is also a risk. Over the past few years, many people with a Medicare Advantage plan have suddenly found themselves without coverage when the plan decided to stop operations in that region. Plans regularly pull out of areas where their profits aren't making them happy. People dropped in this way aren't completely out of luck -- some other options are available -- but scrambling for coverage is stressful.

Where can I get more information about Medicare Advantage plans?

The official Medicareweb site has a feature called the Medicare Personal Plan Finder that can direct you to Medicare Advantage plans available where your parents live. It also gives information about each plan's general terms. But to know exactly what a plan offers, how much it costs, and what its restrictions are, you have to contact the issuing insurance company and carefully read its written materials. You can also get help deciphering plan materials by contacting your local State Health Insurance Assistance Program (SHIP) or Health Insurance Counseling and Advocacy Program (HICAP), which provide free expert assistance. You'll find the phone number under SHIP or HICAP in the white pages of the phone directory.