Does Medicare Advantage replace Medicare? The answer is yes and no.
“Medicare replacement plans” is a phrase commonly used by Medicare beneficiaries and medical providers when referring to Medicare Advantage plans. Advantage plans are private insurance policies that pay instead of Medicare for the calendar year that you enroll in them.
However, Medicare prefers that you use the term Medicare Advantage or Part C plan (instead of Medicare replacement plan) because you are never permanently replacing your Original Medicare benefits. You can always return to them during the next election period.
Why Doctors Call Them Replacement Plans
It’s common for many beneficiaries and their doctor to call these plans Medicare replacement plans because that’s the way they (and their doctors) often think of them.
When you enroll in a Medicare Advantage plan, you are formally telling Medicare that until December 31st, you are choosing to get your Part A and Part B benefits through the Medicare Advantage plan instead of through Original Medicare.
Although this feels like you are replacing your Original Medicare with a Medicare Advantage plan, it’s important to understand it doesn’t mean that you are permanently disenrolling from Medicare. Indeed, you must continue to be enrolled in both Parts A and B before you can enroll in an Advantage plan.
You will also always have the option to return to Original Medicare during a valid election period, but you are agreeing to be part of the Medicare Advantage plan instead for now.
You agree to use the plan’s network of doctors and hospitals when getting your care. Likewise, your providers will send their invoices to the Medicare Advantage insurance company instead of billing Original Medicare whenever you use healthcare services.
Why Medicare Replacement Plans were Created
The Medicare Advantage program was created in the late 1990s to give beneficiaries another option besides Original Medicare and a Medigap plan. Some people cannot afford Medigap plan premiums so these Medicare Advantage “replacement plans” give them an alternative – a way to get their benefits from a private plan instead of Medicare.
Now, you must still be enrolled in both Medicare Parts A and B when you join an Advantage plan. However, the monthly premiums that you pay for a Medicare Advantage plan are often lower than what you would pay for a Medigap plan.
Advantage plans can offer you lower premiums because they will provide a network of healthcare providers for you. They can negotiate contracted rates with these providers which gives the insurance company better control over its costs.
In an HMO-style plan, you usually must choose a primary care provider and often need to get referrals to see specialists. You can’t treat outside of plan’s network at all except in cases of emergencies. In PPO-style plans, you can treat with providers who are not in the plan’s network but you will pay higher costs to do so. You must also confirm the out-of-network provider is
How Medicare Replacement Plans Work as Your Primary Coverage
When you enroll in a Medicare Advantage plan, Medicare pays that insurance company a hefty monthly fee to handle your claims and pay out any benefits necessary.
The plan must offer you all the same Medicare Part A and Part B services that you would normally get from Original Medicare too. They can’t leave anything out. However, the plan’s underwriters are the ones who will make your coverage determinations, instead of Medicare.
You will seek your treatment from the plan’s network of providers whenever possible. If you go outside the network, you may not have coverage or you may have to pay higher out-of-network costs, depending on the plan’s network rules.
When you join the plan, you will be given a Summary of Benefits that shows you all the services covered and what your share of the costs of those services will be. Be sure to review this carefully to see what you will be expected to pay for things like labwork, hospital stays, surgeries, and cancer treatments.
Many Medicare replacement plans also include a built-in Part D drug benefit too. Some people enjoy being able to use one member ID card for hospital, outpatient, and drug needs.
Benefits Change Annually
Something else to be aware of about Medicare Replacement plans is that the benefits change from year to year. When you enroll in a plan, the premiums and cost-sharing that you pay are for that one year only.
In September, the plan will mail you an annual notice of change letter. This will go over all the things that are changing inside the plan for the following year. You may find that next year your premiums, copays, and coinsurance goes up or down.
Be aware also that providers in the network can drop from the network at any time. If a provider you are seeing leaves the network mid-year, you may not able to see that provider again until you have a chance to leave the plan during your next valid election period.
The list of covered medications, called a drug formulary, can be changed from year to year as well.
If you are unhappy with any of the plan’s changes for the upcoming year, you can make a change to a different Medicare Advantage plan offered in your county during the fall Annual Election Period. You can also return to Original Medicare if you prefer that and apply for a new Medigap plan provided that you can answer no to the medical questions and pass the Medigap plan’s medical underwriting.
Medicare Advantage “Extras”
One of the features that some beneficiaries like about Advantage plans are the ancillary benefits. These plans can offer extra benefits for something that Medicare doesn’t cover, like routine dental, vision, and hearing services. Some plans may even offer free fitness memberships.
These benefits are usually somewhat limited and are subject to change, just as the regular benefits can change from year to year. Be sure to review the information about ancillary benefits that are included in the Annual Notice of Change so you can be aware of any of these benefits are being decreased or dropped in the upcoming year.
What Happens When You leave a Medicare Replacement Plan?
When you join a plan, you are generally locked in for the rest of the calendar year until the next annual election period rolls around. There is also an annual enrollment period just for Medicare Advantage plans that runs each year from January 1st to March 31st during which people enrolled in Advantage plans can disenroll/change.
Upon disenrolling from your Medicare Advantage plan, you can return to Original Medicare and apply to add a Medigap plan or you can change to a different Advantage plan offered in your county.
Outside of that, you are usually required to stay in your plan through the end of the year. However, there may be certain circumstances that qualify for a special election period to change plans mid-year, such as when you move out of state and are no longer living in the network service area.
Do you pay Part B premium with Medicare Advantage?
Yes, you must be enrolled in both Medicare Parts A and B before you can sign up for a Medicare Advantage plan. You will continue to pay your Part B premium while you are enrolled in any Medicare replacement plan.
How Do I Know is a Medicare Replacement is Right for Me?
Before enrolling in any Medicare Advantage plan, you’ll want to research the plan’s premiums, network, copays, coinsurance, deductibles, pharmacy network, and drug formulary. Check the plan’s network directory to confirm that your most important providers are in the network. Don’t forget to check which hospitals you’ll be able to use on the plan. Finally, confirm that the plan’s formulary includes all your important medications.
To learn more about the pros and cons of Medicare replacement plans, check out this video on our Youtube channel as well.
Do you need help understanding what Medicare Advantage plans you may be eligible for? Give us a call if we can help.