What’s the difference between traditional Medicare and Medicare Advantage?
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For those 65 years and older on Medicare, the critical open enrollment season, which allows participants to change their plan, comes to an end Dec. 7.
Some health insurance companies are trying to persuade Medicare recipients to change plans and opt for Medicare Advantage to get extra benefits. There are even commercials featuring celebrities making the case for Medicare Advantage. The problem is, Medicare Advantage has proven controversial.
Marketplace’s senior economics contributor Chris Farrell sat down with Marketplace’s Sabri Ben-Achour to break things down. The following is an edited transcript of their conversation.
Sabri Ben-Achour: All right, so you’ve got Medicare, that’s health insurance for people 65 and older. And then there is something called Medicare Advantage. What is the difference?
Chris Farrell: OK, so Medicare Advantage plans — these are private health plans paid by the federal government to provide Medicare covered benefits. So they’re commercially offered managed care plans and it’s an alternative to traditional Medicare, which is fee for service and Part D, prescription drug plans.
Ben-Achour: So why might someone opt for the Medicare Advantage versus Medicare?
Farrell: The plans can offer additional benefits such as dental care and vision services. And another reason is the Advantage plans, they offer a bundle of services so they’re streamlined. And by the way, Advantage plans are sold by for-profit insurance companies, and they have multimillion-dollar ad budgets.
Ben-Achour: If these are privately run, I assume you have to pay extra for them?
Farrell: It depends how you describe “paying extra.” So traditional Medicare is more expensive upfront. But with traditional Medicare, you can use any health provider in the country who accepts Medicare. You don’t need prior approval, just assuming that a procedure is covered. With Medicare Advantage, you must use the approved providers in the plans network or your costs go up when you go out of network. And there’s some other cost differences that suggest caution when looking at the Advantage plans.
Ben-Achour: Why is Medicare Advantage controversial?
Farrell: These plans have been hit with numerous scandals. There have been federal audits show[ing] widespread overcharges and errors in payments, as well as unjustified denial of claims. And companies have been charged with misleading consumers about their benefits. So the bottom line is the insurance companies have figured out how to do well with their Advantage plans. It’s unclear with the enrollees and taxpayers.
Ben-Achour: Well, are there any changes imminent or do people just have to be really careful when they sign up?
Farrell: Be really careful because here’s the thing, Congress isn’t paying enough attention. You know, for Medicare enrollees the choice between traditional Medicare and Medicare Advantage plans or between the various Medicare Advantage plans, it’s just too complex and confusing. Simplification would really help. And there is a push to level the playing field between traditional Medicare and Advantage plans and that would be good. But in essence, Medicare is being privatized without much debate and without strong evidence that enrollees come out ahead from the shift.
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