What is a Medicare Advantage Plan?
Medicare Advantage is a type of health insurance that provides coverage within Part C of Medicare in the United States. Medicare Advantage plans pay for managed health care based on a monthly fee per enrollee (capitation), rather than on the basis of billing for each medical service provided (fee-for-service)). Most such plans are health maintenance organizations (HMOs) or preferred provider organizations (PPOs). Medicare Advantage plans provide beneficiaries the same medical services via capitated-fee as "Original Medicare" Parts A and B Medicare provides via fee-for-service.
A Medicare Advantage beneficiary must first sign up for both Part A and Part B of Medicare but all three of these Parts, A, B and C, are administered by private insurance companies (usually the same insurance company).
Medicare Part A provides payments for in-patient hospital, hospice, and skilled nursing services, excluding those of physicians and surgeons. Part B provides payments to physicians and surgeons in hospitals and skilled nursing facilities, as well as for medically-necessary outpatient hospital services such as ER, laboratory, X-rays and diagnostic tests, certain preventative medical services, and certain durable medical equipment and supplies. Part C health plans, including Medicare Advantage plans, not only cover the same medical services as Parts A and B but also typically include an annual physical exam and vision and/or dental coverage of some sort not covered under Original Medicare. Less often, hearing and wellness benefits not found in Original Medicare are included in a Medicare Advantage plan. The most important difference between a Part C health plan and FFS Original Medicare is that all Part C plans, including capitated-fee Medicare Advantage plans, include a limit on how much a beneficiary will have to spend annually out of pocket; that amount is unlimited in Original Medicare.
Most but not all Medicare Advantage plans (and many of the other public managed-care health plans within Medicare Part C) include integrated self-administered drug coverage similar to the standalone Part D prescription drug benefit plan. The federal government makes separate capitated-fee payments to Medicare Advantage plans for providing these Part-D-like benefits if applicable just as it does for anyone on Original Medicare using Part D.
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