Traditional Medicare is a fee-for-service health insurance plan for people over 65 and with specific disabilities. Fee for service means the health care provider is paid a fee for the healthcare service. Traditional Medicare allows you to use any doctor or hospital that accepts Medicare. There are deductibles, copays, and the 20% which you are responsible for paying.
Most people will purchase a Medigap insurance policy to pay some costs not paid by Medicare. But what about people who do not qualify or cannot afford a Medigap policy? Medicare Advantage is a way to receive Medicare benefits that is different from Traditional Medicare. It provides a means to control out-of-pocket expenses without a Medigap policy.
Medicare Advantage plans are not Medicare supplements or Medigap policies. They are a completely different form of Medicare that is designed, insured, and administered by a private insurance company contracted and approved by Medicare. Medicare Advantage Plans have Part A, B, and sometimes Part D benefits. MA plans are different from Traditional Medicare in several ways.
Unlike Traditional Medicare fees for service, Medicare Advantage plans may provide benefits through a network of doctors and hospitals under a contract to provide benefits. These networks can be PPOs or HMOs. PPOs are doctors and hospitals that contract with the plan to provide services at a discount. HMOs are a group of doctors and hospitals that are under contract to manage the member’s healthcare. Not all doctors and hospitals will participate in these plans for various reasons—those who do benefit by having patients sent to them by the plan.
Medicare Advantage PPOs allow you to use doctors and hospitals outside of their network, but you may have to pay more. HMOs will not usually allow you to use providers that are not in the plan except in the case of an emergency. If you are in an HMO and go out of network, you must pay the total cost of care.
Medicare Advantage plans also have different copays and coinsurance amounts than Traditional Medicare. Because of this, standardized Medigap insurance will not work with MA plans. You must pay your copays until you reach your annual out-of-pocket limit—copays for a week in the hospital run between $1,500 and $2,000. There are copays for doctor visits and 20% coinsurance for some services. If your copays and the 20% add up to the out-of-pocket limit during the calendar year, the Medicare Advantage plan will usually cover the rest of the approved costs for the remainder of the year. The out-of-pocket limit is usually around $6,700 per year in Mississippi.