Making Sense of Medicare Advantage
Should you be among the growing number of retirees who are opting for these plans over traditional Medicare?
Nationwide, more and more people are choosing Medicare Advantage plans over traditional Medicare. According to the Kaiser Family Foundation, in 2021, 42% of all Medicare beneficiaries were enrolled in Medicare Advantage, up from 24% a decade earlier. Within the Federal Employees Health Benefits Program, a growing number of plans offer a Medicare Advantage option.
For the 2021 plan year, Aetna Advantage and United Healthcare Advantage plans are available nationwide. Kaiser Permanente plans are available in the mid-Atlantic area (including Washington D.C.), along with Atlanta, Denver; the entire states of California, Washington and Hawaii; and parts of Oregon and Idaho. United Healthcare Choice plans are available in almost half of the states.
To further complicate your options, you can suspend your FEHBP coverage to enroll in a Medicare Advantage Plan outside of FEHBP. Or you can enroll in a Medicare Advantage plan outside of FEHBP in addition to maintaining your FEHBP coverage.
How do you choose between all these options? First, it’s important to understand a few basics:
- FEHBP plans do not require enrollment in any Medicare options at age 65. According to According to the Office of Personnel Management, the decision is yours. Your FEHBP coverage will continue whether or not you enroll in Medicare. If you enroll, benefits will be coordinated. If you don't enroll, your FEHBP plan will pay benefits in full.
- Your FEHBP premiums will not go down if you enroll in Medicare. But enrolling in Medicare can reduce your out-of-pocket expenses as well as costs to FEHBP, which can help keep FEHBP premiums down.
- There are two paths to enrolling in Medicare: Option one is traditional Medicare: Parts A and B along with a Medicare supplement. Option two is getting your Part A and B coverage through a Medicare Advantage Plan. They’re offered by Medicare-approved private companies that must follow rules set by Medicare. Most Medicare Advantage Plans also include drug coverage (Part D). If you enroll in an FEHBP Medicare Advantage plan, you must enroll in Medicare A and B and you will be enrolled in Part D at no additional charge (unless you’re subject to higher Part D premiums due to your income).
FEHBP is the largest employer-sponsored group health insurance program in the world, covering almost 9 million people including employees, annuitants, and their family members, as well as some former spouses and former employees. As of 2020, it featured 87 health plan contracts and 279 plan choices. A major advantage of using FEHBP coverage is that the government pays 72% of the weighted average premium of all participating plans but not more than 75% of the total premium for any one plan.
OPM has offered little in the way of statistics on the number of enrollments in plans that cater to the needs of Medicare-eligible retirees, such as plans that offer a Medicare Advantage option or those that provide incentives such as a waiver of cost sharing (deductibles, copays and coinsurance), or those that provide a Medicare Part B reimbursement.
The FEHBP Medicare Advantage plans may have more flexibility than options available to the public, because they’re combined with features of the underlying FEHBP coverage. For example, the Aetna Medicare Advantage Plan for federal retirees provides the same coverage as original Medicare but with additional benefits, such as $0 deductibles and excellent prescription benefits. Enrollees continue to pay a Part B premium, but it is reduced by $75 per month, up to $900 per year. You can continue to use your doctors, or any provider that is licensed to receive Medicare payment and is willing to accept the Aetna plan.
Since 2011, the federal government has required Medicare Advantage plans to cap out-of-pocket spending, and these plans may provide additional benefits or reduced cost sharing compared to traditional Medicare. In 2021, the out-of-pocket limit for Medicare Advantage plans may not exceed $7,550 for in-network services and $11,300 for in-network and out-of-network services combined.
Under United Healthcare’s FEHB Medicare Advantage plan, these out of pocket limits only apply to in-network providers. After your copayments and coinsurance total $7,350 for self only, $7,350 per person for self plus one, or $14,700 per self and family enrollment in any calendar year, you don’t have to pay any more for covered services.
So what’s the downside to Medicare Advantage plans? For one thing, as Kiplinger Personal Finance has reported, in many Medicare Advantage plans (including some in FEHBP), you’re restricted to a limited network of doctors and hospitals. The least expensive plans tend to have the smallest networks and larger out of pocket expenses throughout the year. Luckily, FEHBP members have annual open seasons that allow the freedom to change plans if you aren’t satisfied with your current coverage.
Medicare Advantage plans, like traditional Medicare, generally impose cost-sharing requirements for covered services, subject to certain limits, such as daily copayments for inpatient hospital stays or coinsurance for physician-administered drugs. This means that Medicare Advantage enrollees can incur thousands of dollars in out-of-pocket costs before reaching their plan’s maximum out-of-pocket limit. By contrast, most traditional Medicare beneficiaries have supplemental coverage that covers some or most of their Medicare deductibles and cost-sharing requirements.
There’s also the growing problem of waste, fraud and abuse in Medicare Advantage plans, which has attracted the attention of the Justice Department. As always, in the world of health care and other benefits, including those offered to federal employees and retirees, it’s buyer beware.