Medicare Advantage Plans

Published by Steve Hedberg on August 2, 2008 Under Medicare

What is Medicare?

Signed into law over 43 years ago, Medicare is a service that is offered to American citizens that are disabled or over the age of 65. Funded by the federal government, Medicare provides health insurance for over 43 million Americans.

The services covered by Medicare include hospital stays, extended nursing care stays, and visits to the doctor. Durable medical equipment, like lift chairs, wheelchairs, and adjustable beds are also often covered.

The Medicare program has traditionally been funded and administered to solely by the federal government.

What is a Medicare Advantage Plan

In 1997, with the passage of the Balanced Budget Act, those eligible to receive Medicare where given the option to receive their benefits from private insurance companies.

These plans, which are called Medicare Advantage plans, are directly administered by private health insurance companies, but are funded by the federal government. The federal government reimburses the company a set amount for each person that signs up for a Medicare Advantage plan.

The private insurance companies are obliged to offer all of the same services that are offered by traditional Medicare, but they can choose how they cover certain parts.

For instance the co-pay for a doctors visit might be less when using a Medicare Advantage Plan, but long term care might cost more.

There are currently over 9 million Americans who use Medicare Advantage plans.

Changes in Medicare Law

Recently, with the passage of H.R. 6331, Congress has decided to reduce the amount paid to the private insurance companies.

The bill, which was signed into law on July 16, 2008, prevents a cut to doctors payments, by cutting the costs to the Medicare Advantage plans. While still to early to say for certain, many expect that these cuts will be passed onto those who use Medicare Advantage plans in the form of co-pay increases and reduced benefits.

Interestingly Medicare Advantage plans typically cost the government about 17 percent more than traditional Medicare.

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