What Does That Medicare Plan Really Offer?

The local newspaper is carrying an ad for a Humana Medicare plan that boasts "no monthly premium." How can that be?

Private insurers can offer some of their Medicare Advantage plans with $0 premiums (in addition to your Medicare Part B premium) because the federal government gives the companies generous subsidies to enroll people in these plans.

Medicare Advantage plans provide medical coverage through a private insurer -- instead of through Medicare. There are three types of Medicare Advantage plans: Medicare health maintenance organizations, which generally cost the least but limit your doctors and hospitals to a particular network; regional preferred-provider organizations, which give you a network of preferred doctors and hospitals within a state or group of states (and allow you to use out-of-network providers, in return for higher copayments); and private fee-for-service plans, which let you use any doctor or hospital that accepts the plan's terms.

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All of these Medicare Advantage plans offer medical as well as drug coverage in one policy. Otherwise you would have to sign up for Medicare Part B, plus by a Medicare supplement plan and a separate Part D prescription drug policy.

The Medicare Advantage premiums are generally lower than they are for the three separate policies, but you may end up with larger out-of-pocket expenses throughout the year and need to understand the plan's restrictions before signing up.

A Medicare Advantage plan may provide vision and dental coverage and have lower co-pays than traditional Medicare, which covers doctor's visits. But the co-payments may be higher for big-ticket items such as hospitalization.

"If someone has a history of frequent hospitalizations, Medigap coverage may be safer than a Medicare Advantage plan that has limits on the coverage for hospitalizations," says Alan Mittermaier, president of Health Metrix Research.

Some Medicare Advantage plans don't cover the first 20 days in a skilled-nursing facility (which traditional Medicare covers), may charge higher co-payments for important services, such as chemotherapy, and may only provide limited coverage if you travel out of state.

Even if you have a private fee-for-service plan, which doesn't have a limited network of doctors and hospitals, you need to make sure that your particular providers are included -- some choose not to participate in these plans. Many insurance salespeople got into trouble for sales abuses last year when they didn't clarify these limitations.

Instead of just listening to a salesperson or responding to an ad, it's important to check out all of the Medicare options in your area -- the cost and coverage both for Medicare Advantage and a Medigap policy plus stand-alone Part D prescription-drug coverage.

The Medicare Web site has two great tools to help. The Medicare Options Compare tool lists the Medicare Advantage plans available in your area. Look at premiums as well as the "Estimated Annual Cost for People Like You" column, which provides out-of-pocket estimates based on your general medical condition.

Take careful note at how the coverage and co-pays stack up against traditional Medicare plus Part D and a Medigap policy (the Medicare Options Compare tool also includes information about Medigap policies).

You can find prices for Part D policies -- as well as total out-of-pocket costs for your medications -- at Medicare.gov's Prescription Drug Plan Finder.

Mittermaier's firm produces an annual Cost Share Report, which provides out-of-pocket cost estimates for Medicare HMOs and PPOs that include prescription-drug coverage. You can look up the best value in your area in three different health categories: good, fair and poor. Even if you're in good health now, it's important to see what a plan would offer if your health deteriorates during the year.

This is the perfect time to do all of this research because open enrollment season for Medicare plans runs from November 15 to December 31, which is the time to switch Part D or Medicare Advantage plans for 2008. The earlier you sign up, the less likely you'll end up with administrative glitches when your new plan takes effect on January 1.

For more information about open enrollment for Medicare Part D plans, see Medicare Drug-Plan Premiums to Rise.