TN 6 (10-07)
HI 00208.066 The Medicare Advantage (MA) Program
Section 1851 of the Social Security Act
CAUTION: Do not attempt to provide detailed responses to questions about the MA program or counsel individuals in their choice of MA plan. Instead, refer individuals to 1-800-MEDICARE or to the State Health Insurance Assistance Program.
A. Background - Medicare Advantage Program
The Balanced Budget Act of 1997 (BBA) created a new Part C of the Medicare program, known as Medicare+Choice (M+C), that significantly expanded the health care options available to Medicare beneficiaries. Beginning 01/01/99, eligible individuals could begin to receive Medicare benefits through enrollment in one of an array of private health plan choices beyond the Original Medicare Program or the plans that were available through Managed Care Organizations under section 1876 of the Social Security Act (referred to as 1876 cost plans).
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) revised Medicare Part C, including a program name change from Medicare+Choice to Medicare Advantage (MA), and added a voluntary outpatient prescription drug benefit under a new “Part D” of Medicare. The MA program retains many provisions of the M+C program while updating and improving choice of plans for beneficiaries and restructuring how plans are paid. Under the MMA, beneficiaries will have additional choices of plan options -- regional PPO plans and specialized MA plans for special needs individuals (Special Needs Plans or SNPs).
MA organizations may, at their discretion and with CMS approval, offer plans that include a Part B premium reduction. This reduction is known as Medicare Advantage Reduction (MARD). The amount of the reduction may vary among plans.
The Centers for Medicare and Medicaid Services (CMS) contracts with private plans to provide the drug benefit. Individuals need to enroll in a stand-alone Prescription Drug Plan (PDP) or a Medicare Advantage Plan that includes a drug benefit (MA-PD) in order to receive this Medicare benefit, which began on January 1, 2006.
As of January 1, 2006, Medicaid no longer covers pharmacy benefits for individuals eligible for both Medicare and Medicaid (also referred to as “dual eligibles” or “duals”). Depending on their income and resources, individuals may qualify for extra help (the “low income subsidy”) with their Medicare prescription drug costs– premiums, deductibles, and copayments.
Benefits are health care services that are intended to maintain or improve the health status of members, for which the MA organization incurs a cost or liability under an MA plan, and that are approved by CMS. An MA plan includes, at a minimum, basic benefits and may also include mandatory supplemental benefits and optional supplemental benefits.
2. Cost plan
Cost plan means a plan operated by a Health Maintenance Organization (HMO) or Competitive Medical Plan (CMP) in accordance with a cost reimbursement contract under §1876(h) of the Act Some cost plans offer Medicare prescription drug coverage as an optional supplemental benefit.
Election is a request for enrollment in or voluntary disenrollment from an MA plan, a Medicare prescription drug plan or the traditional Medicare fee-for-service program (“Original Medicare”). (Disenrollment from Original Medicare would only occur when an individual enrolls in an MA plan.)
4. Election period
Election period (also called “enrollment period”) is the time during which an eligible beneficiary may elect to enroll in or disenroll from a Medicare Advantage plan, a Medicare prescription drug plan or Original Medicare.
5. MA Organization
MA Organization is a public or private entity organized and licensed by a State as a risk-bearing entity that is certified by CMS as meeting the MA contract requirements.
6. MA Plan
An MA Plan is health benefits coverage offered under a policy or contract by an MA organization that includes a specific set of health benefits offered at a uniform premium and uniform level of cost-sharing to all Medicare beneficiaries residing in the service area (or segment of the service area) of the MA plan.
7. Original Medicare
Original Medicare is health insurance available under Medicare Part A and Part B through the traditional fee-for-service (FFS) payment system.
8. Provider network
Provider network are providers with which an MA organization contracts or makes arrangements to furnish covered health services to plan enrollees.
9. Service area
A Service area is a geographic area that for local MA plans is a county or multiple counties, and for MA regional plans is a region approved by CMS within which an MA-eligible individual may enroll in a particular MA plan offered by an MA organization. Each MA plan must be available to all MA-eligible individuals within the plan's service area. Counties do not need to be contiguous and under limited circumstances, CMS may approve the inclusion of “partial” counties in a service area.
C. Policy — MA organizations
The MMA permits Medicare beneficiaries who are entitled to Part A and Part B to have their health care provided by an MA organization. An MA organization must enter into a contract with the Secretary of the Department of Health and Human Services (DHHS) to participate under Medicare.
An MA organization must provide members in its plan with coverage of the basic benefits by furnishing the benefits directly or through arrangements, or by paying for the benefits. Each MA organization must provide coverage of, through the provision of or payment for, all services that are covered by Part A and Part B of Medicare and that are available to beneficiaries residing in the plan’s service area.
In addition, the law permits MA organizations to offer plans that do not require members to receive services through a provider network (i.e. private fee-for-service plans, regional or local preferred provider organizations and some Medical Savings Account plans).
2. Policy — types of MA plans
a. MA coordinated care plans
MA coordinated care plans include a network of providers that are under contract or arrangement with the organization to deliver the benefit package approved by CMS. The network must be approved by CMS to ensure that all applicable requirements are met including access and availability standards, service area requirements, and quality standards. MA coordinated care plans may include mechanisms to control utilization, such as referrals from a provider (also known as a “gatekeeper”) to receive services within the plan, and financial arrangements that offer incentives to providers to furnish high quality and cost-effective care.
MA coordinated care plans include, but are not limited to, HMO plans with or without point of service options, plans offered by provider sponsored organizations, preferred provider organizations, as well as the Religious Fraternal Benefits Society plan.
Definitions of the various types of MA coordinated care plans are as follows:
An HMO is a public or private organization which provides (either directly or through arrangements with others) comprehensive health services to enrolled members who live within a specific geographic area. The beneficiaries pay a predetermined premium which covers the medical expenses without regard to the frequency or extent of covered services furnished.
An HMO with a point-of-service plan is a plan in which a member may be reimbursed by the HMO for services received through non-network providers when network providers could have been used.
A point of service (POS) plan is a benefit option that an MA plan can offer to its Medicare members as an additional, mandatory supplemental, or optional supplemental benefit. Under the POS benefit option, the MA plan allows members the option of receiving specified services outside of the MA plan’s provider network. In return for this flexibility, members typically have higher cost-sharing requirements for services received and, where offered as a mandatory or optional supplemental benefit, may also be charged a premium for the POS benefit option.
A provider-sponsored organization is operated by providers, in which the substantial proportion of services are delivered through the sponsoring provider or affiliated providers.
A preferred-provider organization (PPO) is a plan that has a network of providers that have agreed to a contractually specified reimbursement for covered benefits with the organization offering the plan; provides for reimbursement for all covered benefits regardless of whether the benefits are provided within the network of providers; and only for purposes of quality improvement requirements in §422.152(e) of the MA regulation is offered by an organization that is not licensed or organized under State law as an HMO.
Religious and Fraternal (RFB) Society Plans are offered by a religious and fraternal society for members of the society. Only members of the society may enroll. The society must meet Internal Revenue Service and Medicare requirements for this type of organization.
A Special Needs Plan (SNP) can be any type of coordinated care plan that meets CMS' SNP requirements and either exclusively enrolls special needs individuals or enrolls a greater proportion of special needs individuals. The MMA designated three specific segments of the Medicare population as special needs individuals: institutionalized individuals; those entitled to Medical Assistance under a State Plan under Title XIX (Medicaid) - “dual eligibles;” and other high-risk groups of chronically ill or disabled individuals who would benefit from enrollment in this type of plan.
b. Medicare Medical Savings Account plans (MSAs)
A Medical Savings Account (MSA) is a type of MA plan that combines a high-deductible health plan and a tax advantaged personal savings account set up to fund medical costs not covered by the plan.
MSA plan members will receive an annual deposit into an interest-bearing account from CMS to help them cover their health care costs. Members will use the money in their MSAs to pay for their health care before the high deductible is reached. Once the deductible is met, the MA organization offering the MSA plan will be responsible for payment of 100 percent of the expenses related to covered services. When the money in the account is used to cover “qualified medical expenses” under IRS rules, it is not taxed. MSA plans are statutorily restricted from covering Part D drugs, but MSA enrollees can join a stand-alone prescription drug plan (PDP).
Depending on the MSA that the beneficiary chooses, the individual may be able to go to any doctor or hospital, or the individual may be limited to a network of providers.
c. Private fee for service plans
An MA private fee-for-service plan is an MA plan that pays providers of services at a rate determined by the plan on a fee-for-service basis without placing the provider at financial risk. A PFFS plan does not vary the rates for a provider based on the utilization of that provider's services, and does not restrict enrollees' choices among providers that are lawfully authorized to provide services and agree to accept the plan's terms and conditions of payment.
Enrollees in a PFFS plan are not limited to a provider network. Members of a PFFS plan can go to any doctor or hospital in the U.S. that is eligible to be paid by Medicare and is willing to accept the plan’s terms of payment. However, if the PFFS has a network of providers, the enrollee’s cost-sharing may be higher if s/he seeks care from non-network providers.
D. Policy — 1876 cost contracts
In a cost plan, Medicare enrollees are not restricted to the HMO or CMP for receipt of covered Medicare services, i.e., services may be received through non-HMO/CMP sources and are reimbursed separately by Medicare intermediaries and carriers. Medicare payment to the HMO/CMP is based on the reasonable costs of providing services to the Medicare beneficiaries. Beginning in 2006, Cost Plans were permitted to offer Part D of Medicare as an optional supplemental benefit. In other words, a cost plan that elects to offer qualified prescription drug coverage may offer alternative coverage as an optional supplemental benefit only if the cost plan also offers basic prescription drug coverage. Thus, an enrollee in the cost plan may, at the individual’s option, elect whether to receive qualified prescription drug coverage under the cost plan. If so, the enrollee has the option to elect whether to receive basic prescription drug coverage or if offered by the cost plan, enhanced alternative coverage.
There can be no new cost plans. Cost plans were permitted to expand service areas, as long as requests for such expansions were submitted on or before September 1, 2006, and all other requirements were met. Beginning in 2008, cost plans located in areas where there are two or more MA coordinated care plans meeting minimum enrollment requirements will not by renewed by CMS.