Why Are Medicare Advantage Plans Existing?

When Medicare was initially passed into law more than fifty years ago, insurance companies introduced Medicare Supplements, often known as Medigap plans, to help consumers protect themselves against the different cost-sharing obligations they would face under the new federal health insurance programme for seniors. These plans were created to assist consumers in covering the costs of Medicare Part A and B deductibles and co-insurance. These were the only types of supplemental plans available for many years. However, as part of the 1997 Balanced Budget Act, the government developed a completely new type of programme known as Medicare Advantage (MA). These are not medicare plans. supplements, though, and they operate very differently so it's important that you know the difference before making a decision on which kind of plan would be right for you.

Why did Congress create Medicare Advantage plans? Well, they came about as the result of several factors.

First, there were was the increasing costs for Medicare itself and for medigap plans. Over the years, the Medicare deductibles and co-insurance increased with inflation, as does the cost of most things in America. Since many medigap plans cover these costs for insured members, the monthly premiums for those same plans also continued to increase.

Second, at the same time, many Americans counted on social security to be their entire retirement income, and sometimes they didn't realize until it was too late that this income was not nearly enough to meet all their living expenses. The outcome was that a fair amount of people over age 65 could not afford the cost of Part B and the premium for a medigap plan. This problem was compounded by the fact that Medicare did not cover for retail prescription drugs, so citizens had to pay for these entirely out of their own pockets. The outcry from Medicare beneficiaries was clear: many were having to make choices between healthcare costs and groceries or rent.

When some beneficiaries decided to forego medicare supplements and just take their chances, an epidemic of tragedies soon followed. Someone healthy at age 65 might have decided not to buy insurance. However, when that individual later developed a health condition requiring, for example, an open heart surgery or chemotherapy, he  found himself facing tens of thousands of out-of-pocket expenses for the 20% he owed after Medicare had paid its share. Congress feared these individuals then would be denied care because they couldn't pay.

Finally, Medicare has always had a budgeting problem since it is impossible to predict exactly how much each individual recipient will spend on healthcare each year. Some are in good health and so have low costs; others, on the other hand, have major illnesses that cost hundreds of thousands of dollars to treat. When trying to anticipate how much our federal government would spend annually on healthcare for our elderly Americans, this produced a guessing game in the legislative budget office.

As a result, Congress addressed these difficulties by authorising or enabling the sale of private Medicare health insurance, dubbed Medicare+Choice plans at the time. These plans eventually evolved into Medicare Part C, which is currently known as Medicare Advantage. MA plans appeared to be a viable answer to the issues raised earlier in this essay. Here's how to do it: