The Risk of Advantage Plans

Millions of seniors have flocked to private Medicare plans, often with low or even zero premiums. But for some, the new choices may also come with risks.

When people enroll in these Medicare Advantage plans, they opt out of traditional Medicare, in which the government pays medical providers directly. Instead, the U.S. pays the insurers that offer the private plans; some plans offer extras such as vision care in addition to covering physician and hospital services.

One problem: When Medicare beneficiaries sign up for these plans, they don't always understand the details, such as how much they will pay for physician visits outside their plan's network or for hospital stays or treatments such as chemotherapy.

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Some beneficiaries have trouble finding providers willing to accept their plans. And they can get tripped up as doctors transfer in and out of networks, says Deane Beebe, spokeswoman for the Medicare Rights Center, a New York-based advocacy group.

Good for the Healthy?

"Many of these for-profit plans work well when you are healthy," Ms. Beebe says. "Once people get sick, that's when they find out the limitations of the plan."

Mohit Ghose, a spokesman for America's Health Insurance Plans, an industry trade group, says Advantage plans can be "extremely helpful" to seniors if they choose ones that fit their needs. For instance, some plans provide disease-management services and cap enrollees' out-of-pocket spending.

"To say that only healthy people should be in Medicare Advantage is highly misleading," Mr. Ghose says.

In the past few years, Advantage plans have become more popular. In an effort to expand private plans, Congress in 2003 raised payment rates to managed-care companies. Insurers improved their offerings and pitched them to seniors alongside the insurers' Medicare prescription-drug plans. (Recently, there's been some talk in Congress of cutting payments to the Advantage insurers.)

Today, one in five Medicare beneficiaries, or 8.3 million, has enrolled in a private plan, according to the federal Centers for Medicare and Medicaid Services. Among the biggest providers: Humana and UnitedHealth Group.

One-Stop Shopping

With all-in-one Advantage plans, seniors can avoid the hassle of enrolling separately in Medicare, supplemental private insurance and prescription-drug coverage. Some plans offer nurses' hotlines and other services to help seniors understand and choose care.

But for some seniors, Advantage plans can prove to be more costly. Low-income beneficiaries who need frequent care, for example, are also covered by the federal/state Medicaid program. Some of those beneficiaries, after switching to Advantage plans, have found out that they have to pay more out of pocket for care.

Another danger: Seniors can inadvertently lose corporate retiree coverage when they sign up for an Advantage plan.

In evaluating a plan's benefits and restrictions, Bonnie Burns of California Health Advocates, a nonprofit Medicare education group, suggests getting free help from state health-insurance counselors. Find them by calling 1-800-MEDICARE or online at medicare.gov/contacts/static/allStateContacts.asp.

Medicare officials are taking notice of some marketing practices. Some insurance brokers, for example, incorrectly marketed a type of Advantage plan as traditional Medicare, according to the Centers for Medicare and Medicaid Services. As a result, for 2008, the agency is planning to impose more accountability and increased oversight. Some plans, for example, will be required to call enrollees to make sure they understand what they are getting into.

The expanded oversight will be "good for beneficiaries and the plans," says Abby Block, director of Medicare's Center for Beneficiary Choices.