In order to properly answer the question ‘What is a Medicare Advantage Plan’ it is important to understand how this plan evolved from the original Medicare Plan introduced by President Lyndon Johnson in 1965. Under the original Medicare plan still in existence today, persons age 65 and special-needs children were allowed to choose their physician, receive care provided by any hospital and receive basic prescription drug coverage. The Medicare Advantage Plan is the new name replacing Medicare Part C which offered supplemental insurance plans with a premium fee attached.
The original Medicare Plan offered Part A covered hospital care with a premium at no cost to the participant since the Federal Government paid and still pays this portion of Medicare. In the mid-1990’s the Medicare Advantage Program was introduced with the intent to offer basic coverage with additional coverage to include such items as eye examinations, prescription glasses and gym or fitness club membership. In order to make the Medicare Advantage Plan cost-effective, lower premium and copay fees, physicians and hospitals had to be chosen from a list approved by the Medicare Advantage Plan. Medical procedures had to meet restricted guidelines approved by the plan. One disadvantage of the Medicare Advantage Plan is that the list of approved physicians, hospitals and procedures can be changed without the consent of those enrolled in the plan.
One argument currently being voiced concerns the fact that ‘Original Medicare’ pays Medicare Advantage Plan insurances companies $1000 more per person than Medicare pays to physicians and hospitals for the same level of care. Of the money paid to HMO’s under the Medicare Advantage Plan, 15-30¢ goes to overhead as opposed to 1¢ for Medicare.