Between 75% and 80% of Medicare beneficiaries are enrolled in the original Medicare plan: Part A for hospital coverage and Part B for outpatient coverage (we'll leave discussion of Medigap supplemental policies, which aren't technically part of Medicare, for another time).

Part C of Medicare encompasses the entire collection of Medicare Advantage plans. These are the HMOs, PPOs, and other specialty plans run by private insurance companies that participants can choose instead of traditional Medicare. Most Part C Advantage participants enroll in an HMO, so that will be our first target.

Why Would Someone Choose a Medicare HMO?

At first blush these plans appear less expensive, although some HMOs do charge extra premiums. In addition to their monthly Part B premium (starting at $96.40 in 2008), participants in traditional Medicare pay an annual Part B deductible ($135 in 2008) and a 20% co-payment for all outpatient care and equipment. They must enroll in another plan and pay another monthly premium for drug coverage (Part D). Enrolling in an Advantage HMO usually eliminates the need for a part D policy, although co-payments for pharmacy items will still exist.
Advantage HMOs also advertise that membership eliminates the need to purchase a Medicare supplement to cover annual deductibles and co-payments. This, however, can be misleading, as Advantage HMOs also require out-of-pocket payments that can quickly add up.

How Medicare Advantage HMOs Work

Medicare turns the insured person's monthly premium and an additional financial incentive over to the private HMO company. In return for this monthly payment, the Advantage HMO is obligated to provide the same basic coverage as original Medicare. Many plans also offer extras such as routine checkups, optical benefits, and wellness programs.

The Advantage HMO also assumes responsibility for managing the insured person's medical care.

Except in an emergency, the insured may only use the physicians and facilities that participate in the HMO plan. Consultations with a medical specialist must be authorized by the patient's primary care physician, who acts as the "gatekeeper" and overseer of the patient's care. Surgery and many diagnostic tests require pre-authorization by the plan. The goal is to conserve medical dollars by managing the utilization of costly medical services. The insurance company makes a profit only if the patient uses less in medical and ancillary services than the premium the insurance company receives every month.

The insured will continue to be responsible for fixed co-payments for outpatient care and medications (either a flat dollar amount or a percent of the cost), and will pay hospital deductibles or co-payments that vary by company, but which can be higher than original Medicare requires.

Satisfied Advantage HMO Members

Younger and healthier members of Medicare Advantage HMOs generally express satisfaction with their insurance. They particularly appreciate the generally reasonable co-payments for occasional doctor visits and prescriptions. Because they are younger and healthier, their need for medical specialists and hospital care is low. Their primary care physician is often the only doctor they see on a regular basis. They frequently take advantage of HMO "extras," such as health club memberships designed to keep them healthy longer.

Less Satisfied Advantage HMO Members

Dissatisfied HMO members are generally older and in poorer health than their "happy" counterparts. Many believe that, because they see multiple doctors, they actually pay more in office visit co-payments than they would pay for a private supplemental policy (had they enrolled in the supplement when they first enrolled in Medicare).

Some feel that they have had difficulty obtaining referrals to medical specialists from their primary care physicians, who they feel are resistant to "referring out." They often say that their preferred specialists do not participate in their HMO, which reduces their medical choices. Participating specialist physicians may be further away than these patients would prefer and attend only at hospitals they would not voluntarily select.

Less satisfied older HMO members have also stated that their out-of-pocket costs for a hospital stay were both unexpected and difficult or impossible to afford. Many believe they were sent home from the hospital or rehabilitation facility much sooner than their counterparts with traditional Medicare. While usually most of their local hospitals do participate in their HMO plan, some were surprised that they have only a few participating rehabilitation facilities to select from, and these facilities are often not geographically convenient.

"Snowbirds" living in different parts of the country according to the season often complain that the plan they selected in one part of the country does not provide coverage in another.
How to Avoid Bring "Less Satisfied" With a Medicare Advantage HMO

The key to choosing your health care plan is to ask all the questions before making a decision, and then choosing a plan which best fits all your medical and financial needs. Knowing the answers to the questions below will eliminate many surprises and reduce your chances of being an "unsatisfied" member later:

1. What is the monthly premium?
   
   
2. Does my primary doctor participate in this plan?
   
   
3. If not, who are the participating primary physicians (PCPs), and are they taking new patients in this plan?
   
   
4. How long will I have to wait for an appointment with my PCP?
   
   
5. What is the co-payment for an office visit? Will I have to meet an annual deductible before coverage begins?
   
   
6. Which hospitals, medical specialists, skilled nursing facilities and home care agencies are in the plan's network?
   
   
7. What is involved in getting a referral to a medical specialist?
   
   
8. How does the plan pay my PCP? If my PCP refers me to a specialist or for costly tests, does he/she face a financial penalty?
   
   
9. Are my prescription drugs on the plan's formulary (the list of covered medications)? Are there any restrictions to obtaining my current medications?
   
   
10. What is the co-payment for brand name drugs? For generic drugs? Is the co-payment a fixed dollar amount, or a percent of the total cost?
    
    
11. Is there a prescription drug "donut hole" where I will have to pay the full cost of my medications for a period of time?
    
    
12. Is my pharmacy in the plan network?
    
    
13. What will my cost be for a hospital stay? If I am hospitalized more than once in a year, what will my costs be for subsequent hospitalizations?
    
    
14. How many days of rehabilitation in a skilled nursing facility are covered?
    
    
15. What will my cost be if I use an out-of-network provider or facility?
    
    
16. Is there an out-of-pocket maximum beyond which I will not pay additional out-of-pocket costs, or my costs will be reduced? Is it an annual or a lifetime amount?
    
    
17. What is the plan's service area?
    
    
18. What is my coverage if I travel outside the plan service area and I need medical care? Are there any special provisions for "snow birds" who travel seasonally?
    
    
19. How do I leave the plan if I want to disenroll?

In Summary:

You may be happy with a Medicare Advantage HMO if:

• You live year-round in the same place;
  
  
• Your doctors, hospitals and other preferred medical facilities are in the plan;
  
  
• You want an all-in-one plan with prescription coverage included;
  
  
• You don't object to the approval process for referrals, hospital care and some procedures.

You may prefer traditional Medicare if:

• You might need to see doctors outside the boundaries covered by the HMO;
  
  
• You prefer to have as broad a selection as possible of doctors, hospitals and other preferred medical facilities;
  
  
• You are satisfied with and can afford your choice of Parts A & B and your supplemental insurance policies.