How Medicare Advantage Plans Are Designed, Governed, And Paid By CMS To Administer Health care Benefits To The Medicare Population
Medicare Advantage plans are a type of health insurance plan for 65+ individuals in the United States that provides Medicare benefits through private-sector health insurers. We've written about Medicare Advantages in the past. However, it is also important to know how Medicare Advantage plans are designed, governed, and paid by CMS to administer healthcare benefits to the Medicare population.
Types Of Medicare Advantage Plans
There are different Medicare Advantage plans available to Medicare beneficiaries. Check each of them out below:
Health Maintenance Organization Plan (HMOs)
The way an HMO plan works is that a Health Maintenance Organization (HMO) gives beneficiaries access to a network of doctors and hospitals that are available for their use. In most cases, an HMO plan requires that beneficiaries get referrals from a primary care physician before they can see a specialist.
Preferred Provider Organization Plan (PPOs)
The Medicare Advantage PPO plan is similar to HMOs as each PPO plan gives its beneficiaries access to its network of doctors and hospitals. However, with a PPO plan, beneficiaries do not have to choose a primary care physician. Not only that, beneficiaries also do not require a referral to see a specialist. Moreover, Medicare Advantage PPO plans can also offer health care coverage for services received outside the network. However, these out of network services usually come at a higher cost share.
Private Fee-For-Service (PFFS)
A Private Fee-For-Service Plan is another type of Medicare Advantage plan. It is important to know, the PFFS plan is not the same as the original Medicare or a Medigap plan. This type of plan determines how much it will pay doctors, healthcare providers, and hospitals. It also determines how much you will pay to receive health care. Private insurance companies that are contracted with Medicare are the ones that provide PFFS plans.
Lest we forget, the 'out of pocket' costs for the services vary according to plans and the providers and practitioners must accept terms at the time of service.
Special Needs Plans (SNPs)
Special Needs Plans (SNPs) are a type of Medicare Advantage specially designed for people with disabilities, specific diseases, or people with chronic illnesses.
Medicare Advantage Quality Star Rating System
Medicare Advantage plans get awarded star ratings between one and five. These ratings are based on how well the plans perform through some quality measures in the Medicare Advantage Quality Star Rating System. One of the benefits of the rating system is that it helps to guarantee public accountability. Not only that, but it also helps to improve consumers’ choice by giving quality information on the different plans.
Furthermore, with the star rating, plans and providers tend to have a healthy competition between them. This, in turn, leads to the improvement of plans and services. And besides, these plans and providers might also get financial incentives for the excellent work.
Components of Medicare Advantage Payment
Medicare Advantage Payment has four components that determine what is paid to Medicare Advantage Plan to provide care for beneficiaries.
The base rate is the lower of the benchmark rate and the plan's bid. In simple terms, when a plan's bid is below the benchmark rate, then that is the base rate. Likewise, if the benchmark rate is lower than the plan's bid, the benchmark rate is the Base rate.
CMS always determines the average FFS Medicare spending in each county. And after making some calculations and adjustments for the location or area, it then becomes a benchmark. When CMS compares each plan's bids with the benchmark, the lower of the two then becomes the Base rate.
Risk adjustment is a system that CMS uses to adjust a plan's base rate to show every enrollee's health status. With this, the payments made to Medicare Advantage plans will show the projected cost of healthcare for every beneficiary. For example, if someone's risk adjustment score shows 1.0, it means the projected cost of healthcare is the same as the average beneficiary's health cost. Also, if an enrollee's risk score is 3.0, then his/her health cost will be projected to cost 3 times the average health cost.
Plans can charge a premium on their enrollees each month. This usually happens when a plan’s bid is higher than the benchmark. In light of this, when the plan doesn’t bid above the benchmark, then there is no enrollee premium.
Plans that bid lower than the CMS benchmark will get a percentage of the difference between the bid and the benchmark. Plans will get percentages ranging from 50% to 70% of the difference. However, the amount received by the plans is determined by the plan's quality star rating. Considering this, plans usually strive to get higher star ratings to be entitled to higher rebates.