About 44 million people are enrolled in Medicare, the federal health insurance I program for seniors. Generally, it's available to Americans age 65 and older.

Most participants choose "original Medicare (the term used by the government). They can select any doctor or hospital that accepts Medicare and Medicare picks up most of the cost.

Alternative: Almost nine million Medicare beneficiaries—nearly 20%—have opted out of the original Medicare program.

These seniors have so-called private Medicare coverage, run by companies, not by the federal government. Several forms of private Medicare are available, collectively known by the government as Medicare Advantage programs. Why people choose private Medicare…

  • Medicare Advantage programs may be less costly to participants than original Medicare.
  • More comprehensive services are offered to patients.
  • Participants in original Medicare sometimes have to pay considerable out-of-pocket expenses. Private Medicare can help you avoid this.

Example: Under original Medicare, you typically pay 20% of doctors' bills while Medicare pays 80%. Your share might be thousands of dollars a year. Many original Medicare beneficiaries buy a Medicare supplement ("Medigap insurance policy to cover these potential expenses. However, the premiums for such policies can be substantial.

  • With private Medicare Advantage plans, there is no need to buy a Medigap policy. You can get comprehensive care, often at a lower out-of-pocket cost.

But there are trade-offs. Before making any decisions, it's vital to understand the fine print.

Types Of Private Medicare

Most Medicare Advantage programs are health maintenance organizations (HMOs) or preferred provider organizations (PPOS).

Many Americans become familiar with HMOS and PPOs during their working years. A network of doctors and hospitals is offered to covered individuals, who bear little or no cost beyond their premiums if they stay within that network. Generally, PPOs are more expensive than HMOS but offer more coverage for out-of-network care than HMOs.

Downside: You have less freedom to choose providers than with original Medicare.

In recent years, yet another private optionMedicare private fee-for-service (PFFS) planshave stolen the spotlight from Medicare HMOS and PPOS. According to the Congressional Budget Office, enrollment in Medicare PFFS plans grew from 200,000 in late 2005 to 1.35 million in early 2007.

Why they grew: These plans claim to offer the advantages of Medicare HMOs and Medicare PPOs (comprehensive care with, potentially, lower costs than original Medicare) without the restrictions of staying in a provider network.

How they work: If you're in a PFFS plan, you may see any doctor or go to any hospital that accepts the plan terms. You show a card to prove that you are in the plan. But it is up to the doctor or hospital to decide whether to treat you—they decide on a case-by-case basis.

Trap: Some seniors have signed up for PFFS plans, only to discover that many physicians won't treat them.

My advice: Do not use a PFFS plan. They are poorly designed. Just the fact that you may be denied care by any doctor at any visit makes them a poor choice.

How To Choose

When deciding among Medicare options, the key is comparing what you'll pay and get with original Medicare with what you'll pay and get with a selection of private Medicare plans.

Reality: You can never know with absolute certainty whether original or private Medicare will turn out to be the best deal for you, because you cannot perfectly predict your own future health needs. But, in general, the more health care that people need, the more they will benefit financially from using a private network, because their out-of-pocket costs (copayments, etc.) will probably be lower than with Medicare.

Typical costs: Although each Medicare HMO and Medicare PPO has its own rules and costs, participants in both types must be enrolled in Medicare Part A (hospital coverage) and Part B (coverage for doctors' visits). For the vast majority of people, those who have worked and paid Medicare taxes for at least 40 quarters in their lifetimes, there is no monthly premium for Part A. In 2007, the monthly Part B premium ranges from $93.50 to $161.40, depending on the participant's income.

Some private plans do not charge anything more, but many others do…

  • Medicare HMOs charge an average of $20 a month, over and above the Part B premium. For HMOs that offer a prescription drug benefit, the average extra charge is nearly $40 a month.
  • Medicare PPOs charge about $20 to $40 above the Part B premium without prescription drug coverage, and about $40 to $50 more with the drug benefits. Prices vary widely depending on competitive market forces in each region.

In return for paying those extra fees up front, private Medicare participants may realize cost savings overall. Examples…

  • You won't need a Medigap policy. In fact, private Medicare enrollees are prohibited from buying this insurance.
  • Private Medicare plans also may offer checkups, dental care and vision coverage—so you might be able to avoid having to pay for these services.
  • Copayments may be lower with private Medicare than with original Medicare,

Bottom line: Some private Medicare plans can be good deals. Others will wind up costing you more than you would pay with a MedicareMedigap combination.

If you have used an HMO or a PPO during your working years, and you know how these systems work, a Medicare version may be a practical choice because you'll know how to "work the system" to get adequate coverage while enjoying the cost savings. If you would rather not be confined to a network, opt for original Medicare with a Medigap policy.

Best: Check with your current physicians before signing up for any kind of private Medicare. Some of these programs are very limited in terms of participating doctors and hospitals.

Read the plan documents closely. Generally seniors may move in and out of private Medicare plans during the annual election period from November 15 to December 31. (You can do the same from January 1 to March 31, but you cannot add or drop Medicare prescription drug coverage during this time.)

After you make such a choice, you're usually locked in until the next annual election period. However, seniors who were misled into signing up for a private Medicare plan can change coverage right away.

Potential cutbacks: The Children's Health and Medicare Protection Act, the details of which are currently being worked out in a House-Senate conference committee, is expected to sharply decrease funding for Medicare Advantage plans. If the measure is enacted as expected, such cuts likely would reduce the number of providers participating in private Medicare.

Safety net: You can choose to drop private coverage and enroll in original Medicare within specific periods, as described above.

What To Do Next

To start comparing and shopping for private Medicare plans, visit the Medicare Web site (www.medicare gou). Click on "Learn more about plans in your area." Enter your state and county to find details on what's available, with contact data for each plan.

Also: Some Medicare Advantage plans are evaluated by the National Committee for Quality Assurance, with results published periodically in US News & World Report. To see how several plans rank, go to http://health.usnews. com, type "best health insurance" into the search box, then click on "Medicare Plans" under "Rankings."

If You Were Misled…

People in private Medicare plans can disenroll I if they signed up after receiving misleading information, according to the US Department of Health & Human Services' Centers on Medicare & Medicaid Services. To find out if you can change your coverage, call the Centers' hotline at 800-633-4227. Provide as much detail as possible, including the name of the person who provided the wrong information, along with the date and time.

Claims of misleading information can be made whenever the plan member discovers that a promised benefit isn't available.

Examples: If the member was told that all health care providers participate in the plan when in fact they do not...incorrect assurance that the member can transfer to traditional Medicare at any time.

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