Medicare vs. Medicare Advantage: Making sense of the political ads

Florida Gov. Rick Scott, like many other Republicans, has pinned part of his re-election strategy on criticizing the Affordable Care Act. He’s attacked President Barack Obama’s signature legislation time and again in campaign ads, especially the law’s effects on Medicare. The ads claim that rate cuts will drastically alter seniors’ access to the doctors and care they want.

But the ads aren’t  telling the whole story. The Scott ads are about changes to Medicare Advantage, in which private companies administer insurance plans for Medicare-eligible recipients. That’s not the same as what’s referred to as traditional Medicare, which is what most people think of when they hear the name of the program.

Confused? That’s probably the point. But don’t worry, PolitiFact is here to help. We’ll iron out the differences between the two programs, and why distinctions should be made when referring to Medicare.

You get what you pay for

In a nutshell, the main difference between traditional Medicare and Medicare Advantage is who runs the program.

The Medicare program has been available to retirees since 1966, and was designed to help provide seniors with subsidized health insurance. It includes Part A, which is for hospital care, and Part B, which is medical insurance, usually physicians’ services.

In the 1970s, the government started to let private insurers into the Medicare business. The insurance companies run the plans and then get reimbursed by the government. The plans must cover all the same things Medicare does, and often include perks traditional Medicare does not, like vision or dental coverage or gym memberships.

The umbrella over these private plans was renamed Medicare Advantage, or Medicare Part C, in 2003. A prescription drug program is now called Part D.

About 15 million people are enrolled in Medicare Advantage, about a third of all Medicare recipients nationwide.

Here’s a table illustrating the main differences between the government-run and privately run programs:

traditional Medicare

Medicare Advantage

Coverage

Offers hospital coverage and separate coverage for physicians services (Parts A & B)

Offers hospital coverage and physicians services, but plans often include vision, dental or wellness programs. Coverage is bundled together as one plan.

Administered by

The federal government, which pays providers directly

Private insurers, reimbursed by the federal government

Doctor choice

Any health care provider, doctor or hospital that accepts Medicare

Limited to providers in the private plan’s network (HMO, PPO)

Premiums

A monthly premium for health coverage (Part B), currently starting at about $105 per month, depending on income; hospital coverage (Part A) has no premium in most cases

A monthly premium that can be lower than traditional Medicare

Deductibles / coinsurance

Usually 20 percent, paid by patient or patient’s Medicare Supplemental Insurance (also called Medigap)

Patient responsibilities depend on the type of coverage selected, and whether a procedure is covered or not (Medigap coverage is not available, but coinsurance rates are often lower than traditional Medicare)

Source: Medicare.gov

Why would someone choose Medicare Advantage over traditional Medicare?

Medicare Advantage plans can offer coverage with premiums lower than traditional Medicare, which can be a big help to seniors on a tight monthly budget. Typically, the plans offers more generous coinsurance.

On the other hand, people in Medicare Advantage are restricted as to which providers they can see. Just like private insurance, the doctors in their networks can change.

People who are in traditional Medicare, on the other hand, can see any doctor or specialist who accepts Medicare.

People can choose their Medicare plan each year during open enrollment, which is in the fall. That’s when the different Medicare Advantage plans announce their offerings, and it’s the time of year when seniors can change plans if they don’t like what they currently have.

Making cuts

Now that we know what Medicare Advantage is, why would it be cut?

The idea behind Advantage plans is that private insurers could administer Medicare coverage for less than the federal government could, and at some points that has been true. Currently it is not. When the Affordable Care Act was being debated in 2009, Advantage plans were being reimbursed at a rate 14 percent higher than traditional Medicare, on average.

Obamacare aims to pare down those overpayments and bring reimbursements in line with traditional Medicare, to the tune of $156 billion over 10 years.

That’s been anathema to the private insurers, who have claimed the changes will result in higher rates, reduced services and fewer in-network doctors -- all of which would lead to reduced enrollment. Several lawmakers have joined in this debate, siding with the insurance lobby. Medicare advocates, on the other hand, say the insurance companies are using scare tactics to keep reimbursements high and maximize profits.

So far, Obamacare hasn’t harmed Medicare Advantage. Coverage has stayed largely the same, premiums have been flat and enrollment has gone up since the legislation became law.

Still, Democrats were relieved when the Centers for Medicare and Medicaid Services announced this week that it would be giving Medicare Advantage a 0.4 percent increase for 2015 instead of 2 percent cut. Democrats hope it will take that away from the GOP as an issue in fall campaigns.

That brings us back to Scott, who has not been making the distinction in his campaign advertising. In one Web ad, he said doctor access would decrease and services would be cut, but didn’t mention cuts were for Medicare Advantage, and doesn’t note the true effects won’t be known for months. Meanwhile, these cuts don’t target people in traditional Medicare. We rated it Mostly False.

In a Spanish-language editorial in El Nuevo Herald he cited potential Medicare Advantage premium increases of $50 to $90 as fact, when they were only year-old estimates by the insurance lobby. Even the group that commissioned the report from which the projection was culled says it wasn’t the proper number for Scott to use. Again, any such premium change wouldn’t apply to traditional Medicare. We also rated that one Mostly False.

Like Scott’s references to Medicare, many of the advertisements about this subject have not been clear that the reductions in payments will be going to Medicare Advantage. And even if that distinction were made clear, so far the changes haven’t affected the program in the drastic way opponents have predicted.

Editor's note: This report was changed after publication to clarify language about how premiums for Medicare Advantage work.