Medicare Advantage Plans

Today’s Medicare program consists of four parts: Part A, Part B, Part C, and Part D. Parts A, B, and D are the components that provide distinct coverages and benefits; Part C is a method that individuals can elect for the delivery and receipt of the benefits of Parts A and B, and often Part D as well.

Part A

The Part A element of Medicare is known as “Hospital Insurance.” It helps cover the costs of inpatient care in a hospital or skilled nursing facility care, hospice care, and some home health care.

Part B

Part B of Medicare is the “Supplementary Medical Insurance” element. It helps cover the costs of physician services, outpatient care, home health services, and durable medical equipment. It also covers certain preventive care services and screenings.

Part D

Added to the Medicare program in 2006, Part D helps cover the cost of prescription drugs. Though Part A does cover drugs delivered as part of a Medicare-covered inpatient hospital stay and Part B covers some outpatient drug therapies (such as chemotherapy), neither covers the kinds of outpatient drugs that are routinely filled at a pharmacy. This letter is provided by Part D. Part D coverage is obtained through plans offered by private insurance companies.

Part C

Part C is not a separate benefit; rather it is a Medicare-approved alternative for the delivery and receipt of Original Medicare. Effectively, it “bundles” the coverages and benefits of Parts A and B—and often Part D as well—into an all-in-one plan in which an individual can enroll. Part C plans are private insurance plans offered by private insurance companies that contract with the federal government to deliver Medicare services through networks of hospitals, physicians, and health care providers, which, in turn, contract with the Part C insurance company. Part C plans are typically known as Medicare Advantage, or MA, plans. If the plan includes Part D coverage for prescription drugs, it is called a Medicare Advantage-Part D, or MA-PD, plan.

Medicare Supplement Insurance (Medigap)

Though technically not a “Part” of the program, Medicare supplement plans, also known as Medigap policies, were introduced soon after the Medicare program was enacted. These are private insurance plans issued by insurance companies that are designed to cover the “gaps” associated with Part A and Part B coverage. These plans are not available to those who choose to receive their Medicare coverage through a Part C or Medicare Advantage plan. They’re available only to those who elect Original Medicare.

Medicare Administration

Medicare is run by the Centers for Medicare and Medicaid Services (CMS), an agency of the U.S. Department of Health and Human Services. The program covers millions of individuals, with annual expenditures in the hundreds of billions of dollars.

When Medicare was first signed into law, it was designed and intended to be a health insurance program only for those 65 and older. However, over time it has expanded. Today, Medicare serves the following groups of people:

• Those ages 65 and older
• those under age 65 who:
  • are disabled and have received Social Security disability (or Railroad disability) payments for a certain period of time
  • suffer from end-stage renal disease (ESRD¹ ) or Lou Gehrig’s disease (ALS)

Those Ages 65 and Older

Individuals automatically qualify for Medicare once they turn age 65 and are eligible to collect (or are collecting) federal Social Security retirement benefits or Railroad Retirement benefits from the Railroad Retirement Board (RRB). This means that they must have earned 40 work credits—which equates to about ten years of work—and must have paid into the Social Security (or RRB) and Medicare systems through associated Federal Insurance Contributions Act (FICA) or self-employed payroll taxes.

Those age 65 who are current U.S. residents can also qualify for Medicare without Social Security or RRB retirement benefits if they are a U.S. citizen or a permanent U.S. resident who has lived in the United States for five consecutive years prior to applying for Medicare.

Unlike in cases with Social Security’s early retirement benefits, individuals who are not disabled cannot elect to receive Medicare benefits any earlier than age 65.

Those who have not reached age 65 may qualify for Medicare if they’ve been determined to be totally disabled and have been receiving federal disability payments from Social Security or the Railroad Retirement Board for at least 24 months. Qualifying for Social Security (or RRB) disability benefits also requires having earned a certain number of work credits.

Individuals who have ESRD can also qualify for Medicare before the age of 65 if they or a family member has sufficient Medicare work history under either Social Security or the RRB.

Individuals younger than 65 who have ALS will also qualify for Medicare once they start receiving Social Security disability benefits; however, there is no 24-month waiting period. They can enroll in Medicare immediately upon receiving disability benefits.

¹ ESRD is the stage of kidney failure that appears irreversible and permanent and requires a regular course of dialysis or a transplant to maintain life.

Medicare is financed primarily through three sources:

• general revenues
• payroll taxes
• Medicare beneficiary premiums

Part A is mainly funded through a payroll tax on earnings paid by both employers and employees (each paying 1.45 percent of the employee’s earnings). Higher wage earners pay a higher payroll tax on their earnings. Self-employed individuals also pay into the program through a tax on their earnings. The taxes are directed to the “Medicare Hospital Insurance Fund,” from which Part A benefits are paid.

Part B is funded through general revenues and premiums paid by Medicare enrollees for their Part B coverage. All enrollees pay a monthly premium for their Part B coverage; higher income earners pay an additional income-related adjustment for their Part B premiums. These funds are directed into the “Supplementary Medical Insurance Trust Fund.”

Part D is financed through general revenues, enrollee premiums, and state payments for those who are eligible for both Medicare and Medicaid. Again, higher income enrollees pay a higher premium for their Part D coverage.

Part C, Medicare Advantage, is not financed separately. The funds derive from Part A, Part B, and Part D financing resources. MA plan enrollees are still responsible for paying their Part B premium to Medicare, and Medicare pays for the plan on a cost-per-enrollee basis. Some MA plans may charge their enrollees a separate premium for the plan’s coverage.

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Medicare Part A provides coverage for costs associated with hospitalization. As noted, the health care costs covered by Part A fall into the following categories: inpatient hospital care, skilled nursing facility care, skilled home health care services, and hospice care.

Inpatient Hospital Care

Part A hospital coverage applies for treatment or items related to an admitted (inpatient) hospitalization that are considered medically necessary—that is, necessary for the diagnosis or treatment of a medical condition. Inpatient costs covered under Medicare Part A include:

Skilled Nursing Facility Care

• A skilled nursing facility stay must be immediately preceded by an inpatient hospital stay for a related injury or illness of at least three days.
• A physician must certify that the patient needs daily skilled nursing care such as intravenous injections or physical therapy.

Medicare Part A covers the costs of an inpatient stay in a skilled nursing facility (often referred to as SNF care) only if both of the following conditions are met:

SNF care costs covered by Medicare include:

Note Skilled nursing facility care refers to care and services required by the patient that only a trained medical professional can perform. Skilled nursing facility care is not long-term care or custodial care. Individuals who only need and receive assistance with the activities of daily living, such as bathing, eating, dressing, walking, and so on, are receiving custodial care .If a patient needs SNF care and also receives custodial care in the skilled nursing facility, Medicare will pay for the custodial care services provided by the skilled nursing facility. But neither Medicare nor Medigap insurance will pay for custodial care by itself. Private insurance coverage for the cost of custodial care alone can only be provided by long-term care insurance.

Home Health Care Services

Medicare covers the costs of having an agency provide part-time or intermittent skilled health care services in the patient’s home if all of the following four conditions are met:

• Care must be medically necessary.
• The care must be ordered by a physician.
• The care must be provided by a Medicare-certified home health agency.
• The patient must be homebound, meaning that leaving the home requires a great deal of effort and is done only infrequently.

The part-time or intermittent home health care services that Medicare will pay for under these conditions must include skilled care. Medicare does not cover custodial home health care services (such as help with bathing, eating, or dressing) when custodial care is the only type of care needed. Approved Medicare coverage for care delivered in the home would also include medical social services, home health aide services, medical supplies, and durable medical equipment used in the home.

Coverage for Hospice Care

Medicare covers the costs of providing hospice care to individuals who are certified as having six months or less to live. The hospice that provides the care must be Medicare-approved. Covered items include:

• drugs used for pain relief and symptom management
• nursing and other medical services
• Grief counseling and other social services are usually not covered by Medicare

Hospice care is usually provided in the patient’s home or other facility (e.g., when the patient is living in a nursing home). Short-term inpatient stays in a hospital, hospice facility, or skilled nursing facility may be approved if required for pain relief or symptom management, or to provide a respite for the patient’s usual at-home caregiver.

Part B Coverage

Medicare Part B is designed to cover the costs of physician visits and treatment received as an outpatient, generally for conditions that do not require hospitalization. Part B also covers the costs of doctor’s services during inpatient hospitalization. Part B covers many preventive health care services, consistent with the requirements of the Affordable Care Act.

Part B covers both medically necessary and preventive services.

Medically Necessary Services

Examples of medically necessary services covered under Part B include the following:

Preventive Services

Part B covers many preventative services, typically at no charge at all to the Medicare recipient. These are common examples of preventative services:

Part D Coverage

Medicare Part D first became available in 2006 following enactment of the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) in 2003.

Part D prescription drug coverage may be obtained in one of two ways: Part D coverage may be purchased as a separate stand-alone prescription drug plan (PDP), or it may be obtained by choosing to enroll in a Medicare Advantage plan that includes prescription drug coverage (MA-PD).

Part D plans are operated by private insurance companies that are given considerable flexibility to set premiums and cost-sharing provisions. While all plans must offer coverage that at least meets certain minimum requirements, plans are free to provide additional coverage and services that exceed the minimum requirements, and they may charge a premium that appropriately reflects the value of the plan. Therefore, premiums for Medicare Part D vary from plan to plan.

Basic Part D Coverage

A Medicare Part D prescription drug coverage plan must meet, at a minimum, the requirements of standard coverage, sometimes also referred to as “basic coverage” or “the basic plan.” Standard coverage is defined as coverage that offers specific coverage and includes the following:

• annual deductible that does not exceed the amount established by CMS (This amount is subject to change every year.)
• a 25 percent copayment after the deductible has been met, up to the initial coverage limit (established by CMS and subject to annual adjustment)
• catastrophic coverage that pays for all prescription drug costs except for the greater than 5 percent coinsurance or a flat copayment once the total amount spent by the enrollee for prescription drugs reaches a stated out-of-pocket limit (Both the flat copayment amounts and out-of-pocket limit are subject to annual inflation adjustment by CMS.)

Formulary Requirements

Generally, Medicare Part D prescription drug coverage must include the following:

• coverage of at least two medications in each class of drugs (A “class” is a group of drugs with a similar chemical structure or therapeutic effect—e.g., antacids, antibiotics, and decongestants are each a drug class.)
• coverage of substantially all drugs in the following six categories:

• Anti-depressants
• Anti-psychotics
• Anti-convulsants
• Anti-retrovirals (AIDS treatments)
• Anti-neoplastics (used in chemotherapy) cancer drugs
• immunosuppressants

• a provision for enrollees to request coverage of a noncovered drug or challenge denial of coverage for a drug
• a pharmacy network providing convenient access for enrollees
• a procedure to provide lists of covered drugs and network pharmacies to enrollees
• a procedure to assist enrollees in their transition to the plan based on their current drug coverage
• an “Explanation of Benefits” statement provided to each enrollee each month in which he or she fills a prescription, summarizing the enrollee’s claims and costs

Payment Tiers

Medicare Part D prescription drug coverage plans usually place their drugs in different “tiers,” or levels. Each tier corresponds to a different copayment amount or coinsurance percentage. The higher the tier, the higher the enrollee’s cost of buying the drug. Generally, generics will fall in the lowest tier. Commonly, a tiered Medicare Part D prescription drug plan’s formulary of covered drugs will have three to five tiers—a four-tiered formulary is very common.

What Original Medicare Does Not Cover

As the preceding list makes clear, there are numerous costs for which an Original Medicare enrollee is responsible, including deductibles and coinsurance amounts. These are the “gaps” in traditional Medicare coverage, many of which a Medigap or Medicare supplement plan is designed to cover, either partially or fully.

Though Original Medicare covers an array of care and services, it does not cover everything. Parts A and B both exclude certain types of care, treatments, and supplies. These exclusions include:

• Acupuncture
• cosmetic surgery
• custodial care or long-term care (nursing home or assisted living care)
• most care obtained outside the United States
• most chiropractic services
• most dental care
• most routine eye care
• most routine physical exams (other than an initial “Welcome to Medicare” exam and annual wellness exams)
• Routine foot care
• Routine hearing exams and hearing aids
• most prescription drugs taken as an outpatient

2. 3 – Medicare Advantage (Part C)

In contrast to Original Medicare is Medicare Part C, more commonly known as Medicare Advantage, or MA. An alternative for the receipt, payment, and delivery of Medicare benefits, Medicare Advantage is a program consisting of private health plans offered by private insurance companies that contract with CMS to deliver Medicare-covered services to the plans’ enrollees. An individual who enrolls in a Medicare Advantage plan is still enrolled in Medicare and is given all of the program’s rights and protections. The difference is that the plan is operated and administered by the issuing insurance company, not Medicare. Claims made by a plan’s enrollees are paid for by the MA plan, not Medicare.

At a minimum, every approved Medicare Advantage plan must cover all of the services and benefits that Parts A and B cover. However, MA plans can provide for additional services and coverages beyond what Original Medicare offers—supplemental benefits—including prescription drug, vision, and dental coverage. – The majority of MA plans include prescription drug coverage.

Enrollment in an MA plan requires an individual to be covered by both Part A and Part B.

Managed Care

Medicare Advantage plans are managed care insurance plans. They were authorized by Medicare a number of years ago to give Medicare recipients a choice of coverage beyond the traditional fee-for-service model and to gain the kinds of cost savings and efficiencies that managed care had provided in the private insurance sector.5 The Medicare Advantage plan accepts the responsibility for the cost of its enrollees’ Medicare services in exchange for a monthly per-enrollee payment from Medicare. In addition, Medicare makes a separate payment to plans that provide Part D prescription drug coverage (just as it does to insurers that offer stand-alone Part D plans).

MA plans have defined geographic service areas. To enroll in a plan, an individual must live within the plan’s service area. Rather than presenting a Medicare card when receiving treatment or services, an MA enrollee will present his or her MA plan membership card.

CMS Certification

Organizations seeking to offer an MA (or MA-PD) plan must enter into a contract with CMS. The contract specifies that the plan is a “risk-based” plan: that is, the plan assumes liability for the cost of its enrollees’ Medicare health care; in turn, the plan receives payments from Medicare based on specific formulas.

The first step in the contracting process is for the MA organization to submit an application to CMS. CMS evaluates the application on the basis of the information it contains and through other means, such as on-site visits and public hearings. If CMS approves the application, it provides written notice to the MA organization, indicating that it meets the requirements for an MA contract.

Each MA contract is for a period of at least 12 months and is effective on the date specified in the contract between the MA organization and CMS. A single MA contract may cover more than one MA plan offered by the contracting MA organization.

MA Funding and Costs

If the plan’s bid is higher than the benchmark, its enrollees pay the difference between the bid and the benchmark in the form of monthly premiums to the plan. If the bid is lower than the benchmark, the plan and Medicare will split the difference, with up to 70 percent of the difference going to the MA plan in the form of a rebate. Rebates are to be used to provide supplemental benefits to the plan’s enrollees, reduce their cost-sharing amounts, or reduce their premiums.

Medicare Advantage plans are funded by the federal Medicare program through the bidding process. Plans to submit per-enrollee bids to Medicare are based on estimated costs for providing an enrollee with covered services for Parts A and B. These bids are compared to “benchmark” amounts, which are the statutory amounts that Medicare will pay for a plan in a specific geographic area, according to Medicare’s fee-for-service schedules and definitions of “reasonable” costs for services.

Other MA Costs

Whether or not an MA plan charges a monthly plan premium, it is likely to impose other costs on the services and treatments it covers. These other costs may include:

• a deductible—an amount that an enrollee must pay before the MA plan pays its share of covered costs.
• a copayment—a set dollar amount enrollees have to pay for a covered service (such as $20 for each physician visit)
• a coinsurance payment—a percentage of the total cost that the enrollee must pay for a covered service (such as 20 percent).

Medicare Advantage plans are given flexibility in setting their premium rates, deductibles, coinsurance amounts, and copayments. These can vary greatly from plan to plan and are also influenced by the area or region in which the plan operates. Generally, benefits under an MA plan that are the same as Original Medicare must be provided at the same cost-sharing level that, in total, is no greater than Original Medicare.

Limit on Out-of-Pocket Costs

Unlike original Medicare, MA plans do impose limits on the amount of out-of-pocket (OOP) costs their enrollees are responsible for each year. Once that limit is reached, the MA plan pays 100 percent of the cost of any covered service or treatment for the remainder of the year. The maximum out-of-pocket limit is set each year by CMS; however, MA plans can stipulate lower OOP limits for their enrollees.

⁵ The Medicare Advantage program originated with the Tax Equity and Fiscal Responsibility Act (TEFRA) in 1982, which authorized Medicare to contract with risk-based private health in exchange for prospective, per-enrollee monthly payments. This program has been called by a variety of names over the past three decades, including Medicare+Choice.

2. 4 – Types of Medicare Advantage Plans

Medicare Advantage plans can take a number of different forms; however, the majority are offered as:

• preferred provider organization (PPO) plans, either regional or local
• health maintenance organization (HMO) plans

Preferred Provider Organization Plans

Preferred provider organizations contract with various hospitals, physicians, and other types of health care providers to form a network that offers a complete range of care. Medicare Advantage PPO plans encourage enrollees to choose providers in the PPO network by making it less costly to use network providers than to go out of network for care.

For example, a doctor’s visit to one of the physicians in a PPO’s network might be covered in full at no cost to the beneficiary, while the fee for an out-of-network doctor visit might require a 50 percent coinsurance payment. Patients can still choose that out-of-network physician, but doing so would come at a higher price than using a health care provider within the PPO’s network. Although the plan may charge different cost sharing for services received out-of-network, all appropriate services must be available to the plan’s enrollees.

With most PPO plans, the Medicare beneficiary usually does not need a referral from a general practitioner in order to see a specialist. Under the PPO plan, the Medicare beneficiary generally is given direct access to all of the services offered by the network.

Local vs. Regional PPOs

Local PPO plans cover an area no smaller than a county; regional PPOs cover much larger areas, such as an entire state. The latter were established to provide better access to MA plans for those who live in rural areas.

Health Maintenance Organization Plans

Health maintenance organization plans also have a network of providers that provide a full range of health care. However, unlike a PPO, HMO plans are generally stricter about using network providers.

In an HMO, out-of-network care may not be covered at all; that is, a Medicare beneficiary who goes to a provider who is not in the HMO network may be required to personally pay the full amount of that provider’s fee. Another feature that generally distinguishes HMO plans from PPOs is that in an HMO, a patient often may not access specialists without a referral from his or her primary care physician—a general practitioner who acts as a gatekeeper to the HMO’s other services. These more rigorous policies are designed to allow HMOs to provide the full range of a patient’s care in the most cost-effective way possible, enabling the savings to be passed along to the Medicare beneficiary typically in the form of lower premiums, lower copayments, and/or lower coinsurance percentages.

Comparing Costs

The following compares the in-network costs of two hypothetical Medicare Advantage plans. One is an HMO; the other is a PPO. Both include coverage for prescription drugs and are provided by MA insurer, Silver Lining Insurance.

.	Silver Lining HMO	Silver Lining PPO
Monthly plan premium (in addition to Part B monthly premium)	$0	$32
Annual deductible	$0	$0
Primary care physician visit	$5 co-pay	$10 co-pay
Specialist visit	$30 co-pay	$45 co-pay
3-month supply prescription drugs (Tier 1 and Tier 2)	$0 co-pay	$0 co-pay
Annual out-of-pocket maximum	$3,800	$3,800
Access to specialists	May require referral	No referral required for in-network specialists

Other Types of MA Plans

Combined, HMOs and PPOs account for the vast majority of Medicare Advantage enrollments. Other less utilized types of MA plans include:

• HMOs with point of service (POS) option—POS plans are HMOs but provide more flexibility for allowing enrollees to seek care outside the network under certain conditions. Enrollees may pay more for using the out-of-network option.
• special needs plans (SNPs)—SNPs help manage the extra health care needs of individuals with certain chronic or disabling diseases, those living in a nursing home or certain other institutions, and those who qualify for both Medicare and Medicaid (dual eligibles).
• private fee-for-service (PFFS) plans—PFFS plans operate on a fee-for-service basis like Original Medicare, except that the PFFS plan, rather than Medicare, establishes the approved amount that will be paid for each service. Cost-sharing provisions—deductibles, coinsurance percentages, and copayments—of a PFFS plan may be different than those of Original Medicare.
• medical savings accounts (MSAs)—MSA plans, similar to health savings accounts, combine a high-deductible health plan (HDHP) with a medical savings account, into which Medicare deposits funds. The account owner can use the funds to cover his or her Medicare costs until the HDHP deductible is met.

Note Medicare Advantage plans are also available as group plans, which are often used by employers, unions, and local government units to provide their retired employees or retired members with retiree health insurance. Group MA plans may be subsidized by the group sponsor and offer the enrollee broader coverage than he or she would otherwise have under original Medicare. Group plans have gained popularity because they help organizations and public entities limit health care costs for retirees and are also an attractive employee or member benefit.

Star Ratings

Medicare Advantage plans are subject to quality ratings by CMS. Known as the star rating system, it provides consumers with additional information about plans available in their area, which can help with their plan selection. Plans are rated on a one- to five-star scale, with one star representing poor performance, three stars representing average performance, and five stars representing excellent performance. (Performance is based on select criteria and pertains to the plan’s network providers.) The quality ratings are assigned at the contract level; consequently, each plan covered under the same contract is given the same quality rating.

Plans with four or more stars receive “quality bonus payments” from Medicare, and plans with higher star ratings are able to retain a larger share of rebates. Five-star plans have their own special enrollment period and can be marketed and sold throughout the year. Beneficiaries may use the five-star special enrollment period one time between December 8 of the current year and November 30 of the following year where they can switch to a five-star MA plan, a five-star MA-PD plan, or a five-star PD plan.

Supplemental Benefits

In 2003, as a result of the Medicare Prescription Drug, Improvement, and Modernization Act (which introduced Part D), federal payments to MA plans were increased in order to expand their role in the Medicare program and offer beneficiaries a greater choice of plans as well as access to additional, supplemental benefits beyond those provided by Original Medicare.

These supplemental benefits are a key differentiator for MA plans and may be one of the reasons why an individual chooses to enroll in an MA plan instead of Original Medicare. Certainly, they are key to CMS’s efforts to provide new, innovative health care options and improved outcomes for Medicare beneficiaries. Supplemental benefits are the topic of the next chapter, where they are examined and discussed in detail.

Coverage Changes Due to COVID-19

On April 21, 2020, CMS issued guidance with regard to Coronavirus Disease and Medicare Advantage plans.⁸ During the period of a declared emergency and any extensions, the following guidance is in effect.

Coverage of Testing and Testing-Related Services

Medicare Advantage plans may not charge cost sharing (including deductibles, copayments, and coinsurance) for:

• clinical laboratory tests for the detection of COVID-19 or for the administration of such tests
• COVID-19 testing-related services for which payment would be payable under outpatient coverage
• COVID-19 vaccines and administration

Note HHS must renew the federal public health emergency (PHE) related to COVID-19 every 90 days to maintain certain health care flexibilities and waivers. The PHE has been renewed throughout the pandemic and remains in effect as of 2023.9

Prior Authorization

Medicare Advantage plans may not impose any prior authorization or other utilization management requirements with respect to coverage for COVID-19 testing. In addition, plans may choose to waive or relax their prior authorization requirements in order to facilitate access to services with less burden on beneficiaries, plans, and providers.

Out-of-Network Services

Medicare Advantage plans are required to cover services at out-of-network facilities that participate in Medicare. Plans must charge enrollees who are affected by the emergency and who receive care at out-of-network facilities no more than they would pay if they had received care at an in-network facility.

Additional or Expanded Benefits

Plans may implement additional or expanded benefits that address issues or medical needs raised by the COVID-19 outbreak, such as covering meal delivery or medical transportation services to accommodate efforts to promote social distancing.

Cost Sharing

Medicare Advantage plans may waive or reduce enrollee cost sharing for COVID-19 treatment, telehealth benefits, or other services to address the outbreak, as long as the plan waives or reduces cost sharing for all similarly situated enrollees on a uniform basis.

Telehealth

Plans may provide enrollees access to Medicare Part B services via telehealth in any geographic area and from a variety of places, including beneficiaries’ homes.

Involuntary Disenrollment

Due to the urgent need to ensure that enrollees have continued coverage and access to sufficient health care items and services, CMS adopted a temporary policy of relaxed enforcement with respect to MA plans that choose to delay involuntary disenrollment of enrollees who are temporarily absent from their service areas for longer than six months due to COVID-19.

Additional Flexibilities

There may be other circumstances where an MA plan should implement strategies or actions deemed necessary, but which do not fully comply with CMS program requirements. In order to provide coverage to enrollees while ensuring they are also protected from the spread of COVID-19, CMS will consider these special circumstances.

⁸ Department of Health & Human Services, CMS, “Information Related to Coronavirus Disease 2019 – COVID-19,” April 21, 2020.

⁹ “Declarations of a Public Health Emergency,” U.S. Department of Health and Human Services, January 11, 2023.

Other Coverage Changes

In 2023, typical Medicare beneficiaries have 43 MA plans to choose from in their local markets, including 35 plans that offer Part D drug coverage.¹⁰ Significant changes were made recently to Medicare Part D, and these are summarized here since most MA plans include Part D:

• The Department of Health and Human Services is required to negotiate maximum fair prices with drug manufacturers beginning in 2023 to be effective in 2026.
• Drug manufacturers will be required to pay rebates to the federal government if their prices for single-source drugs and biologicals covered under Medicare Part B, and nearly all covered drugs under Part D, increase faster than the rate of inflation.
• Beginning January 1, 2023, Medicare Part D enrollees no longer have a deductible for insulin, and beneficiary coinsurance for insulin may not exceed $35 a month. Beginning July 1, 2023, the Part B deductible is waived for insulin furnished to a beneficiary via durable medical equipment (an insulin pump).

¹⁰ “The Average Medicare Beneficiary Has a Choice of 43 Medicare Advantage Plans and 24 Part D Stand-Alone Plans for Coverage in 2023,” Kaiser Family Foundation, November 10, 2022.

Summary

• There are basically two paths that lead to Medicare: Original Medicare and Medicare Advantage.
• “Original Medicare” refers collectively to the program’s Part A and Part B. Medicare-eligible individuals who choose to enroll in Original Medicare are enrolled in Part A and Part B and have the option to enroll in a separate stand-alone Part D prescription drug plan and/or in a Medicare supplement plan, both of which are outside the sphere of Original Medicare.
• Original Medicare is administered by the federal government, and care is delivered and paid for on a fee-for-service basis. Coverage under Original Medicare enables enrollees to use providers of their choice for their health care treatments and services.
• There are numerous costs for which an Original Medicare enrollee is responsible, including deductibles, coinsurance, and copayments.
• Medicare Advantage is a program consisting of private health plans offered by private insurance companies that contract with CMS to deliver Medicare-covered services to the plans’ enrollees.
• At a minimum, every approved Medicare Advantage plan must cover all of the services and benefits that Parts A and B cover. However, they can also offer additional—supplemental—benefits that are beyond the coverages and benefits available with Original Medicare.
• Medicare Advantage plans are funded by the federal Medicare program through a bidding process. If an MA plan’s bid is lower than the benchmark amount that Medicare will pay, the difference will result in a rebate to the plan.
• MA plan rebates are used to reduce a plan’s cost sharing or to provide supplemental benefits.

Overview

Medicare Advantage (MA) plans have long offered additional benefits and services beyond those available with Original Medicare. However, beginning in 2019, the scope and breadth of supplemental benefits that may be offered by Medicare Advantage plans were significantly expanded, as was a plan’s ability to target benefits to specific subsets of its enrollee population. This chapter covers these expanded Medicare coverage options—what they are and what they mean for Medicare beneficiaries.

Chapter Objectives

Upon conclusion of this chapter, you will be able to:

• cite common supplemental benefits offered by MA plans
• explain how these benefits are financed or paid for.
• describe the requirements that supplemental benefits must meet.
• explain the Centers for Medicare and Medicaid Services’ interpretations of “primarily health related” and “uniformity” and their effect on supplemental benefits.
• describe how Medicare Advantage plans can meet the needs of those who are chronically ill.

Revised Interpretation of “Primarily Health Related”

One of the first changes to come about was a broader interpretation by CMS of the term “primarily health related.” CMS had previously defined “primarily health related” to refer exclusively to the diagnosis, prevention, or treatment of an illness or injury. An item or service intended to provide daily maintenance was not eligible as a supplemental benefit.

However, upon examination of medical and health care research, CMS determined that certain items and services can diminish the impact of injuries and health conditions and can reduce emergency health care use. Consequently, the definition of “primarily health related” was reinterpreted to incorporate the following:

• diagnosis or compensation for physical impairments
• relieving the functional and/or psychological impact of health conditions or injuries
• reducing avoidable emergency and health care utilization

As a result, a service or item will be considered primarily health related if it is for the diagnosis, prevention, or treatment of an illness or injury and/or is intended for any of the three objectives noted above. Collectively and independently, the three additional objectives serve to maintain an individual’s health, in some way. Thus, the reinterpretation of primarily health related eliminates the previous exclusion for benefits that are intended to provide regular maintenance.

In the words of CMS, “This will allow MA plans more flexibility in designing and offering supplemental benefits that can enhance beneficiaries’ quality of life and improve health outcomes.”¹¹

New Supplemental Benefits—CMS Guidelines and Examples

Following its announcement regarding the reinterpretation of “primarily health related,” CMS sent notice to Medicare Advantage plans in order to provide additional guidance and examples of new types of supplemental benefits that could be offered under the expanded definition.¹² Most of these benefits are in addition to those that MA plans have commonly offered; in some cases, they are expanded versions of benefits that have been previously allowed but can now cover additional items or services.

Guidelines

With regard to guidelines, CMS states that the primary purpose of an item or service will be determined by typical usage. Second, in order for CMS to approve a supplemental benefit, the benefit must focus directly on an enrollee’s health care needs and it must be recommended by a licensed medical professional as part of a care plan.

Since MA plans have flexibility in offering supplemental benefits, CMS anticipates the benefits will be based on the expected needs of the plan’s population. MA plans are responsible for clearly identifying what will and will not be covered in their “Evidence of Coverage,” the document that plans provide to their enrollees that explains the details of their plan for the current year.

Examples

In addition to this guidance, CMS provided examples of supplemental benefits that meet the new definition of “primarily health related.” They include those in the following sections:

Adult Day Care Services

Adult day care services are services provided outside the home, such as:

• assistance with activities of daily living (ADLs) and/or instrumental activities of daily living (IADLs)
• education to support the performance of ADLs/IADLs
• physical maintenance and rehabilitation activities
• social work services

These services can be offered as supplemental benefits as long as they meet the conditions of improving the functional and psychological impact of injuries or health conditions, or reducing avoidable emergency and health care utilization.

Recreational or social activities or meals that are ancillary to primarily health-related services and items may also be provided; however, the primary purpose of adult day care services must be health related and provided by staff whose qualifications meet state licensing requirements. Adult day care services may also include transportation to and from the adult day care facility.

Note Activities of daily living (ADLs) are activities that people engage in daily. These are personal care activities fundamental for independently caring for oneself. Examples include bathing, toileting, dressing, eating, walking, or transferring from bed to chair.Instrumental activities of daily living (IADLs) are activities related to independent living. Examples include shopping, cooking, managing medications, doing housework, paying bills, driving, or using public transportation.

Home-Based Palliative Care

Home-based palliative (comfort) care services that are not covered by Medicare Part A can now be offered as a supplemental benefit. Such services are intended to diminish symptoms of terminally ill enrollees with a life expectancy of less than six months. (Palliative care is care that begins at diagnosis and through treatment of a disease which is intended to provide comfort and improve one’s quality of life; hospice care begins once treatment ends.) Note that Medicare Part A does not cover palliative nursing and social work services that are provided in the patient’s home.

In-Home Support Services

In-home support services are those that assist individuals with disabilities and/or medical conditions in performing ADLs and IADLs within the home and are intended to compensate for physical impairments, ameliorate the functional/psychological impact of injuries or health conditions, or reduce avoidable emergency and health care utilization. Services must be provided by individuals licensed by the state to provide personal care services or must be otherwise consistent with state requirements.

Support for Caregivers of Enrollees (Respite Care)

Respite care is support provided for caregivers to give them a break for short periods of time (ranging from a few hours per week to a month) and may include services such as counseling and training courses for caregivers of enrollees. Care is provided to the enrollee by a personal care attendant or by short-term institutional-based care, as appropriate, to ameliorate the enrollees’ injuries or health conditions, or reduce the enrollees’ avoidable emergency and health care utilization.

Medically Approved Non-Opioid Pain Management

Medically approved non-opioid pain treatment alternatives may include therapeutic massage furnished by a state licensed massage therapist. Treatment must be ordered by a physician or medical professional in order to be considered primarily health related and not primarily for the comfort or relaxation of the enrollee. Again, consistent with the intent of primarily health-related benefits, non-opioid pain management item or service must treat or ameliorate the impact of an injury or illness. Massage treatment, for example, might be ordered to treat pain, stiffness, or loss of range of motion. Medicare-covered services, such as physical therapy, could be coupled with massage therapy, providing an overall non-opioid pain management strategy.

Stand-Alone Memory Fitness Benefit

Memory fitness describes the benefits of physical exercise and other lifestyle habits to maintain cognitive abilities. Memory fitness benefits may be incorporated as a component of a health education benefit and/or offered as a standalone benefit. The benefits and activities must be primarily for the prevention, treatment, or amelioration of the functional/psychological impact of injuries or health conditions.

Home and Bathroom Safety Devices and Modifications

Supplemental benefits have long included bathroom safety devices, but this category has been expanded. Safety devices are used to prevent injuries in the home and/or bathroom, including installations, provided those devices are not already eligible for coverage under Medicare. (Part B benefits already provide coverage for medically necessary durable medical equipment.) The benefits may include a home and/or bathroom safety inspection conducted by a qualified health professional to identify the need for safety devices and/or modifications. Examples of safety devices and modifications now include:

For this purpose, home modifications do not include items or services that are capital or structural improvements to the enrollee’s home (e.g., easy-to-use door knobs and faucets, permanent ramps, and widening hallways or doorways). In addition, items such as smoke detectors and fire alarms are not considered to be primarily health related. On the other hand, fall prevention kits could be considered a component of home safety devices.

Transportation

Benefits may now be offered for non-emergency transportation to obtain services covered by Part A, Part B, Part D, and supplemental benefit items and services needed to accommodate the enrollee’s health care needs.

For example, such benefits may include transportation for physician office visits. Transportation must be arranged, or directly provided, by the plan and may not be used to transport enrollees for purposes that are not health related. The benefit has been expanded to include a health aide to assist the enrollee to and from the destination. Transportation is limited to the provision of medical services and cannot be used for items and services such as groceries, banking, or personal errands.

Over-the-Counter Benefits

Coverage for over-the-counter (OTC, or non-prescription) items and medications is generally not provided by Medicare Part A, Part B, or Part D, and for some time, supplemental benefits for OTC items have routinely been offered (though coverage has varied widely among plans). Medicare Advantage plans may offer benefits for OTC items that are health related and determined by the enrollee’s medical provider to be appropriate for the enrollee. With the newly revised definition of “primarily health related,” CMS will now approve OTC coverage to include assistive devices, such as pill cutters, pill crushers, pill bottle openers, and personal electronic activity trackers that record a person’s daily physical activity.

What Is Not Considered Primarily Health Related

CMS’s list of supplemental benefit examples resulting from its reinterpretation of “primarily health related” is not exhaustive. CMS encourages MA plans to devise their own supplemental benefits and submit them for review with explanations as to how they are primarily health related.

What will not be accepted as primarily health related are services or items for cosmetic, comfort, general use, or social determinant purposes. Nor can supplemental benefits be used solely to encourage or induce plan enrollments.

Note Social determinants of health are conditions in the places where people live, learn, work, and play that may affect a wide range of health risks and outcomes. They may not appear to be directly connected to the diagnosis or treatment of a health condition, but they can affect factors such as prevention, duration, and/or the impact of injury or illness. Lack of financial resources to meet daily needs, lack of social support, lack of education, and language difficulty are examples of social determinants of health.

How New Supplemental Benefits Might Be Added to an MA Plan

How or if MA plans incorporate additional supplemental benefits into their benefit packages is up to the plan. For example, a plan could provide enrollees with the following, under which a number of the newly allowed supplemental benefits have been included in the plan’s basic or core benefit package, at no additional cost:

Silver Lining Insurance PPO Medicare Advantage Plan
Core Plan Benefits	Parts A and B coverage, prescription drug coverage, and routine dental and hearing coverage. Enrollees can also select from one of the following: Personal home aide: Up to 100 hours per year for assistance with household chores and activities of daily living provided by a licensed aide devices: Up to $500 annual allowance for covered assistive and safety devices Meal delivery service: Up to 60 meals per year delivered directly to the home Transportation: Up to 30 round-trips per year to and from medical appointments	Total Monthly Plan Premium$0
Optional Benefits	reventive dental services Enhanced dental and vision services	$14$26

Coverage requests from an MA plan’s enrollees or providers for supplemental benefits must be treated in a manner similar to requests for coverage for other benefits provided by the plan.

¹¹ “Announcement of Calendar Year (CY) 2019 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter,” CMS, April 2, 2018.

¹² “Reinterpretation of “Primarily Health Related” for Supplemental Benefits,” CMS, April 27, 2018.

3. 4 – Greater Flexibility in MA Uniformity Requirements

Another constraint on MA plans’ supplemental benefits was the “benefit uniformity” requirement. Under CMS’s earlier interpretation of this requirement, an MA plan had to offer identical benefits to all enrollees in a plan’s service area, thus making any supplemental benefit available to all enrollees (and thereby increasing the cost of supplemental benefits).

When CMS announced a reinterpretation of the uniformity requirement, the agency stated that “providing access to services (or reductions in specific cost sharing and/or deductibles) that are tied to health status or disease state in a manner that ensures that similarly situated individuals are treated uniformly is consistent with the uniformity requirement in the MA regulations.”¹³

Consequently, for plan years 2019 and later, an MA plan is given greater flexibility to target benefits for a specific group or population among its enrollees, based on health status or specific disease. This flexibility can include:

• reduced cost-sharing or deductibles for targeted covered benefits
• offering tailored supplemental benefits for enrollees who meet specific medical criteria

These “targeted” benefits must provide for equal treatment of enrollees with the same health status or disease. In addition, targeted benefits must be available with equal access to all targeted enrollees.

Note The reinterpretation of the uniformity requirements applies only to Part C benefits. If the plan offers Part D, it must provide Part D benefits uniformly within the plan’s service area.

Targeted Benefits—CMS Examples

The population of targeted custom benefits must be objectively identified based on health status, disease state, or clinical condition. In the notice announcing its reinterpretation of the uniformity requirement, CMS provided the following as examples of diseases or clinical conditions for which an MA plan can choose to target benefits:¹⁴

• diabetes
• chronic obstructive pulmonary disease
• Congestive heart failure
• patients with past stroke
• hypertension
• coronary artery disease
• high cholesterol
• lower back pain
• Kidney disease
• Obesity
• pre-diabetes
• Asthma
• tobacco use

Targeted supplemental benefits must be health care services or items that are medically related to the health status or disease state of the targeted enrollees.

¹³ “Reinterpretation of the Uniformity Requirement,” CMS, April 27, 2018.

¹⁴ Ibid.

Greater Flexibility in MA Uniformity Requirements

Another constraint on MA plans’ supplemental benefits was the “benefit uniformity” requirement. Under CMS’s earlier interpretation of this requirement, an MA plan had to offer identical benefits to all enrollees in a plan’s service area, thus making any supplemental benefit available to all enrollees (and thereby increasing the cost of supplemental benefits).

When CMS announced a reinterpretation of the uniformity requirement, the agency stated that “providing access to services (or reductions in specific cost sharing and/or deductibles) that are tied to health status or disease state in a manner that ensures that similarly situated individuals are treated uniformly is consistent with the uniformity requirement in the MA regulations.”¹³

Consequently, for plan years 2019 and later, an MA plan is given greater flexibility to target benefits for a specific group or population among its enrollees, based on health status or specific disease. This flexibility can include:

• reduced cost-sharing or deductibles for targeted covered benefits
• offering tailored supplemental benefits for enrollees who meet specific medical criteria

These “targeted” benefits must provide for equal treatment of enrollees with the same health status or disease. In addition, targeted benefits must be available with equal access to all targeted enrollees.

Note The reinterpretation of the uniformity requirements applies only to Part C benefits. If the plan offers Part D, it must provide Part D benefits uniformly within the plan’s service area.

Targeted Benefits—CMS Examples

The population of targeted custom benefits must be objectively identified based on health status, disease state, or clinical condition. In the notice announcing its reinterpretation of the uniformity requirement, CMS provided the following as examples of diseases or clinical conditions for which an MA plan can choose to target benefits:¹⁴

• diabetes
• chronic obstructive pulmonary disease
• Congestive heart failure
• patients with past strokes
• hypertension
• coronary artery disease
• high cholesterol
• lower back pain
• Kidney disease
• Obesity
• pre-diabetes
• Asthma
• tobacco use

Targeted supplemental benefits must include health care services or items that are medically related to the health status or disease state of the targeted enrollees.

¹³ “Reinterpretation of the Uniformity Requirement,” CMS, April 27, 2018.

¹⁴ Ibid.

Special Supplemental Benefits for the Chronically Ill

The expansion of supplemental benefits for Medicare Advantage plans does not rest entirely on reinterpretation of MA rules and regulations by CMS. The Bipartisan Budget Act—specifically, the CHRONIC Care provision of the Act—includes many provisions that affect MA plans. One in particular is aimed at supporting chronically ill individuals through special supplemental benefits.

Effective as of 2020, MA plans can include supplemental benefits for the chronically ill that are not primarily health related. In addition, the benefits may be offered non-uniformly to eligible chronically ill enrollees.

NoteThese benefits have been given their own acronym: SSBCI—Special Supplemental Benefits for the Chronically Ill.

Definition of Chronically Ill

The purpose of this new category of supplemental benefits is to enable MA plans to better tailor benefits, address gaps in care, and improve health outcomes for the chronically ill. To be eligible for these benefits, an individual must meet the following three requirements:

• The individual has one or more comorbid (i.e., simultaneously present) and medically complex chronic conditions that are life threatening or significantly limit the overall health or function of the enrollee.
• The individual is at high risk of hospitalization or other adverse health outcomes.
• The individual requires intensive care coordination.

Chronic Conditions

The chronic conditions identified by CMS as life threatening or significantly limiting include:

Using this list of chronic conditions, individual MA plans have the authority to identify chronically ill individuals who meet the definitional requirements. (According to CMS, a large percentage of the Medicare Advantage population—73 percent—is afflicted by one or more of these conditions.¹⁵ ) This list will be reviewed periodically and updated accordingly.

Allowable Supplemental Benefits for Chronically Ill

For those chronically ill, SSBCI benefits do not have to be primarily health related; instead, they must meet the following standards: They must have a reasonable expectation of improving or maintaining the health or overall function of the enrollee as it relates to the chronic condition or illness. To be considered an allowable SSBCI, the expected maintenance or improvement does not have to result in a permanent change in an enrollee’s condition.

To this end, the following have been identified as special benefits that MA plans to offer their chronically ill enrollees:

• Meals and groceries delivered to the home
• transportation for non-medical needs
• pest control
• indoor air quality equipment and services
• capital and structural improvements to the home (permanent ramps, widening of hallways and doorways)
• benefits to address social needs (as long as such items and services have a reasonable expectation of improving or maintaining the health or overall function of an individual as it relates to his or her chronic condition or illness)

Note This last item deserves attention. While some may believe that CMS has crossed over into using social determinants of health to support eligibility for supplemental benefits, that is not the case—at least, not now. In its 2020 Final Call Letter, CMS included the following:[T]he statute expressly limits these supplemental benefits to enrollees that are chronically ill. We have not identified authority to allow for other criteria or social risk factors to be used when determining eligibility for these benefits. Additionally, there must be a determination by the MA plan that the non-primarily health related benefit will have a reasonable expectation of improving the chronic disease or maintaining the health or overall function of the enrollee receiving the benefit.16Since the majority of MA enrollees are afflicted with one or more chronic conditions, a large percentage of this population will be eligible for SSBCI benefits. At the same time, CMS also indicated that it would continue to study the topic of social determinants of health.

Waiver of Uniformity Requirement

The waiver of the uniformity requirement applies to SSBCI benefits as it does to other supplemental benefits. Thus, MA plans can offer SSBCI benefits to chronically ill enrollees that are not uniform and plans can vary, or target SSBCIs as they relate to an individual enrollee’s specific medical condition and needs. As long as a benefit has a reasonable likelihood of improving or maintaining that specific enrollee’s health or overall function as it relates to a specific chronic condition, it can be offered.

MA plans must develop objective health risk assessments to determine whether a chronically ill individual qualifies for a given benefit or not.

Incur a Direct Cost

Medicare Advantage plans that offer supplemental benefits—including those that offer SSBCIs—must still meet the requirement that they incur a direct (non-administrative) cost for providing those benefits. SSBCI benefits do not have to be delivered by a medical provider to address this obligation; they can be provided by a community-based organization. For example, a plan could elect to offer, as an SSBCI, meals or food and pay a community-based organization to provide the benefit. This would meet the dual conditions of a plan incurring a direct cost and improving or maintaining the health or overall function of the chronically ill enrollee.

Service Not Covered by Original Medicare

Like any supplemental benefit, SSBCI benefits cannot be covered by Original Medicare. They must be supplemental to an MA plan’s core Part A and Part B benefits.

Summary of Supplemental Benefit Changes

To summarize the changes to supplemental benefits: beginning as of 2020, MA plans can offer three categories of supplemental benefits:

1. standard (enhanced) supplemental benefits, which are available to all of a plan’s enrollees
2. targeted supplemental benefits, which are available to a specific group or population among a plan’s enrollees, based on health status or specific disease
3. chronic supplemental benefits, which are available to a plan’s enrollees who meet the definition of and conditions for “chronically ill”

The extent to which an MA plan will incorporate any supplemental benefits is up to the plan, as is how the benefits will be delivered or coordinated with other services and treatments. Standard and targeted supplemental benefits must be primarily health related (as that term has been redefined); chronic supplemental benefits do not have to be primarily health related, but they do have to pose a reasonable expectation that the enrollee’s health or functionality will be improved or maintained.

In addition, all supplement benefits are still required in addition to the coverage provided by Medicare Part A and Part B, and all must still result in a direct cost to the MA plan.

¹⁵ “Announcement of Calendar Year (CY) 2020 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter,” CMS, April 1, 2019.

¹⁶ “Announcement of Calendar Year (CY) 2020 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter,” CMS, April 1, 2019.

Other Changes

In addition to the changes described in this chapter, Medicare Advantage plans have been subject to other adjustments in the last few years. One worth noting is the change to enrollment periods.

Enrollment Periods

Beginning in 2019, the Medicare Advantage open enrollment period changed, giving beneficiaries more time and more options to find a plan that satisfies them.

Original Medicare is the default option for new Medicare enrollees. If they want Medicare Advantage, they have to choose a plan and enroll in it when they first become Medicare eligible. Medicare beneficiaries can join a Medicare Advantage plan at any time during either of the following periods:

• their initial enrollment period, which begins three full months before their birth month, includes the birth month, and ends three full months after their birth month.
• the annual open enrollment period, which runs from October 15 through December 7 of every year

The annual open enrollment period allows Medicare beneficiaries who are in Original Medicare to switch to a Medicare Advantage plan, if they wish. During the annual open enrollment period, those who are already enrolled in a Medicare Advantage plan can also switch to another Medicare Advantage plan or return to Original Medicare.

Another Chance to Change

Additionally, Medicare Advantage enrollees have the opportunity to change their minds after enrollment. In the past, this was known as the “disenrollment period,” and it allowed MA enrollees to change their minds and elect to return to Original Medicare (and to purchase a stand-alone Part D plan). The disenrollment period runs from January 1 through February 14 every year.

In 2019, the disenrollment period was replaced by a new Medicare Advantage open enrollment period (OEP). The OEP gives an MA enrollee more time to change his or her mind about his or her plan selection. The OEP runs from January 1 through March 31 of each year. Those who were on an MA plan as of January 1 can drop their Medicare Advantage plan and return to Original Medicare, or they can switch from one Medicare Advantage plan to another Medicare Advantage plan. (The previous disenrollment period did not allow an MA enrollee to switch from one Medicare Advantage plan to another; it only allowed an MA enrollee to switch back to Original Medicare, with the option to purchase a stand-alone Part D plan.)

NoteIt is not permissible to market to or knowingly target MA enrollees during the January 1 through March 31 general enrollment period.

Summary

• Medicare Advantage plans have long offered additional benefits and services beyond those available with Original Medicare; however, beginning in 2019, the scope and breadth of these supplemental benefits were significantly expanded.
• According to AARP, the most common types of supplemental benefits are eye exams, emergency coverage abroad, gym memberships, oral exams, dental cleaning, routine hearing exams, annual physical exams, dental X-rays, and contact lenses.
• Supplemental benefits are financed largely as a result of the MA plan bidding process: plans that submit bids to Medicare that are below the per-enrollee benchmark rate that Medicare will pay for the plan receive a rebate—a portion of the difference between the benchmark amount and the bid.
• Rebates must be used by a plan to provide supplemental benefits or lower premiums to its enrollees.
• MA supplemental benefits must meet three criteria: the benefit cannot be covered by Original Medicare; the benefit has to be primarily health related; and the benefit has to result in a direct (non-administrative) cost to the plan.
• One change that has broadened the scope of allowable supplemental benefits is CMS’s reinterpretation of “primarily health related.” In addition to meaning the diagnosis, prevention, or treatment of an illness or injury, “primarily health related” can now include:
• diagnosis or compensation for physical impairments:

• relieving the functional and/or psychological impact of health conditions or injuries
• reducing avoidable emergency and health care utilization

• Another change to supplemental benefits was CMS’s reinterpretation of uniform benefits. Now an MA plan has greater flexibility to target benefits for a specific group or population among its enrollees, based on health status or specific disease.
• MA plans can include supplemental benefits for the chronically ill that are not primarily health related. These benefits may be offered non-uniformly to eligible chronically ill enrollees.
• MA enrollees have another enrollment period and open enrollment. If they are on an MA plan as of January 1, they can drop their plan and return to Original Medicare or they can switch to another Medicare Advantage plan.

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