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What Are Medicare MCOs? A Provider's Primer

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If you’re new to Medicare billing or recently expanded to see Medicare patients, here’s the first thing you need to understand: “Medicare” isn’t a single program. It has parts, and one of those parts (Part C, Medicare Advantage) routes Medicare beneficiaries through private insurance companies instead of through the federal government directly.

Those private insurance companies are called Medicare Managed Care Organizations, or MCOs. And if you want to see Medicare patients who are enrolled in these plans — which is now more than half of all Medicare beneficiaries — you need to understand how MCOs work and how to get into their networks.

The Medicare program structure

Part A — Hospital insurance. Covers inpatient hospital care, skilled nursing facility care, home health, and hospice. Funded primarily through payroll taxes.

Part B — Medical insurance. Covers physician services, outpatient care, medical equipment, preventive services. Funded through premiums and general revenue.

Part C (Medicare Advantage) — An alternative to Parts A and B. Private insurance plans approved by CMS that administer the Medicare benefit. Plans must cover at minimum everything A and B cover, may offer additional benefits.

Part D — Prescription drug coverage. Administered through private plans.

When someone chooses Medicare Advantage (Part C):

  • They’re still a Medicare beneficiary
  • They pay their Part B premium plus any MCO plan premium
  • Their medical care is managed by the private MCO
  • The MCO receives a capitated payment from CMS to manage their care
  • They must use the MCO’s network (for HMO plans) or face higher costs (for PPO plans)

How MCOs get paid

MCOs receive a capitated payment from CMS — a set monthly amount per enrolled beneficiary. The MCO takes on the risk of managing that beneficiary’s care for the capitated amount.

If the beneficiary is healthy and uses fewer services, the MCO retains the surplus. If the beneficiary is sick and uses more services than the capitated payment covers, the MCO absorbs the loss.

This creates the MCO’s fundamental incentive: control utilization and cost while maintaining quality metrics that CMS monitors.

For providers, this means:

  • MCOs are more likely to require prior authorization (to control utilization)
  • MCOs may deny services Original Medicare would cover (although appeal rights exist)
  • MCOs negotiate rates based on managing their total cost-of-care

Why patients choose MCOs

Most Medicare-eligible patients choose Medicare Advantage plans because:

  • Lower premiums or $0 premiums compared to Original Medicare + supplemental (Medigap) plan
  • Additional benefits — dental, vision, hearing, gym memberships, transportation
  • Out-of-pocket maximums — Original Medicare has no out-of-pocket cap; MCOs do
  • Coordination — some patients prefer having a single plan managing all their care
  • Drug coverage — most MCO plans include Part D drug coverage

What MCOs can and cannot do

MCOs CAN:

  • Require prior authorization for services that don’t require PA under Original Medicare
  • Require in-network provider use (HMO plans)
  • Require PCP referrals before specialty care (HMO plans)
  • Negotiate their own provider reimbursement rates
  • Restrict their formulary (though minimum coverage requirements apply)

MCOs CANNOT:

  • Deny coverage for medically necessary services that Original Medicare covers (though they can require PA and can deny under non-coverage criteria, subject to appeal)
  • Remove emergency care protections
  • Discriminate based on health status in enrollment
  • Fail to maintain adequate provider networks (CMS network adequacy requirements apply)
  • Withhold claims payment indefinitely (timely payment rules apply)

The MCO landscape: who are the major plans?

The Medicare Advantage market is dominated by a few national insurers, with regional players and insurer-owned plans:

National major plans:

  • UnitedHealthcare (largest Medicare Advantage insurer in the US)
  • Humana
  • CVS Health / Aetna
  • Elevance Health (formerly Anthem) / Blue Cross Blue Shield plans
  • Centene / WellCare

Regional and Blue plans:

  • Blue Cross Blue Shield plans (vary by state)
  • Kaiser Permanente
  • Various regional health plans

Provider-sponsored organizations:

  • Some large health systems sponsor their own Medicare Advantage plans

In any given market, providers may encounter 5–20+ different MCO plans. You don’t have to join all of them — focus on the plans your patients are actually enrolled in.

How to identify which MCOs your patients use

When a Medicare patient presents:

  1. Check their Medicare card — a Medicare Advantage card will show the plan name, not just “Medicare”
  2. Use your practice management system’s eligibility check to confirm their insurance
  3. Some billing systems will identify MCO membership on eligibility verification

Tracking MCO affiliation of your existing patient panel gives you data on which plans are most important to join in your market.

More questions about how MCOs work? Ask Mae →