Medicare Advantage basics

In general, seniors have two options for core Medicare benefits: Original Medicare (often supplemented with a Medicare Supplement plan) or Medicare Advantage. Medicare Advantage plans, also called Medicare Part C or MA plans, are considered to be all-in-one health care solutions. In 2017, one in three people with Medicare enrolled in a Medicare Advantage plan.

What it covers

Medicare Advantage plans, which are offered by private insurance companies, must cover all basic services that Part A and B cover (except hospice care, which is still covered by Original Medicare). What the plan covers beyond this point and all out-of-pocket costs are dictated by the insurance company. This includes costs for services such as surgery, basic treatments, and any related services.

Like Medicare Supplement, Advantage plans assist in covering out-of-pocket expenses that beneficiaries are expected to pay for their health care. But unlike Medicare Supplement, Advantage plan benefits can extend beyond services covered by Medicare. Specific plan benefits and networks can (and usually do) change from year to year. To give you an annual opportunity to assess your plan, Medicare hosts an Annual Enrollment Period (AEP) where you can change coverage such as enrolling in a new Advantage plan or applying for Medicare Supplement coverage.

Basic benefit structure

Coverage for additional services outside of the required federal standard can vary from company to company. For instance, plans can choose not to cover costs of services that aren’t considered “medically necessary” under Medicare. If this is the case, you may have to pay all of the costs of the service or request to see if the service will be covered in advance.

The value of a Medicare Advantage plan is that it can include many benefits that Original Medicare does not. Most Advantage plans include prescription drug coverage (typically referred to as MA-PD). If you want prescription drug benefits, you should enroll in an MA-PD plan, not an additional Medicare Part D plan, which typically works with Original Medicare. Some plans may also include dental, vision, and hearing insurance, travel insurance, or wellness programs.

Medicare Advantage network types

Health Maintenance Organization (HMO)

These plans a fairly strict network of doctors and hospitals that members are generally required to use. If you want to use a provider outside of the plan network, you may be required to pay the full cost out-of-pocket, unless it is an emergency or urgent care. To see a specialist, you generally will need a referral from your primary care doctor for coverage.

This is the most popular plan type; about 63 percent of Medicare Advantage enrollees are in an HMO plan.

HMO Point of Service (POS)

This plan has the benefits of an HMO with more flexibility to see providers outside the network at a higher out-of-pocket cost.

Preferred Provider Organization (PPO)

These plans allow beneficiaries to visit generally any doctor, hospital, or specialist, but they typically have a network that offers cheaper services. These plans are less restrictive, but often come with higher monthly premiums.

Special Needs Plans (SNPs)

These plans are designed for people with special health or financial needs. Benefits, provider options, and prescription drug coverage are specifically designed to meet the needs of each beneficiary.

Qualifications include, but are not limited to:

  • Persons with severe or disabling chronic conditions such as chronic heart failure or dementia
  • Persons enrolled in both Medicare and Medicaid (dual-eligible)
  • Persons living in an institution, like a nursing home

Private Fee-For-Service (PFFS)

These plans are available with or without provider networks, but not all Medicare providers accept this plan. In this plan type, the insurance company determines how much it pays the provider and how much the beneficiary pays for covered services. With this plan, you do not need to choose a primary care physician.

Medicare Savings Account (MSA)

These plans are combined with a bank account for expenses, similar to a traditional health savings account (HSA). Medicare deposits a specific amount of money each year into this account—but it is typically less than the annual deductible.

Comparing Medicare Advantage plans

When it comes to figuring out which plan type is right for you, you should map out your full budget and needs and then compare plans and options.

Medicare uses a Star Rating System to measure the strength of Medicare Advantage and Part D plans. Ratings range from one to five stars, with five being the best. On the Medicare's website , you can use the star ratings to figure out which plan is the highest rated and best fits your needs.


Enrolling in a Medicare Advantage plan

To enroll in an MA plan, you must be enrolled in Medicare Part A and Part B. Then, you are generally able to enroll in a plan as long as you live in the plan’s service area and do not have end-stage renal disease (ERSD). If you do have ERSD, you may be able to enroll in a Special Needs Plan.

Medicare Advantage enrollment periods

There are several timelines during which you can enroll in a Medicare Advantage plan:

Initial Enrollment Period
When you first begin Medicare you have an Initial Enrollment Period, during which you can add a Medicare Advantage plan to your health care strategy.

Annual Open Enrollment Period
During the Annual Open Enrollment period from Oct. 15 through Dec. 7 you may enroll in a new Advantage plan or apply for a Medicare Supplement plan.

Special Enrollment Period
Some people may qualify for a Special Enrollment Period. These typically occur in situations that are out of the beneficiary’s control, such as moving out of service area or an insurance company going out of business.

Medicare Advantage plans refile their benefits annually with Medicare, meaning that year over year, each plan could change its offerings to beneficiaries.

Medicare Advantage basic costs

Plan premium

Monthly premiums are set by each insurance provider and are susceptible to change year over year. Not all Medicare Advantage plans have monthly premiums, but for the policies that come with much more comprehensive coverage (including Part D and dental), you should expect to pay a higher amount.

In addition to a monthly premium, Medicare Advantage beneficiaries will also pay the following basic costs:

Part B premium

With an MA plan, you will still be required to pay the standard Part B premium ($144.60 or higher in 2020, depending on your income) in addition to your Advantage plan monthly premium. People who receive Social Security benefits may pay less than that amount.

Copays

Medicare Advantage members also pay copays for medical services such as x-rays, lab work, and ambulance rides, which vary by plan. If these copays add up to more than what you would spend on a Medigap plan, then Original Medicare plus a Medigap plan may be a better option. Consider how regularly you typically receive medical services throughout any given year when analyzing Medicare Advantage options.

Coinsurance

Unlike Original Medicare, Advantage plans are required to have an out-of-pocket limit for beneficiaries. The maximum out-of-pocket limit a plan can charge for in-network services is $6,700 and $10,000 for out-of-network services per year. This maximum limit can change from plan to plan; if a plan has higher monthly premiums, but lower out-of-pocket maximum limits, it could save you money overall.

Out-of-network costs

If you choose to visit a doctor out of network, you will be faced with higher costs. Example: If you develop a condition and want to see a highly-rated specialist who is out of your network, you'll likely pay more than an in-network option.


Why Medicare Advantage?

Medicare Advantage can be a less expensive option for those who do not face many health care issues and have no problem adhering to a strict network of providers. If you travel or have health issues that require regular attention, however, you may consider a Medicare Supplement plan instead.

For some people, having all benefits wrapped into one plan can be easier and less expensive than enrolling in separate policies for coverage. Deciding between Medicare Supplement and Medicare Advantage typically depends on a variety of factors.