How Do Medicare Advantage Plans Work?

Medicare Advantage Plans, called Medicare Part C or MA Plans, are becoming increasingly available. More than 24 million Medicare beneficiaries are enrolled in a Medicare Advantage Plan in 2020, and there are even more plans available in 2021 than ever before, according to research by the Kaiser Family Foundation.

Medicare Advantage Plans are an alternative to Original Medicare. Like Original Medicare, Medicare Advantage Plans provide Part A and Part B coverage but MA Plans also often include Part D prescription drug coverage. These plans can also cover things Original Medicare does not cover, such as dental, vision and fitness programs. Some may cover services like transportation to a doctor’s office, over-the-counter medications or wellness services.

“There are also special plans for chronic illnesses that offer expanded benefits to help with the condition,” says John Hill, president of Gateway Retirement in Rock Hill, South Carolina. There are 971 Special Needs Plans (SNPs) available in 2021, a 14% increase from 2020, according to the Kaiser Family Foundation.

There may even be other value added benefits such as meal delivery services after you’ve been hospitalized, says Elizabeth Gavino, founder of Lewin & Gavino, an independent broker and general agent for Medicare plans. “It all depends on the carrier and the offerings in your area.”

Medicare Advantage Plans are offered by private insurance companies that have been approved by Medicare. These companies must abide by the rules set by Medicare. You still have Medicare if you have MA Plan. The difference is that with a MA Plan, Medicare pays a fixed amount to the private insurance company providing your plan to help pay for your health care.

“(Medicare Advantage Plans) are reminiscent of plans you may get through your employer as they may have deductibles, copay, and coinsurance, and require you to select providers from a network,” Gavino says. “Some plans may give you access to providers not part of the network.”

Plans can set different rules for how you get care, such as if you need a referral to see a specialist, and these rules can change year by year. MA Plans also charge different out-of-pocket costs with varying annual maxes. The plan costs are set by the private provider, not Medicare, and are set each year. The amount you pay can only change once per year on January 1.

The plan will send you an Annual Notice of Change (ANOC) document each fall notifying you of any changes that will become effective in January. You’ll also receive an Evidence of Coverage (EOC) document provides details about the plan coverage and how much you’ll pay while the Annual Notice of Change

Your costs will depend on things such as if the plan charges a monthly premium. Many plans have $0 or low premiums because they are subsidized by the government, Gavino says. Over half of plans charge no premium in 2021 other than the Part B premium, and nine in 10 beneficiaries have access to a no-premium plan, according to the Kaiser Family Foundation.If your plan does charge a premium, you’ll pay it in addition to your Part B premium. Some plans may pay part or all of your Part B premium.

Other factors that can affect your out-of-pocket costs include if the plan has an annual deductible, copayment or coinsurance for services, the type and frequency of the services you need and if you use in-network or out-of-network providers. MA Plans may also charge for the extra benefits provided.

“These plans are available depending on the county you live in,” Gavino says. So some areas may provide benefits that are not available in other parts of the country. You can find the Medicare Advantage Plans available in your area on Medicare.gov.

Medicare Advantage Plans have benefits but also come with downsides. Some of the pros of Medicare Advantage Plans include:

• “Medicare Advantage Plans are generally very inexpensive and there usually aren’t any health questions except for chronic condition plans,” Hill says.
• Premiums can be as low as $0 per month, Gavino says.
• Medicare Advantage Plans are “bundled plans” that often include prescription drug coverage.
• Some plans provide national coverage, Gavino says.
• “All plans have a maximum out-of-pocket (MOOP) and in some counties, that MOOP is very low,” Gavino says.

The cons to Medicare Advantage Plans include:

• Potential high cost ceilings. “Cost ceilings for 2021 could be as much as $7,550 in-network, and higher out-of-network,” Hill says. “Unfortunately, you cannot purchase a supplement plan to cover Advantage costs while you are enrolled in an Advantage plan.”
• You may be limited to in-network providers or risk paying more for out-of-network coverage.
• Not all plans offer national access to in-network providers, Gavino says.

Given the copays and potentially high cost ceilings, Medicare Advantage Plans can be expensive. Are Medicare Advantage Plans worth the costs?

“Yes,” says Gavino, “but you need to be prepared for all of the costs.”

You should also pay careful attention to what medications and health care providers are offered in the plan. You should also consider if the plan offers value added benefits that may be useful to you. These extra benefits can be even more expensive to purchase separately, such as with a Supplement plan.

“When you are in the Supplement option, everything is a la carte,” Hill says. “In the Medicare Advantage Plans, most everything is bundled.”

These experts were consulted for insight into how Medicare Advantage Plans work.

• John Hill, president of Gateway Retirement in Rock Hill, South Carolina
• Elizabeth Gavino, founder of Lewin & Gavino, an independent broker and general agent for Medicare plans