What is a Medicare Advantage Plan?

checkmark Fact checked Contributing expert: Roseann Birch; Reviewed by: Leron Moore - Published: February 3, 2021

 

Medicare Advantage Plans are health insurance plans that provide Medicare benefits through approved private insurance companies as an alternative to Original Medicare.

 

What is a Medicare Advantage Plan and How Does It Work?

Medicare Advantage Plans, (also known as Part C or MA plans), take the place of Medicare Parts A (hospital insurance), Part B (medical insurance), and usually Part D (drug coverage), combining them into one plan with a network of providers. Most Medicare Advantage Plans offer coverage for other services not provided by Original Medicare such as dental, vision, and hearing benefits, but are also required to provide all medically necessary services that Original Medicare Parts A and B do.

A Medicare Advantage Plan works much like commercial insurance. You will still have Medicare, but you will get your Part A and B coverage from the Medicare Advantage Plan you join. Before you enroll in a Medicare Advantage Plan, consider your healthcare needs, preferences about your healthcare providers, and your budget. You will have the opportunity to comparison shop for plans that are available in your area. You will also have the opportunity to review and change your plan annually.

All private Insurance companies that provide Medicare Advantage Plans receive a fixed amount for your coverage from federal Medicare and must adhere to all Medicare rules and regulations. Each Medicare Advantage Plan can charge different out-of-pocket costs, such as premiums, deductibles, co-pays, and co-insurance, and have different rules for how you obtain services. Medicare sets an annual out-of-pocket limit that insurers cannot exceed, but they can choose to set it lower. For 2021, the maximum in-network out-of-pocket is set at $7,550.

Medicare Advantage Plan insurance companies can change their rules about how you get services each year, and they must notify you about any changes before the start of the next enrollment year. This Annual Notice of Change includes any changes in coverage, costs, service area, and more that will be effective starting in January.

It is important to factor in all potential costs associated with the plan you choose, including premiums and maximum out-of-pocket limits, and understand the Evidence of Coverage that details what the plan will cover and what you will pay. Your plan will send you a notice by October 15 each year, which will include information on how to access the Evidence of Coverage electronically or request a printed copy.

You must be enrolled in Medicare Part A and Part B to opt for a Medicare Advantage Plan. You will continue to pay your Part B premium ($148.50 for 2021 for most people, but you pay more if income is greater than $88,000 for single filers, and greater than $176,00 for joint filers).4 It is important to know that even if the Medicare Advantage Plan you choose has low or no premiums, you will still pay your Part B premium.

Types of Medicare Advantage Plans

There are different types of Medicare Advantage Plans to choose from.

A Health Maintenance Organization (HMO) plan is one of the most common and requires that you choose an in-network primary care physician (PCP) and receive your care and services from in-network providers in a particular geographical area. Prior authorizations for medications and treatments, and referrals for specialist care are typical in this type of plan. Some HMO plans, known as HMO Point-of-Service (HMOPOS) plans offer an out-of-network benefit.

Another type of Medicare Advantage Plan that consumers choose is a Preferred Provider Organization (PPO). PPOs have a network of providers, but you can also use out-of-network providers for covered services, for a higher cost. A PCP is generally not required, nor are referrals for specialists; but if you receive care from in-network providers, your costs will be lower than if you decide to go out-of-network. Both HMOs and PPOs generally include drug plans. You won’t be able to join a separate Medicare drug plan if you are enrolled in a HMO or PPO.

Other types of Medicare Advantage Plans are:

  • Medical Savings Accounts (MSAs) where the high-deductible plan deposits money into a special savings account and typically has no network or restrictions on which providers you use. MSAs do not have drug coverage, so if you need it, you will have to join a separate Medicare drug plan.
  • Private Fee for Service (PFFS) Plans generally allow you to receive services from any Medicare-approved provider, and sometimes have a network of providers who have agreed to treat plan members. If you join a plan that does not have drug coverage, you can join a separate Medicare drug plan.
  • Special Needs Plans (SNP) provide benefits and services to people with specific diseases, certain health care needs, or limited incomes.

The initial enrollment period for a Medicare Advantage Plan starts three months before you turn 65 and ends three months after. You can join, switch, or drop a Medicare Advantage Plan during open enrollment from October 15 to December 7. Your plan then becomes effective January 1. Medicare Advantage Open Enrollment Period runs from January 1 to March 31. If you’re in a Medicare Advantage Plan, you can change to a different Medicare Advantage Plan or switch to Original Medicare (and join a separate Medicare drug plan) once during this time. Any changes you make will be effective the first of the month after the plan gets your request.

What are the Pros and Cons of Medicare Advantage Plans?

There are a number of pros to Medicare Advantage Plans. You still have Medicare and with that, all the same rights and protections all Medicare beneficiaries get. Medicare Advantage Plans offer additional services that are not covered by Original Medicare such as dental, vision, hearing, and discounts for gym memberships.

Medicare’s five-star rating program incentivizes Medicare Advantage Plan insurance companies to offer quality, competitive services.

Lower front-end costs can be a plus of Medicare Advantage Plans with monthly premiums that are lower than those associated with Medigap, a supplemental Medicare insurance. There is a limit on annual out-of-pocket costs as well. With most Medicare Advantage Plans, your costs will be lowest if you stay in-network.

Because benefits are bundled together, you do not need to shop for or purchase separate drug coverage.

If you have a complicated or serious medical condition, a treatment plan allows you to see a specialist with the plan network as often as you and your doctor think you need. Women have the right to go directly to an in-network women’s specialist without a referral for routine and preventive services.

There are a variety of types of Medicare Advantage Plans giving consumers more choice in their healthcare coverage. As your healthcare needs change, and if your Medicare Advantage Plan changes, you have the opportunity to choose a different plan.

The cons or possible downsides to Medicare Advantage Plans include a restricted service area, which may be an issue if you travel or reside in a different area for part of the year. The in-network benefit of cost containment can mean less consumer choice of providers. Additionally, you may have to wait for prior authorizations for medications and treatments or spend time up-front trying to get advance plan approval. Some Medicare Advantage Plans require that you obtain a referral prior to seeing a specialist.

If you had Original Medicare with a Medigap plan previously, then choose a Medicare Advantage Plan, it may be difficult to switch back and return to your previous Medigap plan. Depending on how much you need and use healthcare with Medicare Advantage, you may incur higher costs, up to your out-of-pocket max, compared to Original Medicare with Medigap.

What is the Difference Between a Medicare Plan and a Medicare Advantage Plan?

A Medicare Plan includes Part A and B, and can include Part D for drug coverage, as well as Supplemental Coverage (also known as Medigap) to help pay for deductibles and coinsurance related to Parts A and B. A Medicare Advantage Plan bundles Parts A, B, and usually D together and typically offers other benefits that Original Medicare doesn’t. You cannot have, and do not need, Medigap insurance if you have a Medicare Advantage plan.

Original Medicare is a fee-for-service health plan. After you pay the Part B premium and deductibles, Medicare pays its share of the Medicare approved amount, and you pay your share of the costs in the form of co-insurance and deductibles. Medicare Advantage Plans may or may not have a premium (you will still pay the Part B premium) and vary in their cost sharing requirements. For example, you may pay a $5 copay to see your PCP, and a $40 copay to see a specialist. You may pay a certain percentage for other services such as out-patient surgery, after meeting your deductible. These costs depend on which Medicare Advantage Plan you choose.

Medicare Plans allow you to utilize any doctor or hospital in the U.S. that accepts Medicare assignment (that is, accepts the Medicare-approved amount as full payment). Medicare Advantage Plans may require you to receive your healthcare services from providers (including a PCP), hospitals, and pharmacies that are in-network and in your service area. Some plans allow for out-of-network providersbut will cost more. Most likely you will need prior approval for services, supplies, and medications with Medicare Advantage Plans. Medicare Plans do not generally require referrals.

Costs can vary widely in either case, depending on which type of insurance you choose and how much healthcare you end up needing. Original Medicare Part A has a deductible of $1,484 for in-patient hospitalizations, and daily co-insurance charges that kick in after 60 days; Part B deductible for 2021 is set at $203. There are no out-of-pocket limits with Original Medicare. Medigap and Part D premiums also vary. Medicare Advantage Plan costs vary depending on which type of plan you choose.

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Contributing Expert:

Roseann Birch, Medicare Consultant

With experience in the insurance field since 1986, Roseann Birch is a seasoned Medicare consultant who is passionate in educating and guiding seniors through their Medicare and Medicare Advantage journey.

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Reviewed by:

Leron Moore, Medicare Consultant

With over 10 years of experience in the Medicare industry, Leron Moore has dedicated his career to effecting change, educating, informing, and resolving issues for Medicare patients and their families.