What is Medicare Advantage?

What is Medicare Advantage? | Part C coverage | Eligibility | Types of MA plans | Original Medicare vs. Medicare Advantage | Advantages of MA | Disadvantages of MA | How to enroll

There are two ways to enroll in Medicare coverage: Original Medicare and Medicare Advantage. Medicare Advantage is provided by private insurers. It includes the same coverage as Parts A, B, usually D, and some extra benefits that Original Medicare doesn’t cover, such as hearing, vision, or dental benefits.

What is Medicare Advantage (Part C)?

Medicare Advantage plans, also called Medicare Part C or MA plans, are privately administered health insurance plans that offer Medicare Part A and Medicare Part B benefits. The insurance companies must follow the rules and regulations set by Medicare. The major benefit of MA health plans is that they sometimes come with extra perks.

What do Medicare Advantage plans cover? 

“Medicare Advantage is a [privately administered] alternative to Original Medicare that bundles the parts of Original Medicare along with additional benefits,” explains Kate Ashford, Medicare specialist at NerdWallet. “It includes Part A and Part B and often Part D drug coverage, plus some extra benefits such as cost help with dental and vision care.”

Who qualifies?

You are eligible for an MA plan as long as you are eligible for Medicare, have Parts A and B, and live in that plan’s service area. There is no income limit for those who want to enroll in Medicare Advantage plans. There are even some special needs plans for those with a limited income.

6 types of Medicare Advantage plans

There are six types of Medicare Advantage plans. The most popular of these plans are health maintenance organization (HMO) plans and preferred provider organization (PPO) plans. Here are the six Medicare Part C plans offered from most popular to least popular.

1. HMO plans

HMO plans generally only cover healthcare services that are done within a specific network of doctors and hospitals. If you choose to use someone out-of-network, you will likely have to pay in full without the help of your plan. While you have fewer options for obtaining medical services with an HMO plan, services are typically cheaper overall than those offered with PPO plans. 

RELATED: HMO vs. PPO plans

2. PPO plans

With PPO plans, there is still a network of providers that you can visit for lower costs. However, if you see an out-of-network provider, insurance will still cover it, but it will likely come at higher costs to you.

3. Private fee-for-service plans

Some fee-for-service plans or PFFS plans will have a network. If the plan has no network, you can use any provider that accepts Medicare. These plans are not very popular, as it is possible that healthcare providers will not agree to your plan’s reimbursement rates and refuse your service if they’re not in-network. As another downside, these plans typically do not include a prescription drug plan. 

RELATED: What does ‘out-of-network’ mean?

4. Special needs plans

Special needs plans or SNPS are often recommended for individuals with chronic health conditions. These plans are customized to their specific needs. SNPS are also popular among individuals who have both Medicare and Medicaid or those living in nursing homes.

RELATED: Does Medicare cover pre-existing conditions?

5. Medical savings accounts

Medical savings accounts (MSA) are not common, but a few select Medicare Advantage plans use this method. In MSAs, you’ll have a high deductible and a health savings account where money is deposited monthly. These plans typically do not include any prescription coverage.

6. HMO point-of-service

These plans, as the HMO name suggests, have a network of providers. However, with HMO point-of-service plans, some out-of-network costs will be covered at a higher rate. You will have two deductibles for both your in-network and out-of-network costs.

* This is a summary of coverage. There are other benefits not listed here.

Other tips for choosing between Original Medicare and Medicare Advantage:

• The biggest difference between Original Medicare and Medicare Advantage plans is that Original Medicare is provided by the government, while Medicare Advantage plans are offered by private companies. 
• Medicare Advantage plans are typically less expensive than Original Medicare for healthy adults. 
• If you have a Medicare Advantage plan, you can go back to Original Medicare at certain times of the year by contacting Medicare. 
• You can have Medicare supplemental insurance with Original Medicare, which is referred to as a Medigap policy.

Advantages of Medicare Advantage

“Medicare Advantage plans usually include extra perks, such as cost savings toward hearing, dental, and vision care,” Ashford says. “Many of the plans also come with a $0 premium, which is a plus.” 

MA plans also have an out-of-pocket limit, while Original Medicare does not. That means your MA plan will pay 100% of covered costs after you’ve spent a certain dollar amount, but with Original Medicare, you’ll always need to pay the 20% coinsurance (unless you have supplemental insurance or have low income and qualify for certain Medicare Savings Programs). 

“For healthy adults who do not need frequent visits to the doctor, Medicare Advantage plans may be a good option,” Ashford says. It’s also possible to switch back to Original Medicare coverage during the appropriate enrollment periods, but there’s one caveat. “If you decide you want to switch back to Original Medicare later, you may not be able to get a Medigap plan if you’re in poor health, depending on the state you live in.”

Disadvantages of a Medicare Advantage plan

While Medicare Advantage plans have many perks, there are reasons that individuals choose to stay with Original Medicare.

“Unlike Original Medicare, which is accepted everywhere in the country that takes Medicare, Medicare Advantage plans operate within a network of providers, and usually within a geographic area,” says Ashford. “You have less flexibility in terms of medical providers since you must stay within the plan’s network.” You’ll likely be charged higher costs if you see a provider out-of-network and may need a referral to see a specialist.

An analysis by the Kaiser Family Foundation found that after six days in the hospital, more than half of those with MA plans may end up paying more out-of-pocket costs. As the hospital stays increase to 20 days, 81% of Medicare Advantage plan users will pay more than Original Medicare beneficiaries.

Some doctors may not take MA plans, as the insurance company and the provider will need to come to an agreement first. If your healthcare provider does not have a business agreement with your insurer, then they will be considered out-of-network, and you will pay full price for their services. Other restrictions, such as prior authorization of services, drugs, and supplies, may apply.

How to enroll in an MA plan

If you’d like to sign up for Medicare benefits, visit the Social Security Administration’s website to see if you were automatically enrolled upon turning 65. Find the right Medicare plan for you by comparing plans, prices, and coverage options with the help of Medicare’s comparison tool. Remember, though, you will pay a late enrollment penalty if you do not sign up during your Initial Enrollment Period unless you have creditable coverage.

Sources

• Medicare Advantage in 2023: Premiums, out-of-pocket limits, cost sharing, supplemental benefits, prior authorization, and star ratings, Kaiser Family Foundation (2023)
• Plan for Medicare, U.S. Social Security Administration
• Explore your Medicare coverage options, medicare.gov

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