Medicare Advantage Plans: An Alternative to Traditional Medicare
As you approach age 65, getting educated about your healthcare coverage options should be a top priority. For millions of Americans, Medicare plays a vital role in providing affordable access to healthcare in retirement.
While Original Medicare (Parts A and B) is the standard coverage many enroll in initially, Medicare Advantage plans (also called Medicare Part C) have grown increasingly popular in recent years. About 4 in 10 Medicare beneficiaries are now enrolled in a Medicare Advantage plan.
What are Medicare Advantage plans? How do they differ from Original Medicare? And what are the potential advantages and drawbacks to consider? Let’s explore everything you need to know about this alternative way to get your Medicare benefits.
What is a Medicare Advantage Plan?
Medicare Advantage plans are a way to receive your Medicare Part A (hospital insurance) and Part B (medical insurance) benefits through a private insurance company contracted with Medicare. These plans provide all of the same coverage as Original Medicare, but often bundle in additional benefits, too.
Rather than dealing directly with the government program for Medicare services, Medicare Advantage enrollees receive care through the plan’s network of providers. Most Medicare Advantage plans are either Health Maintenance Organizations (HMOs) or Preferred Provider Organizations (PPOs).
Medicare Advantage plans are still regulated by the federal government and must follow certain rules set by Medicare. However, plan benefits, costs, provider networks, and operations can vary quite a bit between Medicare Advantage plans and insurance companies.
The Different Types of Medicare Advantage Plans
There are several different types and structures for Medicare Advantage plans to be aware of:
Health Maintenance Organization (HMO) Plans: With an HMO plan, you’ll need to use doctors and facilities within the plan’s network, except for emergencies. A primary care doctor usually coordinates care and provides referrals to see specialists. Out-of-network services generally aren’t covered by HMOs.
Preferred Provider Organization (PPO) Plans: PPO plans have a network of preferred providers, but allow you to use out-of-network providers with higher out-of-pocket costs. You don’t need referrals for specialists with a PPO plan.
Private Fee-for-Service (PFFS) Plans: With PFFS plans, you can visit any Medicare-approved provider as long as they accept the plan’s payment terms. The insurer determines plan costs and doesn’t have a contracted network of providers.
Special Needs Plans (SNPs): SNPs are limited to people with certain diseases or characteristics and tailor their benefits and provider networks accordingly. Examples are SNPs for beneficiaries with diabetes, those living in institutions like nursing homes, or those eligible for both Medicare and Medicaid (dual-eligible).
HMO Point-of-Service (HMOPOS) Plans: These HMO plans allow members to get some services from out-of-network providers by paying higher costs.
Medicare Advantage plans can also vary in terms of which Medicare Advantage plan an insurer offers (like an HMO or PPO), the specific benefits covered, associated costs like premiums and deductibles, quality ratings, and the doctors and hospitals included in the network.
What Extra Benefits Are Covered by Medicare Advantage?
One of the main selling points of Medicare Advantage plans is that they are allowed to offer additional benefits beyond what Original Medicare provides. Every Medicare Advantage plan must cover the same inpatient and outpatient services as Medicare Parts A and B at a minimum. However, many plans opt to include other benefits that Original Medicare doesn’t cover, such as:
Prescription Drug Coverage: Most Medicare Advantage plans bundle in Part D prescription drug coverage, eliminating the need for a separate standalone drug plan.
Vision Benefits: Many Medicare Advantage plans include routine vision exams and allowances for eyeglasses or contacts.
Dental Coverage: Some plans provide preventive dental care and basic services like fillings or dentures.
Hearing Benefits: Coverage for hearing tests, aids, and fitting services may be included.
Health and Wellness Programs: Programs to help members manage chronic conditions, quit smoking, access telehealth services, etc.
Over-the-Counter Allowances: Quarterly allowances or reimbursements for over-the-counter medications and health-related supplies.
Home Meals: Some plans cover temporary home meal delivery after being discharged from the hospital.
Transportation Benefits: Coverage for a certain number of rides per year for non-emergency medical transportation.
Medicare Advantage plans can also tailor their benefit packages to make them more or less comprehensive and attractive to prospective members. More benefits often means higher overall costs than a basic, leaner plan.
What are the Potential Advantages of Medicare Advantage Plans?
For many Medicare beneficiaries, the convenience and extra coverage provided by Medicare Advantage plans make them an appealing alternative to Original Medicare. Some key advantages include:
Bundled Benefits: Having all your medical and drug coverage in a single plan can make healthcare more seamless and easier to manage compared to Original Medicare plus separate Part D and supplemental plans.
Additional Coverage: The extra benefits offered by Medicare Advantage plans like vision, dental, hearing aids, etc. can provide significant value by covering services that would otherwise come out-of-pocket.
Potential Cost Savings: Medicare Advantage plans have a maximum annual out-of-pocket limit that Original Medicare lacks. If you require a lot of medical care, the capped costs with an Advantage plan may save you money.
Care Coordination: Medicare Advantage plans that use HMO and PPO models help coordinate your care among different providers, a feature lacking in Original Medicare.
Convenience and Simplicity: Many seniors appreciate the convenience of getting all their Medicare benefits through a single, private insurance plan.
Drawbacks and Risks of Medicare Advantage
While Medicare Advantage plans do offer advantages for some beneficiaries, there are also potential downsides to consider compared to Original Medicare:
Provider Networks: With HMOs and many PPOs, you’ll need to use in-network providers or potentially pay higher out-of-pocket costs. This limits your choice of doctors and hospitals.
Higher Costs for Widespread Networks: Medicare Advantage plans with very broad, nationwide provider networks often charge higher premiums.
Need to Renew Annually: Unlike Original Medicare, Medicare Advantage plan costs and coverage details can change every year during the annual enrollment period.
No Medigap Supplemental Plans: You cannot purchase a Medigap supplemental policy if you have a Medicare Advantage plan. With Original Medicare, Medigap plans help cover deductibles and coinsurance.
Out-of-Pocket Maximums: While the annual out-of-pocket maximums cap costs, the limits tend to be higher than people expect ($7,550 in 2023 for in-network services).
Costly if Traveling: Most Medicare Advantage plans have limited coverage outside their service area, making frequent travel expensive.
Referral Requirements: Seeing a specialist usually requires a referral from your PCP with an HMO Medicare Advantage plan.
Medicare Advantage plans have extra benefits but also more rules, restrictions, and limitations than Original Medicare. These tradeoffs are important to weigh carefully.
Is a Medicare Advantage Plan Right for You?
For many Medicare beneficiaries, Medicare Advantage plans represent an appealing, cost-effective way to get comprehensive medical and drug coverage through a single, convenient plan. Having your Medicare benefits managed by a private insurer, often with attractive extra benefits included, has obvious appeal.
However, the restrictions around using network providers, referral requirements, service area limitations, and the fact that plan details change annually are all important drawbacks to consider. For beneficiaries who frequently travel, have complex medical needs, or want complete flexibility in choosing providers, Original Medicare plus a Part D drug plan (and possibly a Medigap supplement) may be preferable.
Ultimately, there is no one-size-fits-all “best” choice between Original Medicare and Medicare Advantage. The right answer depends on your specific healthcare needs, financial situation, and personal preferences around coverage details.
It’s wise to carefully review and compare all of your Medicare coverage options during the annual Medicare open enrollment period from October 15th to December 7th each year. Medicare plan details and costs change annually, so what made sense one year may not be the right fit the following year.
How to Choose a High-Quality Medicare Advantage Plan
If you do opt for a Medicare Advantage plan, how can you ensure you’re selecting a high-quality plan and insurance company? A few tips:
Look for 4 or 5-Star Rated Plans: Medicare rates plans annually based on criteria like preventive services, chronic condition management, customer service, and more. Higher-rated plans have demonstrated better quality.
Review the Provider Network: Ensure the plan includes providers and facilities convenient to your location, especially for routine care, specialists you require, and hospitals you prefer.
Consider the Costs: Look at premiums, deductibles, copays/coinsurance, and out-of-pocket maximums to understand the bottom-line costs. Lower premiums don’t mean lower overall costs.
Evaluate the Additional Benefits: If certain extra benefits like vision, dental, or fitness are priorities, see which plans offer the most robust supplemental coverage.
Conclusion
As you navigate your Medicare coverage options, Medicare Advantage plans represent an increasingly popular alternative to Original Medicare worth serious consideration. For the 28 million Americans currently enrolled in Medicare Advantage, these privately-administered plans provide an all-in-one way to receive their Medicare Part A, Part B, and often Part D benefits.
The potential advantages of Medicare Advantage plans are clear – simplified, bundled coverage through a single plan, additional benefits like vision, dental, and wellness programs, care coordination among providers, and out-of-pocket maximums to cap annual costs. For those seeking comprehensive, managed care with predictable costs, a Medicare Advantage plan may be an excellent solution.
However, these plans also come with tradeoffs like provider network limitations, referral requirements, and more restrictions compared to the flexibility of Original Medicare. Medicare Advantage costs and coverage details can also change annually, requiring beneficiaries to reevaluate plan options each year during open enrollment. Those who travel frequently or have complex medical needs may prefer Original Medicare’s nationwide coverage acceptance.
There is no objectively “better” choice between Original Medicare and Medicare Advantage. The right decision depends on your personal needs, finances, and healthcare priorities. What’s most important is carefully weighing the pros and cons of each path and selecting the Medicare coverage option that best fits your individual situation.
As health care needs evolve in retirement, Medicare Advantage plans provide an important alternative for managing costs while accessing expanded benefits beyond traditional Medicare coverage alone. With advantages and disadvantages to consider, take the time to fully understand your Medicare Advantage plan options each year. The right plan selection can ultimately improve your health care experience and outcomes in retirement.