What Is Medicare Advantage?

So, what exactly is Medicare Advantage?

Medicare Advantage Defined

Medicare benefits come in two forms: Original Medicare and Medicare Advantage.

With Original Medicare, Medicare benefits are paid by the federal government. This is different than Medicare Advantage plans, which are also referred to as “Part C” or “MA Plans”. Instead of being offered by the government, these plans are actually offered by private companies that Medicare pays to cover Medicare-provided benefits.

Medicare.gov, the official U.S. Government site for Medicare, explains that there is generally at least some cost to participants for each service provided under Original Medicare, between deductibles and copayments, with no yearly limit per person for out-of-pocket medical expenses.

However, Medicare Advantage plans do limit out-of-pocket expenses, though these limits are generally high. For instance, in 2018, the maximum out-of-pocket limit is $6,700, though some plans may offer lower amounts.

Although Medicare Advantage plans provide both Part A (hospital) and Part B (medical) coverage to participants, Original Medicare still covers services related to hospice care and certain new Medicare benefits and clinical research studies for these individuals.

Regardless of which plan is chosen, Original Medicare or Medicare Advantage, all Medicare recipients are covered in emergency medical situations.

Types of Medicare Advantage Plans

Given that Medicare Advantage is provided by private insurance companies, there are many types from which to choose. However, most fall under one of these six categories:

Medicare Advantage HMOs

Medicare Advantage HMOs (Health Maintenance Organizations) are like other HMOs in that you must choose healthcare providers in the plan’s network unless it is an emergency. And if you need to see a specialist for a medical issue, a referral from your primary healthcare provider is required prior to seeing the specialized doctor, otherwise insurance may not cover the costs.

HMO Point-Of-Service Plans

HMO Point-of-Service plans, commonly shortened to HMOPOS plans, are HMO plans that offer a bit more flexibility in choosing some out-of-network providers for certain, predetermined services. However, if this type of plan is chosen, it’s important to understand that higher copayments will likely apply.

Medicare Advantage PPOs

PPO (Preferred Provider Organization) plans offered through Medicare Advantage allow participants to go to any healthcare provider they’d like. But just like with HMOPOS plans, higher costs typically apply when providers outside the PPO network are seen.

Private Fee-For-Service Plans

If a Private Fee-for-Service (PFFS) plan is chosen under Medicare Advantage, the participant can go to his or her healthcare provider of choice, as long as that provider is willing to accept the payment terms and amounts dictated by that individual PFFS plan.

Special Needs Plans

People with chronic medical conditions or other special needs often require specialized health-related services. Special Needs Plans (SNPs) offered via Medicare Advantage help meet those needs, providing more focused care for specific populations.

Medical Savings Account Plans

Some participants prefer to pay higher deductibles in return for having money deposited in a health plan bank account, which is what a Medical Savings Account (MSA) plan does. This enables participants to simply bank the money and pay for their medical care services on their own as they arise.

HMOs, PPOs, and PFFs are the most common Medicare Advantage plans, according to Medicare Interactive.

Medicare Advantage Prescription Drug Coverage

While most Medicare Advantage plans offer some type of drug coverage, participants also have the option of joining separate prescription drug coverage plans (known as Part D) if their plan does not provide these types of benefits. This is often the case with MSA and some PFFS plans.

That being said, it’s important to note that Medicare.gov does advise that if a participant enrolls in a Medicare Advantage HMO or PPO and joins a separate Medicare Prescription Drug Plan, he or she will be disenrolled in Medicare Advantage and returned to Original Medicare.

For this reason, it’s important to understand which type of drug coverage you need, as well as which plan (Original Medicare or Medicare Advantage) offers the best benefits regarding that particular prescription.

Medicare Advantage Pros and Cons

Choosing a Medicare Advantage plan has advantages and disadvantages.

Pros

As for pros, in addition to providing the same services as Original Medicare, many Medicare Advantage plans offer extra coverage options for vision, hearing, and dental expenses. This is beneficial for participants who would like to purchase one or more of these additional insurances to help offset healthcare costs in other areas.

Another pro of Medicare Advantage is that participants are able to select the plan best suited for their physical condition and needs. For instance, if a chronic medical condition exists, a Special Needs Plan can be selected under Medicare Advantage. However, if the person has relatively few medical needs or is financially able to cover a majority of his or her medical needs and just wants protection in case something major happens, an MSA may make the most sense.

The fact that Medicare Advantage does have an out-of-pocket maximum whereas Original Medicare does not can be more appealing as well. Harvard Kennedy School’s Shorenstein Center reports that, from the age of 70 to 90, an elderly person’s medical expenses more than double, usually exceeding $25,000 per year by the latter age.

Cons

One potential con of choosing this type of plan is that each individual provider can set its own out-of-pocket costs and rules regarding healthcare providers and coverage limitations, making it important to research them all closely before deciding which one is for you.

Another con is that it is possible that an insurance provider will decide to not renew its contract with Medicare in later years. This leaves the participant in a situation where a new plan must be chosen, potentially forcing him or her to change healthcare providers if the new plan isn’t accepted by the current healthcare professionals.

Medicare Advantage also has some limitations as to who can enroll. For instance, individuals with end-stage renal disease are generally not allowed to enroll in a Medicare Advantage plan.

Finally, when Medicare recipients choose Original Medicare, they can also purchase a Medigap policy, which is a supplemental policy designed to help pay for medical expenses Medicare doesn’t cover, such as copayments and deductibles. However, Medicare Advantage recipients do not have this same option as Medigap policies cannot be used in conjunction with these types of plans.

In fact, the DHHS indicates that “it’s illegal for anyone to sell you a Medigap policy unless you’re disenrolling from your Medicare Advantage Plan to go back to Original Medicare.” However, before canceling your Medigap policy, DHHS suggests that you speak with your State Health Insurance Assistance Program and the current insurance company because if you cancel your Medigap policy, you may not be able to reinstate it.

Costs Associated with Medicare Advantage Plans

The average cost of a Medicare Advantage plan in 2018 is $134 according to Medicare.gov. For individuals receiving Social Security benefits, the median premium is slightly lower at $130.

However, because of the variety of plans available under Medicare Advantage, your individual costs could be higher or lower and are largely dependent upon:

• Plan premium costs
• Plan deductibles
• Plan benefits and extras
• Copayment amounts
• Choosing healthcare providers who accept the plan

Additionally, these costs can change annually, depending on whether the insurance provider increases their premiums or modifies benefits.

Additional Medicare Advantage Resources

To learn more about Medicare Advantage, you can visit Medicare.gov or call 1-800-MEDICARE (1-800-633-4227). TTY users can call 1-877-486-2048.