Medicare Advantage (MA) plans, also known as Medicare Part C, are private health plans that are an alternative to Original Medicare. These plans are offered by Medicare-approved private insurance companies, and they typically provide additional benefits that are not available under Medicare Parts A and B. They may also offer cost savings, lower out-of-pocket expenses, and potentially lower premiums.
Original Medicare — comprised of Parts A and B — is a benefit provided by the federal government to individuals aged 65 and older, as well as to adults with certain conditions and disabilities. Medicare Part A helps to cover the cost of inpatient care at hospitals and skilled nursing facilities as well as home health care and hospice care. Medicare Part B helps cover expenses related to outpatient care, physician and healthcare provider services, durable medical equipment, home health care, and many preventative medical services.
When enrolling in Medicare, beneficiaries must decide whether to choose Original Medicare or a Medicare Advantage plan. The following guide offers an in-depth look at Medicare Advantage plans, especially in comparison to Original Medicare.
Medicare Advantage vs. Original Medicare At a Glance
The federal government dictates that Medicare Advantage plans must offer benefits that are comparable to Original Medicare. While these plans are required to meet certain basic care requirements, the copays and other costs for medical services may be different.
|Feature||Medicare Advantage||Original Medicare|
|Part A: Hospital Coverage||Yes||Yes|
|Part B: Medical Coverage||Dependent on market||Yes|
|Part D: Drug Coverage||Adjustable||No|
|Out-of-network Coverage||Depends on plan type||Yes|
|Premiums||One premium||Multiple premiums|
|Deductibles||Depends on plan||Yes|
|Out-of-pocket Costs||Depends on plan||Yes|
Understanding Medicare Advantage
Medicare Advantage plans typically provide the same coverage as Original Medicare Parts A and Parts B, with the exception of hospice care. Many MA plans also include prescription drug coverage and some provide additional coverage for expenses related to vision, hearing, and dental care.
There are typically 4 cost components to both Original Medicare and MA plans:
- Premiums: The premium is the fixed amount individuals pay to enroll in the program, and it is typically a monthly fee to keep the coverage active.
- Deductibles: Deductibles are a set amount you pay out of pocket before your coverage begins to pay.
- Copays: Copays are a fixed amount you pay at the time you receive covered medical care, such as during your doctor’s appointment.
- Coinsurance: Coinsurance is a percentage of medical costs an individual is obligated to pay.
When enrolling in Original Medicare, each of these amounts is set by the federal government. The cost is also the same across the board for enrollees who fall within the same income brackets. However, since Medicare Advantage is offered by private insurance companies, it’s common for costs to vary depending on the specific MA plan and insurer.
In addition, while the federal government sets the prices for many medical services covered under Original Medicare, individuals covered by MA plans may pay different rates, depending on what the insurer has negotiated with the healthcare provider. These costs may be either higher or lower than the rates charged to individuals with Original Medicare.
Pros of Medicare Advantage
- Additional benefits: Many MA plans include prescription drug coverage as well as benefits for medical services not covered by Original Medicare, such as hearing, vision, and dental.
- Potential for lower premiums: Premiums vary from between MA plans, and some have premiums as low as $0.
- Limited out-of-pocket costs: MA plans may have lower copays and/or coinsurance than Original Medicare. These plans also limit out-of-pocket expenses, allowing you to pay nothing more for the year after you have met the stated maximum. In contrast, Original Medicare does not have a cap, so your expenses may be limitless.
Cons of Medicare Advantage
- Potentially limited choice of healthcare providers: Whileindividuals covered by Original Medicare may visit any physician or healthcare provider who accepts Medicare, some MA plans restrict coverage to a network of providers. If you choose a provider outside of your network, the plan may not cover your costs or your costs may not apply to your out-of-pocket maximum.
- Specific service areas: Many MA plans are based on a regional, rather than nationwide, network of providers and are only available to individuals who live in the plan’s geographic service area. This can pose a challenge for individuals who divide their time between homes located in different areas.
- Referrals and authorization may be required: Some MA plans require prior authorization for certain procedures and services and/or a referral from your primary care physician before seeing a specialist.While Original Medicare does require prior authorization for a few medical services and equipment, it is far less common.
How to Find a Medicare Advantage Plan
You can compare available Medicare Advantage plans by speaking to a knowledgeable Medicare agent. Once you’ve found a plan that’s suitable, enroll online or contact the insurance provider to request an enrollment form. Note that there are certain documents and information you will need to have on hand to enroll, such as your Medicare number and the dates that your Medicare Part A and Part B coverage started. You can find this information on your Medicare card.
Medicare Advantage Plan Types Explained
When covered under a Medicare Advantage plan, your ability to choose your healthcare providers and facilities is primarily dictated by the type of plan you choose. There are several options, including the following.
Health Maintenance Organization (HMO) Plans
HMO plans limit covered individuals to a pre-defined network of hospitals, physicians, and healthcare providers, except in the case of emergency or urgent care needs. In many cases, referrals from a primary care physician are needed to see a specialist and/or receive certain forms of diagnostic testing.
Preferred Provider Organization (PPO) Plans
PPO plans also have a network of providers and facilities. However, covered individuals can choose to seek care from a provider that is not a part of the network. In this case, expenses are typically higher, but can still be partially or completely covered by your PPO Medicare Advantage plan.
Private Fee-for-Service (PFFS) Plans
PFFS plans typically pay a set amount to healthcare providers, doctors, and hospitals, with covered individuals also paying a set amount. Some PFFS plans allow covered individuals to choose any hospital, doctor, or healthcare provider while others have a network of providers and charge higher costs to individuals who choose to seek medical care outside of the network.
Medical Savings Account (MSA) Plans
MSA plans consist of 2 parts: a medical savings account and a high-deductible insurance plan. With this type of plan, your insurance doesn’t cover healthcare costs until you meet your deductible. However, the plan deposits funds into your MSA, which you can use to pay for healthcare expenses before you meet your deductible.
What to Consider When Choosing Medicare Advantage vs. Original Medicare
With so many options available, it can be difficult to choose the right Medicare coverage for your needs. However, considering a few important factors can help you make your decision.
Your current medical conditions and health forecast can often play a vital role in choosing Medicare coverage. For example, if you take prescription drugs, it’s important to note that this is not covered under Original Medicare unless you enroll in a stand-alone Part D plan. While many Medicare Advantage plans include drug coverage, they may have limitations. In this case, you may decide to look for a Part D plan that covers each of your medications and allows you to get them from your preferred pharmacy.
It’s also important to consider your budget, particularly if you believe you may need expensive treatments. Medicare Advantage plans have an out-of-pocket maximum that limits your liability, while Original Medicare does not. If you choose Original Medicare and do not purchase a Medigap policy to help cover your costs, this could result in significantly higher healthcare costs.
Also consider whether you have a need for extra benefits, like vision, hearing, and dental. If so, a Medicare Advantage plan may be beneficial.
When and How to Change Your Medicare Plans
If you decide you want to make a change to your Medicare Advantage plan or enroll in a plan for the first time, you will need to wait for an enrollment period. Depending on your circumstances, the following windows may apply.
Initial Enrollment Period
- When: Varies depending on your birthdate and when you enroll in Medicare Part A and Part B
- Coverage Begins: Typically, on the first day of the month following the month when you enroll
- What You Can Do: Enroll in Medicare Parts A and B, a Medicare Prescription Drug Plan (Part D), a Medicare Advantage Plan (Part C)
Your initial Medicare enrollment period is a 7-month window that includes the 3 months prior to your birth month, your birth month, and the 3 months after. If you enroll in Part A and Part B at that time, then your MA initial enrollment period occurs over the same period of time.
However, if you delay your Part B enrollment and sign up during another enrollment period, your initial MA enrollment period includes the 3-month period before the start date of your Part B coverage and ends the last day of the month before your Part B coverage begins. For example, if your Part B start date is October 1, your enrollment period is July 1 through September 1.
Medicare Advantage Open Enrollment Period
- When: January 1 to March 31 each year
- Coverage Begins: The first day of the month following the month in which you make a change
- What You Can Do: Change your Medicare Advantage Plan or switch to Original Medicare
If you’re already enrolled in a MA plan, you may switch to another MA plan with or without prescription drug coverage during this period. You can also drop your MA plan and go back to Original Medicare. In this case, you also have the opportunity to sign up for a Medicare Part D drug plan.
Note that you cannot enroll in Medicare Part A or Part B during the Medicare Advantage open enrollment period unless you are already enrolled in a Medicare Advantage program.
Annual Enrollment Period
- When: October 15 to December 7 each year
- Coverage Begins: January 1
- What You Can Do: Make changes to your current coverage or purchase new policies
During the annual enrollment period, you can make a wide variety of changes, including switching from a Medicare Advantage plan to Original Medicare and purchasing a Medicare Part D prescription plan or switching from Original Medicare to a Medicare Advantage plan, as long as you meet the requirements. You can also switch MA plans in general if there is a different MA plan that offers benefits you are interested in.
If you did not sign up for Medicare Part A and Part B when you were first eligible, you cannot enroll in this coverage during the annual enrollment period. Instead, you must wait for the Medicare general enrollment period, which occurs between January 1 and March 31 each year.
Special Enrollment Periods
- When: Varies depending on your circumstances
- Coverage Begins: Varies
- What You Can Do: Join, drop, or switch Medicare Advantage plans; enroll in Medicare premium Part A and Part B, Medigap, or Medicare Part D plans
The timeframe of the special enrollment period and what you can do depends on the circumstances that triggered it. Here are some of the most common examples:
- Moving back to the United States after living abroad: Join a MA or prescription drug plan within 2 months of moving back. For example, if you are moving back to the U.S. in May, you have until July to join an MA plan.
- Moving out of your Medicare Advantage plan’s service area: Switch to a new Medicare Advantage or prescription drug plan beginning the month before you move or when you notify your plan that you are moving (whichever comes later), and continuing for 2 additional months. For example, if you are moving out of your plan’s service area in May, you have from April until June to join an MA plan.
- Moving into or out of a rehab hospital, long-term care facility, skilled nursing facility, or psychiatric facility: Join, switch, or drop plans during the time you are in the institution and for 2 months after. For example, if you are moving out of a skilled nursing facility in May, you have until July to join an MA plan.
- The end of employment or an employer-provided healthcare plan: Join a MA or prescription drug plan within 2 months after your coverage ends. For example, if your employment ends in May, you have until July to join an MA plan.