The Medicare Advantage (MA) program was first created in 1997 as part of the Balanced Budget Act. They are often referred to as Part C or replacement plans. This program gives beneficiaries another option other than a Medigap plan with high premiums. Most Medicare Advantage plans have low premiums, which can be more affordable for some people. However, it is essential to know that they are not the same as a Medicare Supplement (Medigap) plan. Rather than having Medicare as your primary insurance coverage, you agree to receive your Medicare benefits through your Medicare Advantage plan. The Advantage plan has a different structure than Original Medicare because there is a network of providers and copays or coinsurance for services. You may have heard Medicare Advantage plans are bad, but the reality is they may be an excellent fit for some people but not for others.
How Do Advantage Plans Work?
Private insurance companies sell these plans, and according to the Kaiser Family Foundation, the average beneficiary has access to about 33 Medicare Advantage plans. A Medicare beneficiary must be enrolled in Medicare Part A and Medicare Part B to enroll in a Medicare Advantage plan. They must continue to pay the Part B premium even though their Advantage plan provides their coverage.
Since you have an Advantage plan, you would only show your Advantage plan card when you go to a doctor or have a medical service done. If the Advantage plan does not cover a service, that does not mean you can bill Medicare.
Structure of Medicare Advantage Plans
All Medicare Advantage plans have a Summary of Benefits which is a document that lists all services, benefits, and costs related to that plan. An Advantage plan must provide the same benefits as Medicare Parts A and B. An important thing to note is that you no longer look at the Medicare Part A and Part B deductibles when you are enrolled in an Advantage plan. Instead, you look at all costs listed in your Summary of Benefits. Some Advantage plans will have a medical deductible, while others will have a $0 deductible. The same thing goes with the monthly premium. You will likely find a handful of plans that offer a $0 premium. However, some plans have premiums, and it truly comes down to your zip code and county.
When it comes to your cost-sharing for services, those expenses will vary with every plan. Typically, most services will have copayments that you would pay, while other services have coinsurance. For example, for an inpatient hospitalization, you may have a specific copay for the first five days, then you don’t pay anything for your room and board. However, if you see a specialist for a visit, then you may have a $50 copay every time you go.
Advantage plans also include additional benefits that Medicare does not cover. These benefits can include dental, vision and eyeglasses, hearing and hearing aids, gym memberships, transportation, meal delivery, etc. These benefits will vary with each plan, so you will want to check your plan’s Summary of Benefits for more details. You can also call your agent or insurance company if you have any questions.
Since you have out-of-pocket costs with a MA plan, they all have a maximum out-of-pocket limit (MOOP). That limit caps your cost-sharing. In 2022, that limit can be as high as $7,550. However, many plans will have a maximum limit much lower than that. When your cost-sharing reaches that limit, the plan will pay 100% of the cost for all approved services.
Prescription Drug Coverage Benefit
Most MA plans include drug coverage, so a beneficiary does not need to enroll in an additional Part D plan if they have an Advantage plan that provides a drug benefit. There is a separate drug deductible from the medical deductible. Certain tiers may apply toward the drug deductible, and there is cost-sharing once the deductible is met.
The drug benefit in the Advantage plan still includes the coverage gap (donut hole), which is reached when your total drug costs get to $4,430 in 2022. Once that limit is met, you pay 25% of the price for your prescription drugs until the total reaches $7,050. The drug benefit has the same structure as a standalone Part D plan, but there is not a premium since it is included within the Advantage plan. You can check your plan’s formulary to know which drugs are covered and which ones are not.
Many individuals ask, are Medicare Advantage plans bad? The answer is no, not necessarily. They provide additional benefits for enrollees and a limit to their expenses, benefiting those with high health care costs.
Provider Networks with Advantage Plans
Since you will receive your care from the Advantage plan, you must see doctors within your plan’s network, which typically falls within a service area. The network of providers and service area will depend on the specific plan. A doctor may accept one Advantage plan but not another, and that does not mean the one they don’t take is not good or that there is something wrong with that plan. Each provider can choose which plans they want to accept and which ones they don’t. The service area consists of your county and surrounding counties. However, there are plans with a larger service area than others, called preferred provider organizations (PPO).
The Different Medicare Advantage Programs
There are several different programs, and each program has its own features. One of the more common plans is health maintenance organizations (HMO). HMO plans have a smaller network compared to PPO plans. Generally, it would be best to stay in-network to have coverage from your plan. If you go outside your network, you will be responsible for all costs, except in an emergency. Additionally, you will need referrals to see specialists when enrolled in an HMO plan.
Another common type of plan is the PPO plan. PPOs have a larger service area which means they include more healthcare providers within their network. They will have costs for in-network and out-of-network services, but you may pay more money when you are out of network. You also might not need a referral to other physicians when you have a PPO plan, so you have more flexibility in choosing your doctors.
Additional programs include Special Needs Plans (SNPs) and Private-Fee-For-Service (PFFS). SNPs cater more toward those with certain chronic conditions, so those plans may offer different extra benefits. PFFS plans are only offered in certain areas, so you will want to check what is available in your zip code and county.
The plan you enroll in will be entirely your choice, but you will want to make sure you weigh the pros and cons of each plan. Two things to check are that your doctors accept your plan and your drugs are covered.
When to Apply for a Medicare Advantage Plan
Everyone must enroll in an Advantage plan during an available election period. There are four different election periods related to Medicare Advantage plans. The first election period is the Initial Election Period which is a 7-month window around your 65th birthday month. It starts three months before your birthday month and ends three months after. If you do not enroll during this window, you can enroll during a Special Election Period (SEP) if you qualify. Enrolling during a SEP would give you a 2-month window to enroll in an Advantage plan. An example of a SEP would be losing employer coverage past 65.
Since insurance companies make changes to the Advantage plans every year, you can enroll, disenroll, or change your Advantage plan during the Annual Election Period (AEP). This window is from October 15-December 7 of every year. The insurance company you have will send you an annual notice of change letter stating any changes made to your plan that will be effective the following year. Many people will change their Advantage plan during that window, and when you do, your new plan will start on January 1. There are many reasons why someone would change their Advantage plan, such as their doctors are no longer in-network or their drugs are no longer covered.
The final election period is the Medicare Advantage Open Enrollment Period from January 1- March 31. When you apply during this window, your plan will be effective the 1st of the following month. Some might apply during this window if they enrolled in the wrong Medicare Advantage plan during the Annual Election Period. This window allows them to change one more time before they are locked in for the calendar year.
Difference Between Medicare Advantage Plans and Medicare Supplement Plans
There are advantages and disadvantages to both Advantage plans and Medicare Supplement plans (Medigap). However, you will want to evaluate your healthcare needs, budget, and lifestyle when choosing which option may be best for you. Medigap plans cover the gaps in Medicare costs and are secondary plans to Original Medicare. They help cover hospital and medical expenses, but they do not cover medications.
There are ten different types of Medigap plans, and each plan provides different coverage. Medigap insurers can set their premiums for their policy, but they tend to be more expensive than Medicare Advantage plans. However, they offer less out-of-pocket expenses during the year because they pay the 20% coinsurance after Medicare pays 80%. This means you could have 100% coverage for a doctor visit, dialysis, ambulance rides, emergency care, heart procedures, hospice care, cancer treatments, hospitalization costs and hospital stay, and more. Although an Advantage plan can cover these same services, you will have cost-sharing that you must pay for each service.
A disadvantage to a Medicare Supplement Insurance plan is that they have higher premiums which can increase each year, so the rates do not stay the same. A Medigap policy helps take away the hassle of prior authorizations for services. Still, the downside is if you missed your Medigap Open Enrollment window, then you could have to answer health questions and be denied due to specific health conditions.
What to Think of Before Enrolling
Before you choose a plan, there are a few key factors you will want to consider.
- Your potential healthcare costs for important healthcare services such as inpatient care.
- If your favorite physician is in the plan’s network. You can look at the provider directory to determine which doctors around you accept the plan.
- The price of the plan and your drugs.
- Can you travel around the country and have coverage if you need it?
- Is this health coverage cost-effective for all possibilities as you age?
- Do you have the life savings in retirement to meet your plan’s maximum limit if you have to pay that much during the year?
You must do your due diligence before choosing a health insurance plan that best fits your needs, especially if you have a specific illness. Look at the fine print of the plan’s benefits, so you know exactly what to expect, and you won’t run into any surprises.
Most Advantage plans cannot be used anywhere in the country, so you will want to look at the plan network before enrolling. You also want to remember that you will still have outpatient care and hospital care with your Advantage plan, and everyone must continue to pay their Part B premiums no matter which health plan they choose or insurer. Do your homework ahead of time and talk to experts if you have any questions or are unsure where to go for information.