Are Medicare Advantage Plans Good or Bad?

Medicare Advantage Can Cover What Original Medicare (Part A & B) Doesn’t

Medicare Part C (Medicare Advantage plans) that typically offer additional protection beyond Original Medicare (Part A & B) are not inherently bad. There are scenarios where there could be a mismatch in what the enrollee was wanting from their coverage verses what they are actually receiving.

Though Original Medicare offers broad and extensive coverage, it still leaves beneficiaries vulnerable to medical costs because of coinsurance, deductibles, and copays. A quick answer to the question about whether Medicare Advantage plans are bad is that it depends, and it could be the best option for certain individuals and not an optimal choice for others. For more information visit How to Compare Medicare Advantage Plans.

To address a possible shortfall in coverage most Medicare beneficiaries choose either a Medicare supplement plan that can be added to their Medicare Original Plan or a Medicare Advantage plan to control the risk of high out-of-pocket healthcare bills and enhance their valuable benefits. Medicare Advantage plans can help control costs, but they don’t offer the flexibility and predictability of Medicare supplements or Original Medicare. Before making a choice, prudent Medicare beneficiaries should explore the pros and cons of Medicare Advantage plans.

How Do Medicare Advantage Plans Work?

In order to understand Medicare Advantage plans it is is important to understand the following:

Members must have both Medicare Part A and Part B, also referred to as Original Medicare, to enroll in Medicare Advantage.
Medicare Advantage is often called Medicare Part C but it is really an alternative plan to the Original Medicare plan and not an individual subpart of Medicare.
Medicare Advantage plans or MA plans, provide beneficiaries with an alternative way to receive Medicare Part A, Part B, and possibly, Part D benefits.
Private insurance companies offer Medicare Advantage plans, but the government regulates them. An MA plan must provide members with benefits as good or better than Medicare Part A and B.

Essential aspects of typical Medicare Advantage plans include:

Most Medicare Advantage plans also provide drug benefits. With prescription coverage, beneficiaries won’t need a stand-alone Part D plan to help cover medication.
Most Medicare Advantage insurance companies offer managed care health insurance these days, so plan members may need to visit providers from their plan’s network to access covered services. Some MA plans allow members to seek non-network services, but it will cost more.
MA plan members should keep their Medicare cards in a safe place because they’re still enrolled as Medicare beneficiaries. At the same time, they will use their private MA plan card to identify themselves when accessing covered services.
MA plans will probably include copay and deductibles, but they also have an annual out-of-pocket limit, saving plan members from catastrophic medical expenses.
For individuals who are just qualifying into Medicare they can enroll in an MA plan during the Initial Coverage Election Period (ICEP) which occurs at the same time as the Initial Enrollment Period. There are other enrollment windows available depending on the individual’s situation, like during the Annual Election Period (AEP), Special Election Period, and for those already enrolled in a MA plan they can make changes during the Medicare Advantage Open Enrollment Period (MA OEP).

What Are the Pros and Cons of MA Plans?

Suppose beneficiaries choose between only having Medicare Part A and Part B or enrolling in a Medicare Advantage plan. In that case, they will probably find that an MA plan helps control healthcare costs much better. For instance:

MA plans generally charge low premiums, and some don’t charge anything extra at all. The plans aren’t technically “free.” The government contributes to MA plans, similar to how it funds most of Part A and Part B.
MA plans may have deductibles and copays, but they also include an annual out-of-pocket limit. Once the plan members meet their out-of-pocket limit, the health insurance will pay for 100% of covered services.
Also, most MA plans include Part D, so the beneficiary won’t need to choose and pay for separate drug coverage. Beneficiaries may appreciate the simplicity of having medical, hospital, and prescription coverage in one policy.

Disadvantages of Medicare Advantage Plans Vs. Medicare Supplements

Primarily, enrollees compare the advantages and disadvantages of Medicare Advantage plans vs. Medicare supplement insurance. Medicare beneficiaries can only choose one of these kinds of programs, so they need to know which one will serve them the best.

Most Medicare Advantage Plans Rely on Plan Networks

Most MA providers offer HMOs, PPOs, and other types of managed care health insurance. This kind of health insurance does a fantastic job of controlling costs, but it will force plan members to use its network of healthcare providers for covered services. PPOs allow their members to receive services outside of the network, resulting in higher out-of-pocket costs.

Many MA plans only serve networks inside the local area too. Managed care plans make exceptions in emergencies and other rare circumstances, but primarily, plan members should seek services inside the network. In non-emergency situations, members should obtain written permission to use outside providers if they believe it’s justified because the network doesn’t offer a particular specialty. Members won’t have a guarantee that their insurer will grant an exception.

In contrast, Medicare supplements don’t rely on networks and are generally accepted by providers all over the country. Those who prefer more freedom to choose providers, particularly folks who plan to travel during retirement, will enjoy greater freedom to use their coverage with a Medicare supplement.

Some MA plans may also ask members to choose a primary care physician and seek referrals for a visit to a specialist. Many retirees want more flexibility to choose and change providers, and they consider the strict rules a disadvantage of Medicare Advantage plans.

High Out-of-Pocket Maximums

An out-of-pocket maximum might provide beneficiaries with a benefit compared to only relying on Original Medicare. Still, the Kaiser Family Foundation reported these average out-of-pocket maximums in 2021:

PPOs: $5,091 for in-network healthcare and $9,208 for out-of-network services.
HMOs: $4,566.

Most MA plans offer low copay and deductibles for standard medical services, like doctor visits. Cost-sharing amounts for more expensive services, like hospital visits, may be higher. Thus, MA plan members with serious medical issues may still need to spend thousands of dollars before the plan pays at 100%. Notably, the more freedom of choice offered, the higher the out-of-pocket maximum. For instance, PPOs with regional networks had a higher average out-of-pocket limit than PPOs with local ones.

Plans and Healthcare Providers Can Change

Nothing forces healthcare providers to stay with a plan network. According to Medicare.gov, plan providers can leave at any time during the year. Thus, plan members might enroll in a Medicare Advantage plan with a network with their favorite doctor and hospital. That provider could leave the network, and the member could need to seek out other network providers. The member can’t switch MA plans until Open Enrollment in the fall.

Similarly, plans can change their benefit details from year to year, so members need to compare plans each year to ensure the one they chose initially still offers good value. In contrast, the government specified the benefits that various Medicare supplements must provide, and these plans rarely change.

Advantages of Medicare Advantage Plans

Medicare Advantage plans have grown very popular in recent years. For most beneficiaries, MA plans do an excellent job of controlling costs with relatively low premiums and reasonable copayments and deductibles for many healthcare services. In the case of a severe illness or injury, the out-of-pocket limit will give the plan member a stop-loss amount so they won’t face tens of thousands of dollars in medical costs not covered by Original Medicare.

Other reasons that might encourage individuals to enroll in Medicare Advantage include:

Most plans offer additional benefits for things Medicare doesn’t cover, like routine dental or vision care.
Medicare Advantage plans must accept applicants regardless of pre-existing conditions.
Enrollees retain their full rights under Medicare and can return to Original Medicare.
Most MA plans bundle in prescription coverage, so plan members can save even more money on premiums.

Anyone who values the freedom to choose healthcare providers, the option to select providers all over the country, and predictable health costs for covered Medicare services should consider combining Original Medicare with a Medicare supplement. Supplements typically come with higher premiums than Medicare Advantage plans and don’t include prescription benefits. However, they offer access to more providers and can reduce concerns over out-of-pocket costs for covered medical services.

Still, lower premiums and the ability to switch plans during Open Enrollment without worrying about pre-existing conditions will attract plenty of Medicare Advantage plan members. Medicare beneficiaries who plan to travel around the country might choose a relatively more expensive PPO that will let them visit out-of-network providers when away from home.

Some national insurance companies even sell Medicare Advantage Plans with a “snowbird” feature that allows the member to switch service areas for spending part of the year in another part of the country. Thus, Medicare Advantage plans can work out well for individuals who shop carefully to find the right coverage for their needs.

Sources: