How Do Medicare Advantage Plans Work?

Medicare Advantage plans, also known as Medicare Part C, are growing in popularity in recent years.

Seniors often select these plans because they appreciate the convenience of health and drug benefits under one plan, at cost-efficient prices in addition to other benefits, such as dental, vision, and gym memberships.

Here’s an overview of Medicare Advantage plans, so you can have all the information when comparing plans.

What are Medicare Advantage Plans?

Medicare.gov, the government Medicare website explains that Medicare Advantage Plans are “sometimes called “Part C” or “MA Plans,” are an “all in one” alternative to Original Medicare.

They are offered by private companies approved by Medicare. If you join a Medicare Advantage Plan, you still have Medicare. These “bundled” plans include Medicare Part A (hospital insurance) and Medicare Part B (medical insurance), and usually Medicare prescription drug coverage (Part D).”

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How do Medicare Advantage work for provider coverage?

A frequently asked question about Medicare is: “What doctors and facilities will I be able to use?” You are comfortable with them, you trust them, and they are convenient for you. Therefore it’s important to understand that Medicare Advantage has two main plan types which differ in how you can access doctors:

In a Medicare Advantage HMO, you can only use in-network providers. An in-network provider is a doctor who is contracted by an insurance company, usually found within a specified list. In most cases, a referral from your primary care doctor is also required to see a specialist. You are also required to use network hospitals and medical facilities. Not all plan networks include all hospitals.

If you belong to a Medicare Advantage PPO, you can see both in-network and out-of-network doctors without needing a referral from your primary care doctor to see a specialist. Be prepared; if you choose to visit an out-of-network doctor, you will usually pay more than you would an in-network doctor.

How much do Medicare Advantage plans cost?

• Premiums: The first cost people often consider is the monthly premium. Medicare Advantage plan premiums start at $0 and can go up to around $100 a month, depending on plan benefits and location. The low or no premium is one of the most substantial benefits of Medicare Advantage plans. Remember that you will most likely have to pay your Part B premium, so figure that into your costs.
• Copayments and Coinsurance: With Medicare Advantage plans, you will be charged a copayment or coinsurance for any service you use. These amounts differ between plans, and some plans even have a $0 copay to see your primary care doctor or a specialist.
• Out-of-Pocket Maximum: The maximum amount you will pay out of pocket in a given year. Some costs do not count towards the out-of-pocket maximum, including premiums, Part D costs, services not covered by the plan, and some charges from out-of-network providers. Most people do not hit their out-of-pocket maximum.
• Deductibles: Some plans have a deductible, which is what you pay for medical and/or prescription drugs before your insurance begins to pay for coverage. Many plans do not have any deductibles.

How do Medicare Advantage plans work for prescription drug coverage?

Medicare Advantage plans typically include Part D prescription drug coverage. Some Medicare Advantage plans, known as Medicare Savings or Cost Plans, do not include Part D coverage. For these, you must also purchase a stand-alone Part D prescription drug plan (PDP) from a private insurance company.

It’s important to enroll for your Medicare Drug Coverage during your initial enrollment period. This coverage begins three months before the month you turn 65 and ends three months after that month. If you don’t enroll for Medicare Drug Coverage during your initial eligibility period, you may be subject to an enrollment penalty.

Most Medicare Part D or Medicare Advantage plans with drug coverage have a tiered structure to determine what you pay for prescription drugs. To minimize your drug costs, look for a plan covering the medications you take in more favorable tiers.

Additionally, the pharmacy where you purchase your medication impacts how much you will pay. Insurance companies divide pharmacies into “preferred” and “standard.” In general, “preferred” pharmacies offer more cost-effective prescription drug options.

How do you take advantage of extra benefits on a Medicare Advantage plan?

Recently, insurance carriers have included additional health-related benefits in Medicare Advantage plans. It’s easy to understand why. A healthier lifestyle reduces medical costs. The insurance provider and the insured both benefit. Popular additional benefits included in Medicare Advantage include:

• Dental
• Hearing
• Vision
• Over-the-counter items
• For example, toothbrushes, vitamins, medical supplies, and fitness monitors
• Gym memberships

When comparing plans, keep in mind these benefits can vary widely between different plans and insurance companies.

Last updated: May 11, 2022