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What Is a Medicare Advantage Plan?

Nov. 13, 2019
Investing, Retirement Planning
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A Medicare Advantage Plan is an all-in-one alternative to traditional Medicare. Private insurers that offer these plans contract with the federal government to provide health insurance benefits to people who qualify for Medicare.

The pros of Medicare Advantage Plans typically include:

  • Additional benefits, which may include hearing, dental and vision care.
  • Potentially lower premiums for coverage.
  • Limits on how much you have to pay out-of-pocket.

Some of the drawbacks of Medicare Advantage Plans typically include:

  • Less freedom to choose your medical providers.
  • Requirements that you reside and get your nonemergency medical care in the plan’s geographic service area.
  • Limits on your ability to switch back to traditional Medicare with a supplemental policy.

Medicare Advantage Plans — also known as Medicare Part C or MA Plans — are required to provide the same benefits as Medicare Part A, which covers hospitalization, and Part B, which covers doctor’s visits. Medicare Advantage Plans also typically include Part D prescription drug coverage and may include benefits not covered by Medicare, such as routine dental care, eye exams and glasses and hearing aids.

Medicare Advantage Plans are sometimes confused with Medicare supplemental insurance, also known as Medigap. Both are offered by private insurance companies, but Medigap policies cover people who buy traditional Medicare (Part A and Part B). Medicare Advantage Plans, by contrast, replace Medicare Part A and Part B. You can’t have both a Medicare Advantage Plan and a Medigap plan at the same time.

Also, because Medigap policies are standardized, it’s relatively easy to compare costs. Every Medicare Advantage Plan is different, so comparison shopping can be difficult.

Medicare Advantage Plans have provider networks that may limit your choices. If you go outside the network, your care may not be covered. With traditional Medicare, you generally can use any doctor or medical facility that accepts Medicare.

In exchange for less freedom, though, you often pay less. You would still be required to pay a monthly premium for Part B, but the additional cost for a Medicare Advantage Plan is usually less than for a Medigap plan. Sometimes the Medicare Advantage Plan premium is $0.

Medicare Advantage Plans also have a maximum out-of-pocket limit for covered care. That caps the amount you’ll be expected to pay in addition to your premiums. Traditional Medicare and most Medigap plans don’t have out-of-pocket maximums.

If you want to change Medicare Advantage Plans, you can do so once a year. You also can change to traditional Medicare, but it could be hard to get a Medicare supplemental policy if you switch after the first year. Insurers are required to issue you Medigap policies only during your initial enrollment period (typically the six months after you turn 65 and enroll in Medicare Part B), or if you switch out of your Medicare Advantage Plan in the first year. After that, insurers can deny you a Medigap policy if you have health problems, or they can require a waiting period before your preexisting conditions are covered.

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