Medicare Advantage plans are bundled plans that combine Medicare parts A, B, and often D. As private insurers administer the plans, they can also include additional benefits benefits, too.
However, some Medicare Advantage plans can be restrictive regarding the network of healthcare facilities a person may be allowed to use.
If an individual qualifies for Medicare, they can choose between Medicare Advantage and Original Medicare, and which is best may depend on a person’s specific healthcare needs.
Glossary of Medicare terms
- Out-of-pocket cost: This is the amount a person must pay for care when Medicare does not pay the total amount or offer coverage. Costs can include deductibles, coinsurance, copayments, and premiums.
- Premium: This is the amount of money someone pays each month for Medicare coverage.
- Deductible: This is an annual amount a person must spend out of pocket within a certain period before Medicare starts to fund their treatments.
- Coinsurance: This is the percentage of treatment costs that a person must self-fund. For Medicare Part B, coinsurance is 20%.
- Copayment: This is a fixed dollar amount a person with insurance pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
Medicare Advantage plans must cover all services that Original Medicare includes. A person will not have any less coverage if they enroll in a Medicare Advantage plan.
Most Medicare Advantage plans offer additional benefits besides Original Medicare’s basic level of coverage. These vary by plan and may include:
When a person chooses a Medicare Advantage plan, they are still responsible for paying their Original Medicare premiums. Medicare contributes a set amount of money to the participant’s plan that covers healthcare services.
Insurance companies may profit from this, as they can create provider networks. The facilities and healthcare professionals within the networks agree to set fees or discounts for plan members. If a person receives treatment outside of the network, they will typically pay more.
According to the KFF, in 2024, an estimated 54% of Medicare enrollees had a Medicare Advantage plan.
However, Medicare Advantage plans are not available nationwide, and there were 77 U.S. counties where no insurance companies offer a Medicare Advantage plan.
| Medicare Advantage plan features | Pros | Cons |
|---|---|---|
| Additional benefits | coverage extends beyond Original Medicare’s benefits (e.g. dental, vision, fitness) | benefits can vary by plan |
| Prescription drug coverage | many plans include prescription drug coverage | prescription drug coverage and costs may vary by plan and location |
| Out-of-pocket spending limits | annual cap on out-of-pocket spending limits | limits can be high additional out-of-network expenses may apply |
| Provider networks | managed care can lead to better care coordination | limiting provider networks may need referrals (HMOs) higher costs for out-of-network services |
| Added coverage | bundled coverage with various benefits in one plan | no Medigap option to help with additional out-of-pocket costs |
| Prior Authorization requirements | streamlined care through plan networks | prior authorization can sometimes take time |
Medicare Advantage has a number of benefits. The following sections will discuss these in more detail.
Additional benefits
Medicare Advantage plans usually offer coverage that extends beyond Original Medicare’s benefits.
Some examples of extra benefits include:
- bathroom safety equipment
- caregiver support
- dental care
- fitness
- hearing care
- in-home support
- meal benefits
- telemonitoring services
- transportation assistance
- vision care
Although not all Medicare Advantage plans offer all of these benefits, each will usually offer some additional forms of coverage.
However, a plan may state that a person is responsible for copayments or coinsurances.
Prescription drug coverage
According to the KFF, in addition to many supplemental benefits, the average Medicare beneficiary has access to around 30 Medicare Advantage plans with prescription drug coverage.
Medicare requires that all enrollees have some form of prescription drug coverage. A person can secure a prescription drug plan through Medicare Advantage.
To ensure a Medicare Advantage plan covers a person’s specific medications, people should ask to see the plan’s formulary, or drug list. This will detail all included medications and the tier they fall on. Usually, more expensive drugs will be on higher drug tiers.
Out-of-pocket spending limits
Medicare Advantage plans have an out-of-pocket spending limit. This is an annual cap on how much a person will pay in out-of-pocket expenses.
According to the KFF, in 2024, the average out-of-pocket limit for in-network services was $4,882, or $8,707 for both in- and out-of-network services. Health maintenance organizations (HMOs) typically have a lower out-of-pocket limit than other plan types.
Although the out-of-pocket limits represent thousands of dollars, they do offer some assurance to a person that they will not have to spend more than a certain amount.
Once a person reaches their limit, their insurer will cover all eligible costs. For example, if a person pays a 20% coinsurance on doctor’s visits but has an out-of-pocket limit of $5,500, they will not be responsible for any further out-of-pocket costs once they have paid $5,500 in coinsurance.
Medicare resources
For more resources to help guide you through the complex world of medical insurance, visit our Medicare hub.
Medicare Advantage plans may also have some drawbacks. The sections below will cover these in more detail.
Limited provider networks
Several different Medicare Advantage plan types are available. The most common are preferred provider organizations (PPOs) and HMOs.
Each works by defining in-network and out-of-network healthcare professionals and facilities to reduce costs.
An HMO usually involves a person visiting an in-network primary care physician in the first instance.
If they have a health condition that requires specialist care, they will usually see their primary care physician, who must then refer them to an in-network specialist before an HMO covers the cost at their reduced rate.
A PPO varies slightly in that a person does not usually need a specialist referral. However, these types often have a fixed network of doctors, healthcare professionals, and facilities.
Under Original Medicare, a person can see any doctor who accepts Medicare assignment. Some people prefer this option, as they have more freedom to choose facilities and specialists.
Supplemental coverage is not available
When a person has Original Medicare, they can purchase a supplemental insurance policy called Medigap. This helps them reduce out-of-pocket costs by covering deductibles, coinsurance, and copayments.
People cannot get a Medigap policy if they have Medicare Advantage. However, it is possible to switch plans during one of several enrollment windows.
Authorization is often necessary before procedures
In most instances, as long as Original Medicare covers a particular service or procedure, a person does not have to get authorization for coverage before receiving treatment.
However, Medicare Advantage may require a person to request prior authorization for a procedure to ensure that the doctor, healthcare professional, or facility is in-network.
Although doing so may not delay care, a person could end up waiting before they can get clearance for their procedure.
Private insurers offer thousands of Medicare Advantage plans, which vary by price and coverage level.
Some areas have multiple plans available, while others may only have a few. It is best to carefully review the plans available and consider whether or not they match your budget and healthcare needs.
If a person finds that a Medicare Advantage plan does not fit their healthcare needs, they can revert to Original Medicare or choose a different Medicare Advantage plan during one of the enrollment periods.