Medicare Advantage (also known as Medicare Part C) is an alternative way to receive Medicare offered by Medicare-approved private insurance companies. It is a replacement for the Original Medicare, which is a federal health insurance program run by the US government.

The law requires that insurance companies must offer the same benefits as the government program, along with any extra coverage individual plans want to offer. These additional benefits vary widely from plan to plan but most commonly include prescription drug coverage (so that beneficiaries don’t need to enroll in a separate Part D plan), as well as dental, vision, and hearing services.  Because of this, MA is often considered an “all-in-one” coverage, while Original Medicare beneficiaries need to enroll in separate drug plans or Medigap plans should they choose so.

How does Medicare Advantage work? 

Insurance companies must follow the rules set by Medicare and offer a standardized set of benefits to the Medicare Advantage recipient. You have all the same rights and protections you would have with Original Medicare.  

But private insurance companies are free to set some rules of their own such as your premiums and out-of-pocket costs. They can also determine what you need to do to receive care, such as get a referral to a specialist or go to in-network providers for care if you want your policy to cover the cost. Each year, the rules and the costs associated with care can change, and the insurer must notify you of any changes. 

What does Medicare Advantage cover? 

By law, all Medicare Advantage plans will cover your hospital treatment (Medicare Part A) and basic medical care (Medicare Part B), just as Original Medicare does. 

However, these plans can and usually do offer additional benefits you can’t get under Original Medicare. In addition to the most common extras — prescription drug, vision, dental, and hearing care coverage—some plans offer acupuncture, chiropractic and other wellness benefits, including discounted gym memberships and weight loss counseling. In addition, starting from 2019, some plans may provide transportation services to and from doctors, access to telemedicine, coverage to install bathroom safety devices, and other newly available benefits. 

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Even if you have Medicare Advantage, Original Medicare will still be the go-to insurer for coverage of hospice care and some costs for clinical research studies if you need these services. 

It’s important to remember that Medicare Advantage’s extra benefits typically come with different rules and restrictions. In most cases, you must visit a healthcare provider in your plan’s designated network or, if this option is available, face higher costs to see an out-of-network provider. You also commonly need a referral to see a specialist. 

Medicare Original vs. Medicare Advantage  

Although Medicare sets the rules that guide the standardized benefits that Medicare Advantage plans must have, these plans are not the same as Original Medicare. Private insurers provide Medicare Advantage plans, but Original Medicare is a government-run program. Both of these healthcare options can cover doctor appointments and hospitalization expenses. However, Medicare Advantage policies usually include additional healthcare coverage that Original Medicare does not cover.  

Another difference between Medicare Advantage versus Original Medicare is cost. When talking about cost it is important to note that the full cost of a Medicare plan is not just the monthly premium. The cost includes deductibles, copays or coinsurance, and whether there is a maximum-out-of-pocket or not, what is that maximum. 

A key difference is that Original Medicare does not have any cap to the out-of-pocket expenses, while Medicare Advantage plans have an annual maximum-out-of-pocket cap, after which the plan pays for covered costs for the rest of the year.

For Original Medicare, the premiums, deductibles and copays are determined every year by the Center for Medicare Services (CMS), while for Medicare Advantage they are set by private insurance companies with guidance from CMS. 

The number of people enrolling in Medicare Advantage plans is increasing each year. As of 2022, more than 28 million people had enrolled in a Medicare Advantage plan, accounting for nearly half of all Medicare-eligible people. People who stay enrolled in Original Medicare must also often manage a Part D prescription drug plan in addition to their Parts A and B coverage. They also pay for hearing, vision, and dental care out-of-pocket. Many have transitioned to a Medicare Advantage plan because that means they get  a single policy that covers all these healthcare needs. 

Medigap vs. Medicare Advantage  

Medigap and Medicare Advantage plans are two different ways to provide much of the additional healthcare coverage that many people want, but Original Medicare does not provide. Original Medicare covers many basic inpatient or hospital services, and outpatient or doctor’s offices and preventive care services. But patients must pay the deductibles and up to 20 percent of the total care expenses. Medigap plans are Medicare Supplemental policies that fill in the gaps of Original Medicare.  

There are pros and cons to choosing Medigap versus Medicare Advantage. For instance, many select Medigap because: 

  • You do not need a referral or prior authorization from a doctor; 
  • Your coverage can travel more easily with you within the US to any doctor or facility that accepts Medicare; 
  • Some Medigap plans include some coverage for emergency care while traveling outside of the US

Other people prefer the benefits of a Medicare Advantage plan. Some of the pros of these plans include: 

  • Some plans have lower premiums than Medigap plans; 
  • A more convenient way to manage all of your healthcare needs with a single insurer; 
  • Care coverage for dental, vision, hearing, and prescription drugs. 

Medicare Advantage plan types 

Private insurers offering Medicare Advantage plans can offer many different types of plans. The two main plan types are HMO and PPO: 

  • Health Maintenance Organization (HMO) Plans: With HMO plans, you usually must get your care from in-network providers, except for temporary out-of-network dialysis, out-of-network urgent care, and emergency care. You will probably also need a referral to see a specialist if you have an HMO. 
  • Preferred Provider Organization (PPO) Plans: PPO plans are popular with people who like flexibility. Usually, people will pay less to see their in-network providers and specialists and may pay a little more to see out-of-network providers that accept Medicare. In a PPO, most people do not need prior authorization or a referral to see a specialist. PPO plan premiums are often higher than HMO plan premiums. 

Plan types vary depending on how you access your healthcare providers and how much you pay in copayments, coinsurance, and premiums. 

Specialty Plans (SNP, PFFS, MMP, MSA)  

In addition to the more common HMO and PPO plans, you may also have the option to enroll in a specialty plan. 

Private Fee for Service (PFFS) Plans: With a PFFS plan, a private insurer pays providers on a fee-for-service basis. Plan recipients may be able to see any healthcare provider that accepts Medicare, or they may be restricted to providers who contract with the insurer — it depends on the plan. These plans could be a more expensive out-of-pocket option per month, but many also have a spending cap. 

Special Needs Plans (SNPs): SNP plans are tailored for people with specific characteristics or diseases. Within these plans, the provider focuses on coverage, providers, and prescription drug choices that best fit the conditions or needs of its members. These plans also usually include specialists in the disease or condition that is the focus of the SNP. 

HMO Point of Service (HMO-POS) and Medicare Medical Savings Account (MSA) Plans: These types of plans are much less common but might be available in your area. HMO-POS plans combine HMO plans with the ability to seek out-of-network services at a higher cost, and MSA plans use a high deductible and a special bank account that you can use, but only for Medicare services. You may also often have to pay some expenses out-of-pocket. 

Medicare-Medicaid Plans (MMPs): An MMP is a Medicare Advantage plan that coordinates Medicare and Medicaid for people who are eligible for both by creating a contract that allows the insurer to administer it like a single plan. 

Medicare Advantage costs 

When you sign up for a Medicare Advantage plan, you may have to pay some costs for your care. Plan costs can vary based on the plan, the insurance provider, and your location or region. And although several insurers may provide very similar Medicare Advantage plans, they can charge very different premium amounts for the plans. When you are considering Medicare Advantage plans, you’ll want to think about the possible: 

  • Deductibles 
  • Premiums 
  • Copays and coinsurance 
  • Out-of-pocket maximums 

In addition, you will also need to continue paying the Medicare Part B premium. In 2024, this premium will be $174.70 per month. Depending on several factors, Medicare Advantage plans can have premiums as low as $0 and as high as over $1,000. 

Medicare Advantage Pros and Cons 

Like all of your Medicare options, there are pros and cons to enrolling in a Medicare Advantage plan. One significant benefit is convenience. Staying with Original Medicare means handling multiple policies and purchasing a separate Part D plan for prescription drug coverage if you don’t want to pay out-of-pocket.  

It’s essential to list the pros and cons of Medicare Advantage and Original Medicare, and a Medigap plan to decide which option will work best for you. 

Advantages of Medicare Advantage 

In addition to convenience, many Medicare Advantage plans also include coverage for vision, dental, and hearing care. These types of healthcare can add up and become very expensive year over year, so incorporating them into a comprehensive plan helps many people manage the costs more effectively.  

Medicare Advantage monthly premiums are also often lower than those of Medigap plans. For relatively healthy people, they can be a helpful cost-management choice for their healthcare. 

The disadvantages of Medicare Advantage plans 

In some situations, a Medicare Advantage plan may not be the best choice for you. For example, although the monthly premium might be lower compared to Medigap, you could still end up paying more overall if you become ill and must pay copays or coinsurance more frequently. 

If you have a Medicare Advantage plan that relies on smaller provider networks, you might also pay more to access the out-of-network care should you need it. And people in rural areas may struggle to access even more run-of-the-mill care, whereas Original Medicare recipients can go to any provider that accepts Medicare. 

Medicare Part C eligibility 

To enroll in a Medicare Part C plan, you must be eligible and meet specific requirements. You must: 

  • Be enrolled in Original Medicare, both Part A and Part B;  
  • Live within the service area of the insurer and plan you are applying to enroll in;
  • The plan must be accepting new users. 

When can I enroll in MA or change my Medicare Advantage Plan? 

You can enroll or change your Medicare Advantage (Part C) plan only at certain times of the year. Your main opportunity to change plans is during the Annual Election Period (AEP) also known as Open Enrollment which takes place between October 15 and December 7 each year. Your new coverage begins on January 1.  

You can also enroll in Medicare Advantage (MA) during your Initial Enrollment Period (IEP) after you have enrolled in Medicare Parts A and B for the first time or during the Medicare Advantage Open Enrollment Period (OEP) from January 1 to March 31. You can also make changes during this enrollment period, but you can only switch once. 

See our dedicated article to learn about more times to switch or drop your Medicare Advantage coverage. 

Why do I need Medicare Part C? 

Many people head into retirement not fully understanding the true potential costs of their healthcare. In fact, some people don’t even factor their healthcare needs into their retirement budget at all. In the late 1990s, Congress created Medicare Part C as a way for people to manage healthcare costs from month to month. Your health can change anytime, and many seniors may need long-term care that would be too burdensome if they were forced to pay the entirety out-of-pocket. 

Finally, even relatively healthy people are facing rising healthcare costs. From prescription medications to hearing and vision loss, costs can add up quickly, and affordable Medicare Advantage plans can effectively manage them. 

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FAQs 

Do Medicare Advantage plans cover the donut hole? 

Many Medicare Advantage plans also cover many prescription drug costs. One issue that some people worry about is the prescription drug “donut hole.” The donut hole is a gap in prescription drug coverage that some people encounter each year. However, not everyone enters the donut hole, and the dollar amount to enter the donut hole changes each year. Medicare Advantage plans do not cover this donut hole, but you can avoid it by spending less than the pre-set amount. 

I’ve heard many people say Medicare Advantage plans are bad and that doctors don’t like them. Why is that?

While affordable Medicare Advantage plans are an increasingly popular choice for beneficiaries, not everyone loves the plans. Patients often do not have as much choice in the doctors they can see and may face hurdles to getting to the specialists they need for specific conditions.  

Insurers providing affordable Medicare Advantage plans also pay doctors upfront based on the diagnosis of the patient. This method can be risky for the doctor, who can lose money if they do not stay within the budget. And the patient may not get the most appropriate care.  

That is why it is very important to check if your preferred doctors are in the network of the Medicare Advantage plan that you are looking to enroll in. You can easily do that using this tool, just enter your zip code and your preferred doctors and check which plans are offered in your area by the top insurance carriers that include your doctors as part of their respective network.

Finally, prior authorizations can be just as frustrating for the doctors as it is for the patients. 

Can I enroll in a Medicare Advantage plan anytime? 

No, you cannot enroll in a Medicare Advantage plan any time. There are specific times when you can enroll in a Medicare Advantage plan, including: 

  • The Initial Enrollment Period (IEP): When you first become eligible to enroll in Original Medicare, you can then go on to select a Medicare Advantage plan. Just remember you cannot have a Medigap plan and a Medicare Advantage plan at the same time. 
  • The Open Enrollment Period (OEP): This period is also called the Annual Election Period (AEP). The open enrollment period occurs each year between October 15 and December 7. You can switch, drop, or join a Medicare Advantage plan during this time, and if you enroll by December 7, then your coverage will begin January 1 of the following year. 
  • Medicare Advantage Open Enrollment Period: If you are already enrolled in a Medicare Advantage plan but want to switch to another plan, you can do so during the Medicare Advantage open enrollment period from January 1 to March 31 each year. You can also switch to a Medigap plan during this time. You can only make one switch during this enrollment period. 

Why was Medicare Part C put into effect? 

Original Medicare has provided healthcare coverage for older Americans for 56 years and counting, but Medicare Part C is a more recent addition. The Balanced Budget Act of 1997 introduced Medicare recipients to the Medicare Part C option. Private insurers offer these Medicare Advantage plans as a way for people to access both basic Medicare services as well as additional healthcare benefits in an insurance model that is more similar to what people often get through their employer. 

Article updated on January 18, 2024.