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Medicare Advantage Plans: The Ins, Outs, Pros and Cons.

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Medicare Advantage Plans: The Ins, Outs, Pros and Cons.

One of the aspects of retirement is ensuring you have health care insurance. One type of coverage available for retirees is Medicare Advantage Plans. These plans, which are an alternative to Original Medicare, can be an excellent form of coverage to sustain you throughout retirement. However, they are not for everyone. To determine if a Medicare Advantage Plan is right for you, it is advised that you discuss your options with a qualified health care insurance professional. That being said, let’s take a look at the general overview of Medicare Advantage Plans as well as some of the pros and cons of this type of coverage.

Medicare Advantage plans are Medicare approved health insurance plans offered by private insurance companies. Medicare Advantage plans offer the same level of coverage as Original coverage but can also offer additional benefits. These benefits can include vision and hearing care. Medicare Advantage Plans have rules that enrollees must follow to qualify for coverage. These rules can include limitations on which health care providers the beneficiary can see, or steps that must be followed to ensure a service is covered. There are several general types of Medicare Advantage Plans which offer different benefits and have different rules. Two common types are HMOs and PPOs. However, there is no standard for Medicare Advantage Plans. Any insurance company can create a plan as long as it meets the basic requirements issued by the government. There are many pros and cons associated with Medicare Advantage Plans. A few of the pros and cons can be seen in the table below.

Medicare Advantage Plans Pros and Cons

The monthly premium, as well as co-pays tend to be affordable for most plans. Many plans have price caps that keep beneficiary’s expenses down.Medicare Advantage Plans can sometimes lack stability which can cause Beneficiaries to lose coverage.
Networked health providers mean you can rest assured that provider actually wants to see you and that the costs will be covered.Rules of a networked plan can make it inconvenient to obtain coverage for services. It can also make it difficult to obtain care while traveling or otherwise away from home.
The coverage with Medicare Advantage Plans tends to be better than that of Original Medicare often offering additional benefits not available through original Medicare.Additional benefits may be an add-on that requires higher premiums or may not be a great as advertised.

While the answer above provides a quick overview of Medicare Advantage Plans, there is a lot more to understand about this type of insurance. If you want a more complete understanding of the program, then keep reading.

Original Medicare Vs Medicare Advantage

Anyone who wants to receive social security benefits in retirement must also enroll in Medicare. Medicare is government administrated health insurance. There are two options for those enrolling in Medicare: Original Medicare and Medicare Advantage Plans. Original Medicare is administered by the federal government and is the form of Medicare most people are familiar with. Medicare Advantage plans are an alternative to Original Medicare. Medicare Advantage plans are administered by private insurance companies that contract with the federal government. Because of this contract, the plans are regulated by the Center of Medicare Services (CMS). This means that the plans must offer the same level of coverage as Original Medicare, but they can also offer additional coverage that Original Medicare does not offer.

What Medicare Advantage Plans Offer

As stated above, Medicare Advantage Plans are required to provide the same amount of coverage as Original Medicare. Original Medicare is comprised of Medicare Part A (Hospital Insurance) and Part B (Medical Insurance). Most Medicare Advantage plans also include some sort of prescription drug coverage (Medicare Part D). The extent of the drug coverage is determined by the provider and the plan itself. One of the benefits of Medicare Advantage Plans is that they often include additional benefits that are not available through Original Medicare. These benefits can include vision, hearing, dental, health and wellness programs, and even things such as Gym memberships. Of course, the existence and extent of these benefits are dependent upon the plan and provider.

How Medicare Advantage Plans Work

As stated previously, Medicare Advantage Plans are administered by private insurance companies that contract with the federal government. The federal government pays a fixed amount every month to these contracting insurance companies in the form of subsidies. This ensure that there is adequate competition and coverage for retirees.

The companies that receive these subsidies must follow rules set by Medicare. Each company that administers Medicare Advantage Plans may have different rules that a retiree must follow. These rules can include limitations on what providers a retiree can see, whether or not a referral is required to see a specialist, and other regulations. Providers may also charge different out-of-pocket costs. It should be noted that these rules can change on an annual basis. This can be source of annoyance for retirees.

Medicare Advantage Premiums, Deductibles, and Co Pays

All Medicare Advantage Plans have premiums that must be paid to obtain coverage. These premiums must be paid regardless of age, gender, or health. The premiums vary dependent on the plan, but it should be noted that the monthly premium may be higher than the monthly premium one would pay for Medicare Part B.

Cost-sharing (co pays) are also common in Medicare Advantage Premiums Plans. These co-pays must be paid for most medical services. Many plans have an out-of-pocket annual maximum which is set by the plan provider. These “out-of-pocket caps” can help keep unforeseen medical bills from rising to a catastrophic level.

Types of Medicare Advantage Plans

There are many types of Medicare Advantage Plans. Below are some of the standard plan types available.

  • HMOs – Health Maintenance Organizations. Generally, HMOs have a network of healthcare providers who will work with the Advantage Plan. Beneficiaries of this type of plan must receive care from one of the in-network providers. It may also be necessary to receive a referral from a general practitioner before a beneficiary can see a specialist. You can learn more about HMO plans here.

  • PPOs – Preferred Provider Organizations. PPO plans generally have a network of healthcare providers who will work with the Advantage Plan. However, PPO plans also allow beneficiaries to receive care outside of the network. Beneficiaries will pay less for in network care and more for out-of-network care. You can learn more about PPO plans here.

  • PFFS – Private Fee-for-Services Plans. These plans have no networks which means beneficiaries are not limited in who they can receive care from. However, it can be difficult to find healthcare providers who will work with this type of plan. You can learn more about PFFS plans here.

  • SNPs – Special Needs Plans. Special Needs Plans are tailored to the needs of groups with certain health needs. Because of this, membership is limited to certain groups of people. These groups can be individuals in institutions such as nursing homes, individuals who qualify for both Medicare and Medicaid, or individuals with certain chronic or disabling conditions. You can learn more about SNPs here.

  • HMOPOS – Health Maintenance Organizations Point of Service. This is an HMO plan that may allow beneficiaries to receive some services out of network for a higher cost.

  • MSA – Medical Saving Accounts. These plans combine a high-deductible health plan with a saving account. You can learn more about MSA plans here.

  • Other – There is no standard for Medicare Advantage Plans. Any Insurance Provider can create a Medicare Advantage Plan and tailor it to what they think the market wants. However, they must meet the regulations issued by the Center for Medicare & Medicaid Services (CMS).

Obtaining prescription drug coverage varies depending on the plan. If a beneficiary enrolls in a PPO or HMO plan, the beneficiary must also enroll in a prescription drug coverage plan from the same provider. If a beneficiary enrolls in a PFFS plan, they can choose either the plan’s drug coverage, or a stand-alone prescription drug plan.

Medicare Advantage Plans Pros and Cons

With a general understanding of the workings of Medicare Advantage, lets take a look at some of the benefits of a Medicare Advantage plan. Of course, the benefits of each plan will be different from each other.

  1. Price

    1. For most plans, the monthly plan payment is affordable.

    2. The co-payments for doctor and annual routine physicals tend to also be affordable.

    3. Some providers pass subsidies on to beneficiaries which result in lower costs.

    4. Many Medicare Advantage Plans have caps of beneficiary’s out-of-pocket costs. These caps can help unexpected medical costs from becoming catastrophically large.

  2. Networked Providers

    1. Whether or not you must work with a network of providers will depend upon your plan. Being subject to a network of providers can be both a positive and a negative. With a Networked plan, you can choose any doctor or hospital within the network and be assured they will work with your insurance. Working within a provider network can also result in lower Out-of-pocket costs.

  3. Coverage

    1. By law, Medicare Advantage Plans are required to provide the same amount of coverage of Original Medicare (Parts A and B). However, many plans offer additional coverage such as dental, hearing, and podiatry. It should be noted that these types of additional coverage may be an add-on to the basic plan and may cost more.

    2. Medicare Advantage Plans may also offer emergency coverage anywhere in the world.

    3. Medicare Advantage Plans also tend to have better prescription drug coverage than a standard Part D drug plan. However, Drug coverage is not available with all plans.

    4. Often times annual screenings are covered at no charge.

Of course, this article would be incomplete without looking at the negative side of Medicare Advantage Plans. These issues with Medicare come from a report created by the Medicare Rights Center. The report is based on thousands of calls to the Medicare Rights Center. The report lists nine common problems with Medicare Advantage Plans that include the following:

  1. Beneficiaries have reported that the cost of care under Medicare Advantage Plans can cost more than it would under original Medicare.

  2. Medicare Advantage Plans are not as stable as Original Medicare. Because of this, plans can suddenly cease coverage.

  3. Members may experience difficulty getting emergency or urgent care.

  4. Because plans only cover certain doctors, the continuity of care is often broken when then plan drops a provider.

  5. Members have to follow plan rules in order for care to be covered.

  6. It can be difficult to get care away from home.

  7. The extra benefits offered often turn out to be less than promised.

The original report from the Medicare Rights Center can be found here.


So, is a Medicare Advantage Plan the right plan for you? That depends upon your medical needs, likelihood of moving or traveling in retirement, and your budget. The best way to determine if a Medicare Advantage Plan is right for you is to speak with a Medical Insurance professional. They can help you to find a plan that best suits your needs.

In summary:

  • Medicare Advantage Plans are offered by private insurance companies that contract with the federal government.

  • Each Medicare Advantage Plan offers, at the least, the same amount of coverage as Medicare Parts A and B (Original Medicare). However, most Medicare Advantage Plans offer additional benefits that cannot be had with Original Medicare.

  • Medicare Advantage Plans have monthly premiums as well as co-pays. Many plans also have out-of-pocket caps that keep medical costs from rising to catastrophic levels.

  • There are different types of Medicare Advantage Plans. Common types include HMOs (Health Maintenance Organizations) and PPOs (Preferred Provider Organizations). Each type has different rules and benefits associated with them. Of course, every plan is different as any insurance company can contract with Medicare to create their own plan.

  • Medicare Advantage Plans have pros and cons when compared to Original Medicare. Benefits include better coverage and the potential for lower premiums. Cons include less stability than Original Medicare and rules that govern coverage.

It is important to ensure you have insurance to cover health needs in retirement. This can be a daunting task. However, with proper research and guidance, you can settle on a plan that will help you to be happy, healthy, and prosperous for the rest of your life.

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