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What Are the Pros and Cons of Medicare Advantage Plans?

Published January 21, 2022


When you turn 65, you have three basic choices for your health insurance – Original Medicare, which covers only about 80% of your costs, Medicare with a Supplement (Medigap) plan that fills in the benefit gaps that Original Medicare does not cover, and a private insurance plan called Medicare Advantage or Part C, that bundles Parts A, B and usually D into one plan.

During Open Enrollment time of October 15-December 7, you will see many ads that make these Medicare Advantage plans sound too good to be true – they may advertise zero or very low monthly premiums and promise all kinds of extra benefits that Original Medicare usually does not cover, like hearing aids, dental care, and vision care, even meals and transportation to doctors’ offices.

Drawbacks of Medicare Advantage Plans

However, as with all things that look too good to be true, there are some drawbacks. There are additional costs associated with Medicare Advantage and restrictions on the providers you can use. Depending on the plan, there may be a monthly premium between $25 and $50. You may have to pay the hospital deductible but also an additional coinsurance for each day you spend in the hospital. (Original Medicare plus a Supplemental plan has no coinsurance for the first 60 days in the hospital.) In addition, Medicare Advantage plans often charge coinsurance or copays for emergency room visits, lab tests, and specialist doctor visits, and you have to continue paying the Part B monthly premium (starting at $148.50 in 2021). The extra benefits promised to you may not be fully covered, so vision care may mean only one pair of glasses every two years and hearing aids may have only partial coverage. What seems like a nearly free plan is not free at all.

Types of Medicare Advantage Plans

Medicare Advantage comes in different flavors – HMOs, PPOs, and Private fee for service plans. Most beneficiaries choose the HMO option, because it usually comes with the lowest monthly premium cost. However, as you know from other experiences with managed care, you will need to get preauthorization for many services, and you will need to use the providers in the plan network or incur additional costs. The Medicare Advantage PPOs may give you the option of going out of network, but the monthly premiums may be higher. Since Medicare Advantage plans can change their network providers, leaving you without access to a physician group or hospital you really prefer, you will want to check carefully to be sure the providers you want are in-network.

Signing Up for Medicare Advantage

If you sign up for Medicare Advantage plan when you first enroll in Medicare, you will need to have enrolled in Part A as well as Part B, but you cannot buy and won’t need a Supplemental plan, and in most cases, you won’t need a separate Part D prescription drug plan either. However, if you want prescription drug coverage, you must join a plan that includes it. You can’t join a plan without that coverage and then sign up for a separate Part D plan. Another drawback is the “lock-in” that requires you to stay with a Medicare Advantage plan after the first year or face additional costs based on your health status if you want to go back to a Supplemental plan1.

How Do Medicare Advantage Plans Pay for All These Services?

In these plans, the federal government pays the health plan a fixed amount of money to take care of you (generally about $1000 a month or up to $9000 for members with multiple complex conditions). If you do well and don't need many services, the plan can split the savings with Medicare. However, if you use a lot of services, the plan may lose money. Plans submit a bid to Medicare every year for how much they think they will spend based on the prior year. The theory is that the plan will be incentivized to keep you healthy in order to remain financially viable. To save money, the plan may attempt to steer you to a provider who is less expensive or impose copayments or coinsurance that you were not expecting.

Final Tips

If you choose Medicare Advantage, it is important to understand all the pros and cons of your decision.

  1. Be sure that the network and plan you choose is reliable
  2. A national plan is less likely to leave your region than a local plan, and the networks may be more consistent from year to year
  3. Since there are a variety of plans in your area, all vying for your attention, you should ask a lot of questions before enrolling
  4. For more information about Medicare Advantage plans, you can check out the Medicare website here, or call one of our advisors

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