Is a Medicare Advantage Plan Right for You?

You've probably seen the commercials with Joe Namath touting all the extra benefits of a Medicare Advantage plan. Rides to doctor's appointments! Meals delivered to your home! Dental, hearing and vision, all covered at no additional cost! The extra benefits are real, but so are the trade-offs.

More than 60 million Americans were enrolled in either original Medicare or its alternative — a Medicare Advantage plan — in 2023 according to the Kaiser Family Foundation, and this is the time of year when those same Americans can change their annual coverage. Medicare open enrollment runs from Oct. 15 to Dec. 7. During this window, enrollees age 65 and older can switch between original Medicare and Medicare Advantage, or stick with the latter but select a different plan. The new coverage begins Jan. 1.

Unlike original Medicare, which is health insurance administered by the federal government, Medicare Advantage plans are private health insurance. A decade ago, only 24% of Medicare beneficiaries selected Advantage plans; today, it's 51%, according to the Kaiser Family Foundation. The plans have skyrocketed in popularity because they often have lower premiums and additional benefits.

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Nevertheless, Medicare Advantage can also cost more in the long run. With the average enrollee having 40 plans to choose from in 2023, the choice can be overwhelming. "You will be getting a plethora of flyers in the mail from Medicare companies trying to get you to enroll in their plan," says Bethany Cissell, an account manager at Allsup in Belleville, Ill., which helps consumers navigate Medicare. To know what to look for, it helps to understand how Advantage plans work compared with original Medicare because getting seduced by freebies is no way to choose health insurance.

You get multiple Medicare services through an Advantage Plan

Medicare Advantage, or Medicare Part C, is managed care. These preferred provider or health maintenance organization plans restrict patients to in-network physicians and hospitals. Private insurance companies contract with Medicare to sell Advantage plans and must offer at least the same benefits as Parts A and B, which cover hospitals and doctor visits, respectively. A common misconception is that you don't pay Part B premiums with an Advantage plan, but that's not correct, says Casey Schwarz, senior counsel of education and federal policy at the Medicare Rights Center. You pay premiums for both an Advantage plan and Part B while getting your Parts A and B benefits through the Advantage plan. Part A coverage is generally free.

Unless you're insured by a qualifying plan through your employer or a spouse's, you must sign up for Parts A and B when you turn 65 or risk a stiff penalty. But you are not required to sign up for an Advantage plan or original Medicare's supplemental insurance known as Medigap. The extra insurance, though, is considered essential because Part A pays for all hospital costs only for the first 60 days and that's after a $1,632 deductible. (All deductibles and premiums are for 2024 unless otherwise noted.) Medicare Part B typically pays only 80% of outpatient health care costs once a $240 deductible is met, leaving you on the hook for the rest with no limit to your out-of-pocket costs. "If you get something serious like cancer, you pay for 20% of that care," says Danielle Roberts, co-founder of Boomer Benefits, a health insurance agency in Fort Worth, Texas, that helps seniors enroll in Medicare. Medigap plans help plug those holes in Parts A and B coverage.

The costs associated with Medicare Advantage plans

An alternative is to get Medicare benefits through an Advantage plan. It also picks up where Parts A and B cut off to limit what you pay out of pocket. On average, Advantage plan participants are responsible for a maximum of nearly $4,835 for in-network care in 2023 and about $8,659 when out-of-network care is included, says the Kaiser Family Foundation.

The average monthly cost for an Advantage plan with prescription drug coverage for 2024 is $18.50, and almost 75% of those plans have no monthly premium, the Kaiser Family Foundation reports. "When you enroll in Medicare Advantage, one of the pros is lower premiums than you would pay for Medigap," Roberts says. "Instead, you pay copays for health care services as you go. You can see how that might be appealing if you are on a budget." Insurers can provide plans at little to no cost to the consumer because the Centers for Medicare & Medicaid Services pays the insurer a fixed amount per enrollee.

Most Advantage plans bundle Part A, Part B and Part D, which is for prescription drugs, together. Beneficiaries of original Medicare often must buy three separate plans for Part B, Part D and Medigap for similar coverage. Those costs can add up. Medigap policies, which are also sold by private insurance companies, charge a monthly premium that you pay in addition to those for Parts B and D. In 2023, Medigap premiums ranged from an average of $241 to $413, according to Investopedia. 

The combined coverage for Medicare Advantage simplifies shopping for insurance and can mean better coordinated care because all the doctors belong to the same network, says Jeff Smedsrud, president of insurance at HealthCare.com, an online health care company in Miami that helps consumers find insurance. Because Advantage plans have no medical underwriting, the insurer must accept you.

Extra perks available from Medicare Advantage plans

Many of these plans have extra perks, such as dental, vision or hearing coverage, that original Medicare doesn't provide. If you're in original Medicare, you must buy yet another plan, this one outside of Medicare, for dental, vision or hearing. Some Advantage plans throw in a free gym membership or transportation to and from doctor's appointments, says Gary Culp, chief growth officer for Medicare Advantage at the insurance company Cigna in Bloomfield, Conn.

You even get another chance to change your Advantage plan during the year. Medicare's general enrollment runs every Jan. 1 to March 31, with coverage starting July 1. Beneficiaries who missed signing up for Medicare when they turned 65 and don't qualify for a special enrollment period can enroll in Parts A and B. Advantage plan members can also use this period to switch to a new Advantage plan or back to original Medicare. "If you try a Medicare Advantage plan and find something you don't like about it, this is a kind of correct-your-mistake period," Roberts says.

The cons of Medicare Advantage

Out-of-pocket costs typically run higher for Medicare Advantage compared with original Medicare when paired with a Medigap supplemental plan. This is true even though, unlike Medicare Advantage, most Medigap plans have no out-of-pocket maximums. The Kaiser Family Foundation found that 19% of Advantage beneficiaries had trouble covering costs in 2018, compared with 12% of beneficiaries with original Medicare and Medigap. The Kaiser study attributed that difficulty to Advantage plan cost-sharing requirements, such as copays for hospital stays and coinsurance for drugs administered by a physician, expenses that Medigap plans mostly cover. Patients who become ill can pay thousands of dollars for care until they reach their Advantage plan's out-of-pocket maximum. "Everyone loves Medicare Advantage until they get sick," Roberts says. "Then they are paying more."

Advantage plans may also require a referral to see a specialist, and you will pay far more for a doctor or hospital out of network. By contrast, nearly every physician or hospital accepts original Medicare. "I've seen an Advantage plan with a couple hundred doctors in the network. That's thin," Smedsrud says. "You need one with thousands of providers."

The coverage can also change each year, with any differences outlined in the Advantage plan's annual notice of change, although "you probably don't look at it because it's a giant door stopper of a packet," Roberts says. Premiums and copays could increase, and some medications may no longer be covered. Your primary care physician might be in-network one year but not the next, whereas the coverage provided by most Medigap plans should remain the same, Roberts says.

Although you can switch from an Advantage plan back to original Medicare and Medigap, you may be temporarily underinsured. The medical underwriting ban for Medigap plans only applies for the first six months after you enroll in Part B. At any other time, like after having an Advantage plan, the Medigap insurer can charge more or impose a waiting period.

How to shop for a Medicare Advantage plan

The choice of original Medicare with a supplement or an Advantage plan boils down, in part, to this: "Do you prefer a higher premium versus higher out-of-pocket costs?" Schwarz says. Roberts suggests that if you choose an Advantage plan, set aside the money saved on premiums to pay for out-of-pocket costs later. "Have a rainy-day fund" in case you have a year of bad health, she says. Lifestyle is another a factor, Culp says. For instance, snowbirds should choose original Medicare with a Medigap plan to visit doctors in different parts of the country.

Medicare.gov has a tool that lets you price different Advantage, prescription drug and medigap plans based on your personal details and location. The tool estimates the cost of your specific medications for each Advantage plan and lists the monthly premium, copays, and maximum out-of-pocket expenses. Details about additional benefits, such as vision or dental, are also provided.

Check the insurer's website to see if your preferred doctors are in the network for each Advantage plan you're considering, or contact your doctors to see if they are provider members. Schwarz tells beneficiaries to also check that the plan's network includes their preferred hospital or long-term care facility.

Help choosing a Medicare Advantage plan

An insurance broker can walk you through the process, but because many earn commissions from insurers, the advice may not be impartial. Ask how much the agent gets paid by each insurance company. "If someone doesn't want to answer that, I would get a little nervous," Smedsrud says.

The National Association of Benefits and Insurance Professionals has strict standards for broker certification, but all Medicare agents are required to have you sign a "scope of appointment" listing the type of insurance products you want to discuss. That protects you from an unscrupulous agent pushing products you don't want, and it's a red flag if an agent violates that list.

Otherwise, Medicare has a 24-hour live chat function to answer questions. That website also lists organizations in each state that can help you with claims, billing and complaints.

Experts recommend starting the process of selecting Medicare coverage early to ensure you have enough time to get questions answered and consider all your options. "Don't rush," Culp says. "This is a health care decision. It's not just getting coverage. It's finding the right health care partner, and that means taking your time."

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