Since 2003, Medicare Advantage has been the name for private health insurance that takes the place of Original Medicare. It’s also known as Medicare Part C. When you become eligible for Medicare, you have a choice between selecting Original Medicare (plus the option to purchase a Medicare supplement (Medigap) and/or a Part D prescription drug plan), OR a Medicare Advantage plan.
With a Medicare Advantage plan, you get all of the benefits offered by Medicare A (hospitalization), Medicare B (outpatient coverage), and – with most plans – prescription drug coverage. Many Advantage plans also include additional benefits that aren’t offered by Original Medicare, such as vision, hearing, and dental, as well as perks like free gym memberships.
All Medicare Advantage plans have an annual maximum out-of-pocket (for covered services) of no more than $6,700 in 2015. Many plans have lower out-of-pocket maximums, but they cannot exceed that threshold (in 2013, nearly half of Medicare Advantage plans had out-of-pocket maximums of $3,400 or less). This is one of the inherent benefits of Medicare Advantage, since Original Medicare has no limit on maximum out-of-pocket (to solve that problem, many Original Medicare enrollees select a separate Medigap plan to cover their out-of-pocket costs).
But it’s also important to note that although most Medicare Advantage plans include prescription drug coverage, your out-of-pocket costs for prescriptions are NOT included in the Medicare Advantage plan’s maximum out-of-pocket; instead, the prescription coverage has its own maximum out-of-pocket, which will be separate from medical costs. And of course, as with all health plans, the premiums you pay for Medicare Advantage are not included in the maximum out-of-pocket.
Since Medicare Advantage plans can have varying premiums as well as varying maximum out-of-pocket amounts (up to $6,700), be sure to consider both numbers when comparing plans.
How much does Medicare Advantage cost?
In 2015, beneficiaries have an average of 18 Medicare Advantage plans from which to choose, and premiums average $53 per month (in addition to the Medicare Part B premium ($104.90 per month for most people in 2015, and it’s deducted from your Social Security check just as it is for people who are enrolled directly in Medicare A and B).
But there are zero-premium plans available, which means that you’d only pay the Medicare B premium, and nothing else, despite the fact that your Medicare Advantage plan will have a cap on out-of-pocket charges (Original Medicare does not) and will likely include prescription coverage (Original Medicare does not – in order to have prescription coverage with Original Medicare you’d have to purchase a stand-alone prescription drug plan).
What about networks?
Since Medicare Advantage is administered by private health insurance carriers, the network is an important part of the plan selection process. While virtually all (96%) doctors who provide Medicare-covered services are participating providers with Original Medicare, the network for each Medicare Advantage plan will be limited by the network arrangements the carrier has established. There are six different network designs for Medicare Advantage plans, although they’re not all available in all areas:
- HMO (health maintenance organization)
- PPO (preferred provider organization)
- HMOPOS (HMO Point of Service)
- PFFS (Private Fee-For-Service)
- MSA (medical savings account)
- SNP (special needs plan).
With an SNP, HMO, or HMOPOS, you’ll need to designate a primary care provider. HMOs and SNPs require a referral from your primary care provider if you want to see a specialist. If your Advantage plan is an HMO, you’ll be limited to receiving all of your care from in-network doctors (ie, there’s no out-of-network coverage).
Most Medicare Advantage plans include prescription drug coverage, except MSAa. If you want prescription coverage and you’re enrolling in an HMO or PPO Medicare Advantage plan, be sure to choose a plan that covers prescriptions (most do – Medicare Advantage plans without prescription coverage are the exception to the rule), as stand-alone Medicare Part D drug coverage is not available to Medicare Advantage enrollees who have an HMO or PPO plan. SNPs all cover prescriptions. PFFS plans sometimes include prescription coverage, but if you enroll in one that doesn’t, you can purchase a separate Medicare Part D plan.
When can I enroll?
You can enroll in Medicare Advantage when you’re first eligible for Medicare, or during the annual open enrollment period that runs from October 15 to December 7. During the open enrollment period, you can also switch from one Medicare Advantage plan to another. If you’re enrolled in a Medicare Advantage plan and you want to switch back to Original Medicare, you can do so during the Medicare Advantage Disenrollment Period, which runs from January 1 to February 14 each year.