Medicare Advantage (MA) Plans, Explained.

1. How Medicare Advantage Benefits Work

Medicare Advantage plans, sometimes abbreviated as MA or MAPD, are the all-in-one Medicare solution that can cover prescription drugs, reduce medical copays and coinsurance, and even provide extra benefits like dental and vision.

MA plans are required to provide coverage that is at least equivalent in value to Original Medicare, but they are allowed to restructure benefits within certain limits.

Medicare Advantage plans usually charge lower copayments and coinsurance than Original Medicare for certain common services, provide limited coverage for some benefits that are not covered by Original Medicare, and cap the maximum yearly out of pocket costs expense that a person can be asked to pay while on the plan. Specific benefits are different for each plan, and benefit information can be found in the ‘Summary of Benefits’ document, which can be found in the plan’s enrollment kit or on the plan website.

Apart from people with ESRD (End Stage Renal Disease), Medicare Advantage plans are required to enroll any qualified person who applies for the plan. This makes Medicare Advantage a good option for people who are unable to enroll in a supplement plan due to a pre-existing condition.

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2. Plan Types, Plan Networks

There are many different types of Medicare Advantage plans, but the ones you are most likely to encounter are HMOs and PPOs, both of which use provider networks.

In a PPO plan, enrollees may see out of network providers, but will be charged a higher copayment or coinsurance amount to do so.

In an HMO plan, out of network providers are not covered at all. Generally, HMO plans require a doctor referral to see a specialist, and PPO plans do not.

Other, less common Medicare Advantage plan types include: Private Fee-for-Service (PFFS) Plans, HMO Point of Service (HMOPOS) Plans, and Medical Savings Account (MSA) Plans. If you want to learn more about these plans, you can find more information on medicare.gov.

3. Who pays for Medicare Advantage

Many Medicare Advantage plans generally have low premiums, sometimes as low as $0 a month. How does that work?

When you sign up for a Medicare Advantage plan, the insurance company that runs that plan gets a check from Medicare each month which they use to administer your benefits and pay their share of your bill. When you are enrolled in a Medicare Advantage plan, the plan - not Medicare - pays your bills and determines the copays and coinsurance that you pay when you go to a medical provider. So show your Medicare Advantage plan membership card - not your paper Medicare card -when you receive medical care.

Even though the Medicare Advantage plan is paying your bills, it’s important to understand that when you enroll in an Advantage plan, you are not giving up your Medicare coverage. In fact, you need to maintain your Original Medicare coverage to be enrolled in an Advantage plan. This means that you should file your Original Medicare card away in a safe place, and continue to pay your Part B premiums directly to Medicare.

4. Limitations of Medicare Advantage Coverage

MA plans use networks, so your choice of hospitals and doctors may be limited. MA plans often have referral requirements and other rules that some people find burdensome. Plan benefits change from year to year, so you need to check in on your benefits each year to make sure they haven’t taken a turn for the worse.

5. Is Medicare Advantage Right for Me?

Medicare Advantage is a good choice for people who want to save money on insurance premiums, but still lower their exposure to costly medical bills. Many of my lower income clients choose an MA plan simply because they can’t afford a Medicare Supplement plan premium. However, the majority of my MA clients could afford a Supplement plan, but choose Medicare Advantage because they are younger and healthier than average, and find it hard to pay $200+/month for supplemental coverage that they believe they are unlikely to use. I think both these situations are reasonable, and my MA clients are usually happy with their coverage.

For a more complete discussion of this question, see my article comparing Medicare Advantage and Medicare Supplement plans.