Medicare Advantage plans, which are alternatives to Original Medicare provided by private insurance companies, have been growing in popularity in recent years. Their popularity is due in large part to the fact that they can provide higher levels of health coverage than Original Medicare can. Between 2019 and 2020, 414 new plans joined the Medicare Advantage market, providing more options in response to consumer interest. Many seniors experience significant yearly savings as a result of switching from Original Medicare to Medicare Advantage, with the average enrollee saving $1,253 a year (according to the latest data from 2016).
Possible savings and more complete health coverage are attractive reasons to switch to Medicare Advantage, but making the switch can be daunting. Medicare Advantage plans fulfill the same basic purpose as Original Medicare, but they have their own set of rules that they abide by. Getting a firm grasp of how Medicare Advantage coverage works takes time and effort. Insurance companies have a lot of latitude in what they can offer, so each plan is different from the next.
We’ve created this guide to help seniors understand the ways that Medicare Advantage coverage both mirrors and differs from the coverage provided through Original Medicare. Below you can learn about the types of coverage that all Medicare Advantage plans have in common as well as aspects of coverage that set plans apart from one another.
There’s a large variety of coverage options available through the thousands of Medicare Advantage plans that are currently offered across the United States. Before we explore the aspects of coverage that can differ from plan to plan, it’s important to understand the baseline coverage standards that all Medicare Advantage Plans share.
When seniors join a Medicare Advantage plan, they remain part of the Medicare system. They are simply choosing to get their coverage through a Medicare-approved, private plan. Medicare pays flat fees to insurance companies that offer Medicare Advantage, so Medicare gets to set standards of minimum coverage. In order for plans to qualify for Medicare’s approval and funding, they have to offer “complete coverage” that lines up with what Medicare typically covers under Parts A and B. Complete doesn’t mean that all healthcare is 100% covered; it means that the coverage will be comparable to or better than what is offered through Original Medicare.
Below we have included a quick overview of items and services that are typically covered by Parts A and B (Original Medicare). We’ve also included some resources for further reading that provides an even greater level of detail.
Part A Coverage Overview
Part A is also called “hospital insurance,” and it covers items and services related to inpatient hospital stays, skilled nursing facility stays, home health care, and hospice. Under Medicare Advantage, all of the above except for hospice is covered by the private insurance company. Original Medicare still steps in to cover hospice care when it is needed. If you are curious about exactly how expansive hospital coverage is under Original Medicare, you can visit Medicare.gov’s resource on the topic and click the links included on that page to see more details. You can also see deductible and copay information for Part A services here. The details listed are for Original Medicare, but Medicare Advantage plans should provide very similar levels of coverage.
Part B Coverage Overview
Part B focuses on two broad categories of need: “preventative” and “medically necessary” items and services. These categories include things like primary and specialist doctor visits, screenings and treatments for illnesses, mental healthcare (inpatient, outpatient, and partial-hospitalization), clinical trial participation, ambulance use, a very limited list of prescription drugs (for example, certain drugs that are typically administered by a medical professional instead of by the patient), and Durable Medical Equipment (examples include blood sugar monitors, hospital beds, patient lifts, and much more). More information on how Original Medicare defines all of these categories of care can be found on the official Medicare website.
Anyone who signs up for a Medicare Advantage plan should have coverage in all of the categories of care from Parts A and B. Rules of coverage can and often will be slightly different in their Medicare Advantage plan than they are in Original Medicare, but the end result for the patient should be coverage that is similar to or better than the coverage offered for Parts A and B.
Those who use Medicare, whether Original Medicare or Medicare Advantage, enjoy certain rights and protections that have been written into the system over time. The rights are actually quite extensive, but we have listed some important ones below.
Medicare Rights and Protections:
These are some of the highlights of Medicare rights, but a more complete list can be found on the Medicare website. Additionally, those who have Medicare Advantage have a few more rights.
Rights and Protections Specific to Medicare Advantage:
CMS provides even more information on rights and protections specific to Medicare Advantage on the official Medicare website.
Medicare Advantage, like Original Medicare, is a plan for splitting medical costs between the patient and insurer. Below you can learn about how cost-sharing works in Medicare Advantage.
A deductible is a fixed dollar amount that the patient must pay out-of-pocket each year for covered healthcare before their insurance begins to pay for anything. The plan may have a separate deductible for health and prescription drugs in some cases. Medicare Advantage plans aren’t required to have a deductible, however, and many do not. It’s important for patients to know that their plan’s premiums (if it has any) do not count towards the deductible.
A copay is a fixed fee, expressed in a specific dollar amount, that is charged for an item/service. In Medicare Advantage plans it’s quite common to see copays as low as $0-$40 for most office visits. Copay amounts for other services can be much higher, too- several hundred dollars for a day in a hospital, for example. Medicare imposes some restrictions on how high plans can set copays. High copays for a hospital stay may apply for the first few days of a stay and then drop to $0 for some specified, extended period (e.g. 90 days).
The term coinsurance usually means a percentage of the overall cost of an item or service. Under Medicare Part B, patients usually pay 20% of their medical bills and Medicare pays the remaining 80%. Medicare Advantage, however, can charge patients coinsurance rates above 20%. While 20% coinsurance is often the minimum, 30%-50% coinsurance is quite common as well. Note that occasionally you may see the word coinsurance is used interchangeably with copay, but in most cases, these words have separate meanings. A plan may involve both types of cost sharing, with copays for certain services and coinsurance for others.
Medicare Advantage plans must stipulate an out-of-pocket maximum for their patients. This a specific dollar amount between $0-$10,000, depending on the plan. After the patient has paid this maximum amount of money in deductibles, copayments, and coinsurance in a year, then the insurance will pay 100% of the patient’s covered care costs for the rest of the year. This out-of-pocket maximum policy is designed to protect patients from excessive medical debt. Original Medicare does not have a comparable policy, so the out-of-pocket spending limit is a great perk of choosing a Medicare Advantage plan.
Medicare imposes certain limits on Medicare Advantage plans, but it still allows for quite a bit of variation in coverage within the Medicare Advantage system. Below you can explore the ways that plan types, extra benefits, and even the judgement of plan administrators can impact what kind of the health coverage a patient receives.
Medicare Advantage plans can be offered in a variety of forms. They are typically defined by their policies regarding health networks, primary doctors, and referrals to see specialists. These related plan features dictate how easy or difficult it is for the patient to access care, thus impacting the level of coverage.
Neither networks nor referrals are major factors in Original Medicare, so those who are switching from Original Medicare to Medicare Advantage may need to review some definitions before they explore the topic of plan types further.
The Basics of Networks and Referrals:
If a plan has a network, then the plan will usually incentivize the use of the network over the use of non-network healthcare by offering higher levels of coverage for in-network care than they do for out-of-network care. Using a plan that requires referrals can be fine for some patients, while it’s too restrictive for others. However, keep in mind that primary doctors can write “treatment plans” that allow for easier access to specialist appointments in the case of complex medical conditions.
In addition to the use of networks and referrals, some plans also require patients to get “prior authorization,” that is, permission, for certain tests and procedures. A prior authorization policy enables the insurer to evaluate if what your doctor is recommending is “medically necessary” and therefore covered in your case. Prior authorization requirements vary from company to company even for the same basic plan type, so they are something that you need to ask about when shopping.
Below you can see how coverage is regulated in the most common types of Medicare Advantage plans.
Overview of Basic Plan Types
|Primary Doctor/Care Coordinator Required?
|Referrals for Specialist Visits Required?
|Health Maintenance Organization (HMO)
|Out-of-network costs are not covered.
|In most cases
|Health Maintenance Organization- Point of Service (HMO-POS)
|Some out-of-network costs are covered.
|In most cases
|Preferred Provider Organization (PPO)
|Out-of-network care is covered but at a higher cost to the patient than in-network care.
|Private Fee-For-Service (PFFS)
|Patients can get coverage anywhere that accepts their plan’s payment terms; some plans also have networks that offer lower costs.
|Special Needs Plan (SNP)
|Care must be received in-network in most cases, but details can differ.
|In most cases
|Medicare Medical Savings Accounts (MSA)
|Plans may not restrict patients to a network in most cases
*Note: Emergency care and dialysis is typically exempt from network coverage restrictions, but patients should ask their insurance provider for details on what constitutes an emergency.
For more details on these and other plan styles, you can read our article on How to Compare Medicare Advantage Plans. Note that Special Needs Plans (SNPs) offer care coordination and special forms of assistance to low-income, institutionalized, or chronically ill patients. If you’re in any of those categories then you’ll want to explore the linked information on SNP plans in full.
It’s also important to keep in mind that MSA plans operate in a completely different manner than typical forms of insurance. They include a high deductible, a special savings account that the patient can spend on medical expenses, and 100% Parts A and B coverage once the deductible has been met. They can but may not always include extra coverage as well. If you have a MSA in your area, it’s well worth exploring all of Medicare’s MSA articles to get a complete picture of the unusual rules by which these plans operate.
Determining the quality of a plan’s coverage is a matter of personal judgment and will depend on your specific needs. Ask detailed questions before committing to a plan. The number of providers in a network and the location of providers you are likely to use are perhaps the most important factors to consider. If there are too few in-network providers in your area, then getting timely in-network coverage may be exceedingly difficult due to waiting times. Learning about the local reputation of doctors in the network can also be helpful.
How Networks Impact Yearly Spending Maximums
Above we mentioned that all Medicare Advantage plans have out-of-pocket spending limits that help patients avoid catastrophic medical debt. To recap, once a patient’s total deductible(s), copays, and coinsurance exceed the stated yearly limit ($0-$10,000 in 2020), every covered service for the remainder of the year will be 100% covered, with the patient’s typical copays and coinsurance waived. The spending limits that you have, and therefore the coverage that you have, are impacted by plan types and networks.
Plans that have networks usually have an in-network spending limit and a “combined” (in- and out-of-network) spending limit. This means that if you exceed just the in-network limit, then all in-network care will be 100% covered but you’ll still be charged for any out-of-network care you receive. If you exceed both limits, then all covered care will be free regardless of its network status.
Medicare enforces rules regarding maximum spending limits, which it also calls the “Maximum Out-Of-Pocket” (MOOP). Plans can opt to abide by “voluntary” limits that are particularly low, or they can abide by the “mandatory” MOOP. Those that abide by the lower limits are allowed to charge patients slightly more for certain copays than companies that use the mandatory limits are allowed.
*Only PPOs can have limits as high as $10,000; other plans will have an upper limit of $6,700.
There’s no “maximum” on the level of extra coverage that a company can offer its customers. Many insurance companies that offer Medicare Advantage choose to go well beyond the minimum Parts A and B coverage level, offering items and services that would otherwise be 100% paid for by the individual under Original Medicare. The most common form of extra coverage is prescription drug coverage (Part D), which most seniors want and benefit from, but drug coverage is far from the only option.
Common forms of extra coverage:
The exact amount of coverage offered for any of the above categories depends on the plan. Some forms of extra coverage, like in-home care, are extremely rare, while others are commonplace. The Kaiser Family Foundation provides an excellent breakdown of how common each coverage type is in the 2020 market. When you investigate plans on the Medicare Health Plan Search Tool, you can get detailed coverage information by clicking the “Plan Details” button. You can also include coverage for specific drugs in your search if you’re looking for a plan that will make a specific prescription affordable for you. Beyond the information offered in the search tool, it’s always best to contact a plan for more exact information on extra forms of coverage.
The cost of extra benefits can be included in the overall plan costs, but sometimes it will be listed as optional, with an extra premium charge and deductible charge for each add-on. For example, with some plans adding dental coverage may result in an additional $30 monthly premium and a $150 dental deductible. Each plan is a little different.
In recent years there’s been debate about how closely health plans adhere to Medicare’s standards of coverage. Although they are required to abide by restrictions that Medicare creates, Medicare Advantage plans are ultimately still run by private, for-profit companies. These companies have the right to decide whether or not a service is “medically necessary” for an individual, and they can deny coverage based on their own judgment of a situation. When a plan decides to deny coverage, it’s called an “organization determination.” Ultimately, these determinations can have a huge impact on the kind of coverage a patient gets.
Past Problems with Denials of Coverage
As unfortunate as it is, researchers have documented that Medicare Advantage insurers do sometimes deny valid medical care claims, presumably because they’ll make a higher profit if they do. In 2015, the Centers for Medicare & Medicaid Services (CMS) found that 56% of audited contracts (plans) made “inappropriate” denials of coverage. Seniors need to be aware that this has been a serious flaw in the system in the past and that it may still be an issue with some companies. CMS has increased its scrutiny of plans since its initial findings of inappropriate denials.
Dealing with Inappropriate Denials
Knowing ahead of time whether or not a health plan will create an organization determination that’s bad for your health isn’t possible. Seniors can look at the 1-5 star ratings of plans to get an overall picture of how well the plans perform, but you can’t learn everything from a rating. Speaking with other seniors who use a health plan in your area can be helpful as well, though the evidence you gather in favor of or against a plan will be anecdotal.
Ultimately, it’s not possible to be certain how a plan will handle your coverage claims, but it is possible to advocate for better coverage if a problem arises. Patients, their representatives, or their doctors can appeal coverage denials. While, ideally, you want to find a plan that consistently makes fair judgments about what’s medically necessary for you, if you find yourself in a bad situation with a plan, you have options. Appeals made to Medicare Advantage companies tend to have a high rate of success.
How much does Medicare Advantage cost?
Medicare Advantage plans often have very low premium costs. Plan premiums can be as low as $0, though many are around $30 and some are a few hundred dollars. However, seniors need to pay premiums for Medicare Parts A and B in addition to any premiums that the Medicare Advantage plan charges. Part A premiums are free for many people, though those who did not spend several years paying income taxes may owe a few hundred dollars in premiums each month. Part B premiums for most people are most commonly about $140 each month, though premiums can be higher or lower.
Who can enroll in Medicare Advantage?
To be eligible for enrollment in Medicare Advantage, you must first be eligible for and enrolled in Medicare Parts A and B. Most people qualify for Parts A and B when they turn 65. Many also qualify due to disability. Those who have been receiving disability for 25 months are automatically enrolled in Medicare and are therefore qualified to enroll in Medicare Advantage if they choose. Qualifying for and enrolling in Parts A and B and in Medicare Advantage itself can be a complicated process.
Who is Medicare Advantage best for?
In general, Medicare Advantage is best for those who qualify for Original Medicare but who want more coverage than Original Medicare can offer. It can be an especially good option for those who typically have several thousand dollars of out-of-pocket costs every year due to serious medical conditions. The out-of-pocket spending maximums that are built into Medicare Advantage plans can help patients lower their yearly costs.
Will I be able to leave Medicare Advantage if I don’t end up liking its coverage?
Yes, you can leave Medicare Advantage if it turns out to not be a good fit for you. You can also switch from one Medicare Advantage plan to another if your problem has more to do with the insurance company and/or its health network. Leaving a plan can’t happen at just any time, however. To leave a plan you need to be in a qualified enrollment period. Visit Medicare.gov to learn more about changing plans.