How to Compare Medicare Advantage Plans

Introduction

Seniors and others who are Medicare-eligible can find and compare Medicare Advantage plan costs and benefits through the Medicare Plan Comparison Tool. Picking a plan is a matter of finding the kind of coverage and costs that works best for the individual.

Over the years premiums for Medicare Advantage plans have gone down and consumer protections built into them have improved, making them a more attractive option than ever before. Recent data from the Kaiser Family Foundation indicates that Medicare Advantage plans account for 33% of all Medicare spending and one-third of all Medicare enrollees. These plans are clearly popular, but they aren’t as commonly used as Original Medicare is. Many seniors may feel confused about how to join a plan and how available plans differ from Original Medicare.

Seniors who need more information on Medicare Advantage or who are interested in enrolling can read on to learn more about Medicare Advantage basics, the main types of Medicare Advantage plans, and how to pick a Medicare Advantage plan that meets their needs. Those who already have a plan may also find included information on enrollment periods and other policies helpful.

The Basics of Medicare Advantage Plans

It can be difficult to understand the difference between Medicare Advantage (also referred to as Medicare Part C) and other parts of Medicare. When seniors sign up for a Medicare Advantage plan, they continue to pay Part A ($0 for most people) and B (about $150 for most) premiums to Medicare, but their Part A and B services are covered by the Medicare Advantage company they choose. Essentially, they remain enrolled in Medicare, Medicare provides the insurance company some compensation, and the company assumes financial risk by agreeing to cover the patient. Thus, Medicare Advantage is like a replacement for Original Medicare, yet the seniors using it don’t exactly drop Original Medicare since they are still paying one or two premiums directly to Medicare. 

Medicare Advantage plans can charge an additional premium to be paid directly to the insurance company, but many do not since they are already being compensated. If the plan offers extras- like vision, dental, and drug coverage- that Original Medicare doesn’t cover, then they often charge between $20-$50 a month, though sometimes the charge will be much higher.

Like Original Medicare and most insurance, Medicare Advantage plans include deductibles, copays, and coinsurance, and they won’t cover all medical expenses. The level of coverage provided by a Medicare Advantage plan should be equivalent to or better than Original Medicare coverage.

The table below demonstrates how Medicare Advantage (Part C) fits into the “big picture” of all types of Medicare policies.

Note: Parts C and D and Medigap are always offered through private insurance providers.

Reasons Seniors Switch to Medicare Advantage

Seniors switch from Original Medicare to Medicare Advantage for a variety of reasons, but some of the most common include:

• Simplicity: Medicare Advantage simplifies healthcare access by rolling all or most benefits into a single plan. 
• Extras: Some seniors need additional benefits like prescription drug, dental, or hearing coverage that Original Medicare doesn’t provide.
• Savings: Some seniors can save money on healthcare by picking a Medicare Advantage plan with better coverage than Original Medicare provides. 
• Protection: The security of having an out-of-pocket spending cap can help protect against excessive medical debt.

How Medigap and Medicare Advantage Interact

There are some noteworthy rules regarding the relationship between Medigap and Medicare Advantage that seniors need to know about. Before switching to Medicare Advantage take a look at the areas of concern below.

• Exclusive Properties: Medicare Advantage is supposed to be an “all in one” policy that usually exceeds the coverage level of Original Medicare, whereas Medigap is supposed to fill in gaps in Original Medicare coverage. These very different policies are considered mutually exclusive in most cases. It’s illegal for a company to sell a Medigap policy to someone already enrolled in Medicare Advantage unless they are in the process of dropping Medicare Advantage to return to Original Medicare.
• Complications: Medicare recipients may switch back and forth between Original Medicare and Medicare Advantage at their discretion during certain enrollment periods. However, switching can get complicated for those who want to switch to Original Medicare and who are counting on adding a Medigap policy to meet their needs. In most states, Medigap companies have the freedom to refuse to issue a Medigap policy due to pre-existing conditions if a person is switching from Medicare Advantage to Original Medicare.

The Four Main Types of Medicare Advantage Plans

The term Medicare Advantage describes several different plan types that act as an alternative for Original Medicare. All of these plans are offered by for-profit companies, and they can operate in quite different ways even though they’re all Medicare Advantage.

In the table below we have ranked the level of restrictions that each plan has from I-III. Plans can vary by company, but in general, the higher the ranking, the less likely the plan is to cover out-of-network care and the more steps the patient will need to take to see a specialist. For those unfamiliar with the concept, a network is a group of healthcare providers that the insurance plan actively and continuously contracts with to provide lower costs and/or consistently available services to patients.

The table below includes a quick overview of the main types of Medicare Advantage plans.

Note: In the case of plans with networks, out-of-network care should still be covered without regard to network in certain emergency situations, including for some dialysis needs.

Health Maintenance Organization (HMO)

HMOs are a health plan structure that many seniors may already be familiar with even outside of the context of Medicare. Sometimes HMOs are also called “managed care,” and they are designed to keep costs low. These plans have some of the most controlled networks of the Medicare Advantage plans, but they frequently have $0 deductibles and low out-of-pocket spending limits for in-network care. Drug plans are very commonly included in HMOs, as are other extra benefits. All healthcare in an HMO must be based around a primary doctor, meaning that you must ask that doctor for a referral if you need to see a specialist.

Below you can find a table that summarizes the kind of coverage likely with an HMO.

Preferred Provider Organization (PPO)

A Preferred Provider Organization (PPO) is a health plan that has a network but that also allows patients to use services outside of the network. Copays and other patient costs are lower within the network, but decent coverage is still offered for services obtained outside the “preferred” network. Most PPOs include drug coverage and other extra benefits, but some do not. For the most part, PPOs don’t require patients to have a primary doctor or to get referrals to see specialists. This relaxed policy regarding referrals means that PPOs more closely resemble Original Medicare than they do the HMO model discussed above.

Private Fee-For-Service (PFFS)

Private-Fee-For-Service (PFFS) plans are insurance plans that let patients see any provider that will accept the payment terms of the insurance and agree to treat them. Some PFFS plans have contracts with networks that provide guaranteed service and discounts, but seeking out-of-network services should still result in a decent amount of coverage for the patient. The downside to using a PFFS plan is that doctors and other providers can refuse to work with a PFFS plan, and they may choose to do so abruptly after having cooperated with the plan in the past. Verifying that the doctor still cooperates with the PFFS is the responsibility of the patient at every visit. Accepting services when the relationship between the provider and the plan has changed can leave the patient responsible for the full bill.

Special Needs Plan (SNP)

The main goal of a Special Needs Plans (SNP) is to connect patients who have unusual challenges to networks, doctors, and care coordinators that are highly experienced in helping with those challenges. There are three main types of SNPs, each geared towards a different population. An I-SNP serves those who live in institutional settings such as nursing homes, inpatient psychiatric facilities, or homes for the developmentally impaired. A D-SNP serves patients who have dual eligibility for both Medicare and Medicaid. A C-SNP serves those with chronic conditions such as certain severe diseases affecting the lungs, heart, immune system, or brain function. The insurance company that offers the C-SNP decides which of the conditions on the C-SNP list it caters to. Each of the links for the different types of SNPs includes more information on eligibility.

Other Types of Medicare Advantage Plans

The four categories above make up the vast majority of available Medicare Advantage plans. There are some less common varieties, however, which we will briefly describe below. Medicare itself provides relatively little information on these Medicare Advantage types, but you’ll want to look into them more if they are offered in your area.

Alternative and Uncommon Medicare Advantage Types: 

• MSA: An MSA plan is a Medicare Advantage plan that incorporates an unusually high deductible and a medical savings account. At the beginning of the year, the plan deposits money into a special bank account. Before health plan deductibles are met, the patient can use these deposited funds to cover health expenses. These plans don’t cover prescription drugs, but they may offer other extras and are mandated to cover everything Original Medicare does. 
• HMO-POS: HMO-POS stands for Health Maintenance Organization Point of Service. These plans follow the same basic HMO structure discussed above, but they allow certain services to be obtained at a “point of service” provider, that is, an out-of-network provider. The POS medical care may cost the patient more than it would in-network, but there will still be some coverage, whereas a regular HMO would cover 0% of out-of-network services except in certain emergencies.

Buyer’s Guide: Comparing Medicare Advantage Plans

Medicare Advantage plans differ according to location and the company offering them, and picking a plan can be a challenge due to the sheer amount of options. The following steps will help seniors pick the best Medicare Advantage plans for their needs.

Step 1: Check Enrollment Eligibility

Medicare restricts Medicare Advantage enrollment and plan changes to certain times of the year and certain conditions in the enrollee’s life. Before they really start shopping for a Medicare Advantage plan, most seniors should learn more about their eligibility to enroll. After reviewing the enrollment periods listed below, most seniors will also benefit from reading the expanded enrollment rules as stated by Medicare itself.

Initial Enrollment Periods:

• Age-Based Enrollment: Turning 65 grants everyone an opportunity to join Medicare Advantage and/or a Part D plan. This enrollment period is seven months long, and it encompasses the three months before the month of the 65th birthday, the month of the birthday, and three months after the month of the birthday.
• Disability-Based Enrollment: Entering the 25th month of receiving disability from either Social Security or the Railroad Retirement Board qualifies you to sign up for Medicare Advantage, regardless of age. Enrollment is for a seven month period that includes three months before the 25th month, the 25th month, and three months after the 25th month.
• Enrollment for those already enrolled in Parts A and B: Those who already have Part A and who enrolled in Part B between January 1st-March 31st are eligible to enroll in Medicare Advantage between April 1st–June 30th of that year.

Annual Enrollment Periods:

• Medicare Advantage Open Enrollment Period: Those who already have Medicare Advantage and want to switch to a different Medicare Advantage plan (or switch back to Original Medicare) can do so from January 1st-January 30th. Medicare Advantage plans can change their costs once per year on January 1st, so having the option to change plans is important if the costs change dramatically.
• Medicare Advantage and Prescription Drug Coverage Open Enrollment: Everyone who already has Original Medicare has the yearly opportunity to switch to Medicare Advantage between October 15th–December 7th. They can also make changes to prescription drug plans at this time.

Step 2: Identify the Best Plan Style for You

Those who have determined that they are in or are nearing a Medicare Advantage enrollment period should take a closer look at the different plan types to determine the best fit. As reviewed earlier in this article, Medicare Advantage plans can be divided into four main types: HMO, PPO, PFFS, and SNP. The information on networks and referrals below will help clarify which of the above types are most likely to be beneficial for you.

Networks

Some Medicare Advantage plans have no networks, but the majority do. Getting care outside of a network may result in no coverage, a lower tier of coverage, or the same coverage, depending on the specific insurance company and plan. HMOs and SNPs have the strictest networks, HMO-POS and PPOs have slightly less strict networks, and PFFS plans have the most relaxed networks. You may not be able to completely decide which network style is best until you look at actual plans, but write down the types you think will be best and be prepared to revise your opinion later if necessary.

If you’re still unsure if a network will work for you when you begin actively shopping plans, you’ll want to ask “how or when will I be financially penalized for seeking care outside of this network?” and “how practical is this network for my situation?” A network may be impractical if its doctors are far away, don’t treat your conditions, or have excessive wait times for appointments.

Referrals

Some plans, especially HMOs and SNPs, require a referral from a primary doctor for the patient to see a specialist. Patients who tend to need many different specialist appointments may want to opt for a plan with fewer or no referrals, such as a PPO or PFFS. However, in many cases, a plan that requires referrals can be a good option if it has other benefits such as superior access to cutting edge treatment. This can be the case with some SNP plans even though they generally require referrals for specialist visits. For some patients, the occasional need for a referral will not be a significant factor in the decision process, and the merits of plans can be judged by other criteria.

Step 3: Prioritize Extras Based on Their Benefit to You

Once you’ve determined what kind of networks and referrals processes is most likely to be practical, you’ll probably have your search narrowed down to one or two types of plans. You may know that you want either an HMO or SNP, for example, or you may think you want either a PPO or a PFFS. Whatever the case, now is the time to start comparing secondary benefits. Secondary benefits are parts of the plan that are not mandated by Medicare but that the plan offers as an attractive selling point for its customers.

Medicare Advantage plans often offer one or more of the following extras:

• Prescription drugs (required for SNPs)
• Over-the-counter drugs
• Vision
• Hearing
• Fitness
• Transportation to and from medical appointments
• Telehealth (video and phone appointments)
• In-home support
• Home medical equipment
• Home safety devices
• Home modification
• Emergency response devices
• Worldwide emergency coverage

Many seniors already have some of these benefits through other forms of insurance. Consider the implications of dropping that coverage and switching to a Medicare Advantage plan that has a similar benefit. Would your costs be lower or higher for those services in the end? Ask yourself which extras a plan absolutely must have and which ones would be nice but optional. For most seniors, quality prescription drug coverage will be the most crucial. You can check the coverage of individual drugs through the Medicare Plan Finder, which we explain in the next step.

Step 4: Look at Cost Specifics for Comparable Plans

After getting an idea of the type of plan and the kinds of benefits that they would like, seniors should start looking at real-life plans and their costs by visiting the Medicare Plan Finder. To begin, create a user account, log in to an existing one, or click “continue without logging in.” The search tool will walk you through several questions about location and coverage preferences. After this short survey, the search tool will present a list of options. Many seniors will immediately eliminate certain plans from consideration due to their understanding of plan types and extras. For the types of plans you are interested in, it’s time to look at cost specifics which are listed clearly for each plan.

Below you can learn what some cost-related terms mean and what typical costs look like:

• Premiums: The premium is the cost the senior pays monthly to keep the plan. Many Medicare Advantage monthly premiums are between $0-$40, but some can be several hundred dollars. The drug plan premium may be listed separately from the overall premium. Keep in mind that plan premiums are paid in addition to Parts A (if applicable) and B premiums.
• Deductibles: The deductible is the amount the senior has to pay out-of-pocket before the health plan’s coverage begins. Plans that offer drug coverage can have separate deductibles for the main health plan and the drug coverage. Health plan deductibles can be anything from $0 to about $1,000, with $0-$200 being the most common. Prescription drug plan deductibles are hardly ever more than a few hundred dollars and can often be $0. 
• Out-of-pocket maximums: All Medicare Advantage plans must have an out-of-pocket maximum. Once the patient pays this maximum through deductibles, copays, and coinsurance, then the rest of their Medicare-approved medical costs are 100% covered for the year. Premiums are excluded from the out-of-pocket maximum calculation. Plans can have in-network, out-of-network, and/or combined in- and out-of-network out-of-pocket maximums. Out-of-pocket maximums vary widely, from about $500-$10,000. Combined out-of-pocket maximums between $4,000-$7,000 are quite common. When looking at a plan, ask if anything other than the premium is excluded from the out of pocket maximums. 
• Copays and coinsurance: These are fees charged for individual services like doctor visits or tests. A copay is a flat fee and coinsurance is a percentage of the overall cost, usually 20%-30%. Some services will simply be free. You’ll be able to see primary and specialist visit fees on the main listing of the insurance plan, but you’ll need to click “Plan Details” to see more costs. When you get down to making a final plan decision, you should probably ask for an even more detailed list of copays and other fees.

Step 5: Make the Final Decision Holistically

One of the hardest parts about comparing plans is that with so many cost categories, it’s common to find a plan that has low costs in one area but high costs in another. Under “Plan Details” you can view “estimated total yearly costs for care.” Hypothetical numbers can’t account for everyone’s actual patterns of healthcare use, though, so the value of these estimates for comparing plans is somewhat limited.

Ultimately, you need to make your final decision holistically, taking into account all of the information provided in the above steps. The trick is to find a plan that provides the right blend of convenience, coverage, and low costs for your health and situation. The following tips can help you clarify what matters most to you for this multifaceted decision.

Considerations for making the final call: 

• Consider up-front vs. long term costs: Let your past experiences with healthcare costs inform your priorities for your health plan. If you’re most concerned about long-term costs adding up, then focus on plans that have a low out-of-pocket spending limit. However, if you’re more concerned with keeping monthly costs low, focus on a plan that has low premiums and copays and a small deductible. 
• Question extremes: If one part of a health plan appears to have extremely generous terms, it may be a great plan, or it may be hiding high costs in another area of the plan. For example, a plan with extremely low copays could have an overly limited network of doctors. If something seems too good to be true, try to find out if there are any trade-offs and if those trade-offs are worth it.
• Look at your health: If you already know you’re going to repeatedly need a certain service or type of services throughout the year, then your decision should be led by a very close look at the network and fees related to those services. Ask for a full list of copays, including copays that might be charged for hospital stays, ambulance rides, and more.

Resources for Learning More About Medicare Advantage

Below we have included links to articles, videos, and other resources for learning about how Medicare and Medicare Advantage work.