Should you join a Medicare Advantage plan?

In 2020, 62.6 million people were enrolled in Medicare. That same year, 24.1 million people — or about 39 percent of all Medicare beneficiaries — were also part of a Medicare Advantage plan.

These numbers have grown rapidly over the past two decades. In 2012, only 26% of Medicare beneficiaries were part of a Medicare Advantage plan. And 20 years ago, this figure was only 14%.

By 2030, the Congressional Budget Office estimates that approximately 51% of all Medicare beneficiaries will enroll in a Medicare Advantage plan. What is a Medicare Advantage Plan? Why are they becoming so popular and are they right for you?

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All About Medicare Advantage Plans

Medicare Advantage plans, often known as “MA” or “Part C” plans, are health insurance plans offered by private companies to Medicare-eligible retirees that combine different parts of Medicare. The largest MA plan providers include UnitedHealthcare with 26% of all MA enrollees in 2020, humane with 18%, Anthem Blue Cross (now Elevation) with 15%, and SVC with 11%.

By law, all MA plans must provide benefits covered by Original Medicare (Parts A and B). Medicare Part A provides hospitalization insurance and covers hospital services such as surgeries, overnight stays, skilled nursing, palliative care, and home care. Meanwhile, Medicare Part B covers outpatient services, which include doctor visits, preventive health care, mental health care, durable medical equipment, and ambulance services.

About 90% of all MA plans will also provide generic and brand name prescription drug coverage under Medicare Part D. Some MA plans may also offer benefits not covered by Medicare, such as gym memberships, services vision, hearing or dental. Additionally, all MA plans come with spending limits, so there’s a cap on how much you’ll have to pay for your health care in any given year.

Medicare Advantage plan costs

For most MA plans, you’ll be responsible for the Medicare Part B premium — which ranges between $171.10 and $578.30 per month, depending on your income — but nothing else.

This is because most Medicare Advantage plans do not carry an additional plan premium. In fact, according to the Kaiser Family Foundation, 65% of MA plans charged a $0 premium in 2021, while the average plan premium was just $21.

On the other hand, MA plans that offered the most flexibility, such as Preferred Provider Organization (PPO) plans, charged an average monthly premium of $48 in addition to the Part B premium. However, premiums are generally rare and only 5% of all MA plan members reported paying more than $100 in premiums per month.

Of course, MA plans will also come with deductibles, copayments (or coinsurance), and other cost-sharing fees, all of which will vary depending on the plan you choose. Either way, be sure to account for these expenses when budgeting for your annual reimbursable healthcare costs.

Types of Medicare Advantage Plans

Medicare Advantage plans bundle and provide coverage for these health services using a managed care system, making them similar to employer-sponsored or self-purchased private health insurance plans that are available. for non-retirees.

There are five types of MA plans:

  • Health Maintenance Organization (HMO): These plans are aimed at light to moderate users of healthcare services and offer more restrictive coverage solutions at a lower cost. In an HMO, you will need a referral from a primary care physician to see a medical specialist. Additionally, HMOs don’t cover out-of-network services, so you’re limited exclusively to service providers within your plan’s network.
  • Preferred Provider Organization (PPO): These plans are best for moderate to heavy health service users and offer more flexibility than their HMO counterparts. In particular, you will not need a referral to see a specialist. PPOs also offer an out-of-network coverage advantage, so you can see any provider you want – although it will always cost you more to see an out-of-network provider than an in-network provider.
  • Private Fee-for-Service Plan (PFFS): In a PFFS, you can see any service provider that accepts Medicare — and nearly 97% of all physicians nationwide do. As the name suggests, you pay a fee each time you visit a provider. Unlike HMOs or PPOs, PFFS plans do not distinguish between in-network and out-of-network coverage.
  • Special Needs Plan (SNP): These plans provide tailored coverage for groups of people with certain health conditions, such as cancer, dementia, alcoholism, heart failure or HIV/AIDS. You can only stay in an SNP if you currently have a covered condition. Otherwise, you must join another MA plan.
  • Medical Savings Account (MSA): These plans combine a high-deductible MA health plan with a tax-advantaged savings account that works similarly to a health savings account (HSA). MSAs do not provide drug coverage under Medicare Part D, so you will need to join a separate plan for coverage.

Are Medicare Advantage plans right for you?

MA plans are becoming increasingly popular for several reasons. First, they’re designed to be familiar and work much like the health insurance plans you were used to before retirement. They’re also convenient, allowing you to get coverage for a wide range of services under one plan.

On the other hand, MA plans are more restrictive than Original Medicare and generally discourage plan participants from seeking care outside of their networks.

Despite the lower monthly premiums, MA plan participants may also face higher fees than enrollees who opt for a combination of Original Medicare and Medigap. This is because MA plans usually come with higher cost-sharing fees, which can hurt you in a year when you need a lot of healthcare services.

As usual, all health care coverage options will have both advantages and disadvantages, and the best coverage option will depend on factors such as your current and expected medical condition, your desire for flexibility, and your level of of risk tolerance. Either way, learning about your retirement health care choices is an important first step in finding the coverage that’s right for you.

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