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March 25, 2020
What Is Medicare Advantage?

What Is Medicare Advantage?

Medicare Advantage (MA) – also called Medicare Part C – is private health insurance for individuals that are eligible for Medicare. The private companies that offer MA are required to follow rules set by Medicare.

MA is often referred to as the “all-in-one” alternative to Original Medicare. (Original Medicare just means Part A, your hospital insurance, and Part B, your medical insurance). MA plans often bundle Part A, B, and D coverage into one plan.

According to Kaiser Family Foundation, about 1 in 3 Medicare beneficiaries is enrolled in a Medicare Advantage plan. That number has been trending up for a number of years, and it’s expected to continue growing.

There’s a lot to know about Medicare Advantage, including the different types, how they work, and of course, if it’s right for you.

Types of Medicare Advantage Plans

There are 6 types of MA plans, and there are a lot of acronyms here: HMO, PPO, MSA, PFFS, SNP, and HMOPOS. 

HMOs and PPOs

The two most popular types of Medicare Advantage plans are HMOs and PPOs, which are both network-based and typically come with drug coverage included. When people talk about Medicare Advantage, they’re most often referring to HMOs and PPOs.

HMOs, or Health Maintenance Organizations, are the strictest network-based plans. In most HMOs, you can only see doctors in your network unless it’s an emergency situation.

With PPOs, or Preferred Provider Organizations, you pay less if you use in-network providers. You typically pay more if you see out-of-network providers, but it’s still an option.

Medicare Advantage plans like HMOs and PPOs are network-based, which means you need to see in-network doctors or you risk hefty out-of-pocket expenses. This is problematic for those who travel often or even move to another state for part of the year. Medicare Advantage plans like MSAs are not network-based, which means you can see any doctor that accepts Medicare assignment. These plans make more sense for those who like to travel or who go south for the winter months.

MSAs

Next up is the MSA, which is a Medical Savings Account. These plans are nothing like the others, because there’s no network (there are other difference, but this is the main one). 

MSAs combine high-deductible health coverage with a savings account. Money is deposited into that account at the beginning of each year, and you can use the funds for qualified medical expenses throughout the year. MSAs don’t come with drug coverage, so you do have to purchase a separate Part D drug plan.

When you really take a good look at the MSA, in our opinion, it’s one of the best options available to seniors in the Medicare space today. The agents here in our office are selecting it for themselves as they turn 65.

Learn more: How Do Medicare MSA Plans Work, and Do I Need One?

PFFS, SNP, and FMOPOS

The other plans are far less common, but let’s go through them for good measure.

PFFS, or Private Fee-for-Service plans, are similar to Original Medicare in that you can generally go to any doctor as long as they accept the plan’s payment terms. The plan determines how much it will pay and how much you must pay when you get care.

SNPs, or Special Needs Plans, provide specialized health care for specific groups of people, like those who have both Medicare and Medicaid, live in a nursing home, or have certain chronic medical conditions.

Finally, HMOPOS, or HMO Point-of-Service plans, may allow you to get some services out-of-network for a higher copayment or coinsurance.

Extra Benefits of Medicare Advantage Plans

Most advertisements overemphasize the “extra” benefits that come with MA plans. These extras, or benefits that go above and beyond the regular Medicare benefits, can include vision, hearing, dental, fitness, telehealth, and more.

Many MA plans come with programs like SilverSneakers, which gives you access to gyms and fitness centers across the country. This benefit is free and adds additional value to your insurance coverage.

About 77% of MA plans include eye exam or glasses benefits, 69% include fitness benefits, and 62% include dental benefits (KFF). 

Read more: 10 Things Medicare Advantage Plans May Cover that Original Medicare Doesn’t

To offer these benefits, MA plans will use rebate dollars, bonus payments from Medicare, or they’ll sometimes increase their premium (which is still typically low). If an MA plan has a quality star rating of 4+ stars (or no rating at all), it’s eligible for bonus payments. Between 2015 and 2018, the total annual bonuses paid to MA plans more than doubled from $3 billion to over $6 billion (KFF).

While extra benefits are nice, it’s important to look at the plan basics to make sure it’s a good fit for you. 

Key Features of Medicare Advantage Plans

Here are the key features of MA plans:

  • They must offer the same level of coverage as Original Medicare (they can offer more)
  • Most (88%)  also offer prescription drug coverage 
  • You will have out-of-pocket costs, including deductibles, copays, coinsurance
  • There is an out-of-pocket maximum – once you reach that, your plan pays 100% for your care
  • Most plans are either $0 premium or very low premium
  • You still pay the standard Part B premium ($144.60 in 2020)
  • Plans can change each year – benefits are not standardized by the government like Medicare Supplements are

If you don’t mind a higher deductible in exchange for a lower premium, Medicare Advantage could be a great choice for you. Some even refer to MA plans as “pay-as-you-go.” You’re paying out-of-pocket for most care you receive, but if you don’t need any care, you’re not paying much.

Medicare Advantage plans have deductibles, copays, and coinsurance. While premiums are low, you will be paying out-of-pocket when you need care. With Medicare Supplements, the premiums are higher, but you have a very low deductible and no copays or coinsurance. That can vary slightly depending on which Medicare Supplement plan type you choose, but the most popular plans today have low or no out-of-pocket costs.

Where You Live Is Important

Medicare Advantage plans are based on counties, so the plans available in your county is different than plans available in another one.

In general, larger cities have more options than rural areas. Plans are also usually better in larger cities – there are bigger networks, plans with lower out-of-pocket maximums, etc.

The Kaiser Family Foundation reports that Medicare Advantage enrollments vary from 1% to over 40% depending on what state you’re in. For example, 43% of individuals in Florida are enrolled in an MA plan, whereas only 3% of individuals in Wyoming have one.

The geography is important here, because costs vary depending on which plan options you have in your county

For example, Bedford, Wyoming, population of 201, has only 1 Medicare Advantage plan option, which is the Lasso Healthcare MSA. In this county, the Lasso Healthcare MSA has a deductible of $9,400. There are no HMO or PPO options at all.

On the other hand, Orlando, Florida, population of 280,257, has 41 Medicare Advantage plan options, many of them costing $0 premium and having out-of-pocket maximums under $3,000.

Where you live plays a huge factor in your Medicare Advantage costs, which is why it’s so important to meet with an insurance agent. Our agents here at Medicare Allies would be happy to sort through and explain the available plans in your county.

Costs of Medicare Advantage Plans

While costs vary by county, there are some averages we can reference about premiums and other costs inside Medicare Advantage plans.

For example, 51% of Medicare Advantage prescription drug plans have no premium ($0). Only 10% of Medicare Advantage plans have a premium of $100 or more (KFF). For those that do pay a premium, the average is $70 per month.

As we mentioned, Medicare Advantage plans are often referred to as “pay-as-you-go” plans, because you’ll pay your deductible followed by copays and coinsurance percentages until you reach your out-of-pocket maximum. The average out-of-pocket maximum is between $5,000-$6,000 for the year (KFF).

Because Medicare Advantage plans are required to follow rules set by Medicare, the out-of-pocket maximum can’t be more than $6,700 as of 2020.

Medicare Advantage plans boast low or even no premium, but you still have costs up to your out-of-pocket maximum. Typical HMOs and PPOs have an average out-of-pocket maximum of between $5,000-$6,000. Once you reach that maximum for the year, your plan pays 100% off the costs.

Is Medicare Advantage Right For Me?

Medicare Advantage is usually a great fit for veterans and individuals who are dual eligible (eligible for both Medicare and Medicaid). MA can also be a good option for everyday consumers who prefer to have a higher deductible in exchange for lower premiums

Here are a few additional factors that might increase your compatibility with MA:

  • You rarely see the doctor and don’t see that changing
  • You are challenged financially
  • You would rather have low premiums in exchange for some risk
  • You live in a large city
  • You don’t travel much (N/A for the MSA plan type)

With Medicare Advantage, the two biggest factors are the plans available in your county and their networks. If you live in a state that offers the Lasso Healthcare MSA, you don’t have to worry about networks, which is fantastic.

However, if you travel often or go south for the winter, a Medicare Supplement is a better fit.

Additionally, if you live in a rural area, it’s more likely that there aren’t a lot of competitive plans. We typically recommend a Medicare Supplement to clients in small cities and rural areas.

As you can see, it’s best to make your decision about Medicare Advantage after you’ve seen the plans offered in your county. Our agents can pull up that specific information and evaluate the options with you – all you have to do is give us a call.

We look forward to serving you!

Further Reading:

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