Medicare Advantage Plans, also known as Medicare Part C, are an alternative to Original Medicare offered by private insurance companies that enter into a contract with the federal government to provide these health insurance benefits. These plans provide all the benefits of Medicare Part A (hospital insurance) and Part B (medical insurance), and often include additional coverage such as prescription drugs, dental, vision, hearing, and wellness programs. Medicare Advantage Plans are required to offer at least benefits from the same categories of coverage as Original Medicare, but they may have different rules, costs, and provider networks.
When considering what Medicare Advantage Plans are, it’s important to understand that they function like managed care plans—typically Health Maintenance Organizations (HMOs) or Preferred Provider Organizations (PPOs). Beneficiaries usually pay a monthly premium (in addition to the Part B premium) and may need to use in-network providers for the lowest costs. These plans often include an out-of-pocket maximum, which can provide financial protection not available under Original Medicare.
Your First Medicare Decision
As you know from my Medicare Explained video, before you make any other decisions with Medicare you must first be enrolled in both Medicare Part A (inpatient services) and Medicare Part B (outpatient services).
It is crucial to understand the specific enrollment periods for Medicare Advantage Plans, such as the initial enrollment period and the annual open enrollment period, as these times impact your coverage options and eligibility for other plans.
From there you can make one of three choices.
Do nothing. Just keep Medicare Part A and Medicare Part B (aka Original Medicare) as your insurance coverage and add Medicare Part D prescription coverage. Of course, with just Medicare Part A and Medicare Part B and no other coverage, a person still has unlimited financial risk should you get sick or injured. Your portion of the medical cost could still result in financial hardship.
A second option is to increase your insurance coverage by enrolling in a Medicare supplement plan and use that coverage in addition to Medicare Parts A and B.
A third option is to trade in your Medicare Part A and Part B benefits for a Medicare Advantage Plan, also known as Medicare Part C.
This article discusses the pros and cons of the third option, Medicare Advantage Plans health plans.
Follow this link if you are also interested in the pros and cons of Medicare Supplement Plans.
Medigap Seminars Insurance Agency Reviews.
What Is a MOOP?
An important Medicare insurance term you should be aware of as you research different Medicare choices is your MOOP. MOOP stands for your annual Maximum- Out -of- Pocket financial risk. Your MOOP is the most money you will be liable for in approved Medicare bills for in-patient or outpatient services during any calendar year. It’s a great way to measure the coverage of one health insurance plan versus another. The plan with your lowest MOOP has the most insurance coverage because your financial risk is the lowest. Once your out-of-pocket expenses has reached your MOOP you have 100% coverage for the remainder of the calendar year. Your MOOP resets every January 01.
It’s important to know that your MOOP never includes the cost of prescription drugs or your premium to purchase the plan. Prescription drugs are always separate. Even if your Part D is bundled with your Medicare Advantage Plan. Understanding the premiums associated with Medicare Advantage Plans is crucial for financial planning, as many of these plans often have low or even zero monthly premiums compared to traditional Medicare. However, members must still pay their Medicare Part B premiums.
It is also very important to understand that the MOOP is only in reference to APPROVED Medicare services or procedures. If a procedure or service is not approved, you will bear 100% of the cost and it will not count toward your MOOP.
Original Medicare Parts A & B have no MOOP. You have unlimited financial risk. All Medicare Advantage Plans and Medicare supplement Plans have a MOOP. Which is why people are attracted to them.
What Is a Medicare Advantage Plan?
A Medicare Advantage plan is a health plan, also referred to as Medicare Part C, offered by private health plans approved by Medicare. These plans are part of a program designed to provide an alternative to traditional Medicare. Medicare beneficiaries can choose these plans as an alternative to traditional Medicare. It is a privatized version of A and Part B. You are trading in your Medicare Part A and Medicare Part B for roughly equivalent coverage (technically referred to as Actuarily Equivalent) operated by a “for-profit” insurance company. Mind you, you must continue paying your Medicare Part B premium. That premium is typically deducted from your Social Security Income.
About 98% of all Medicare Advantage Plans are structured as either an HMO or a PPO.
How Medicare Advantage Works
Overview of Medicare Part A and Part B coverage
Medicare Advantage plans, also known as Medicare Part C, are managed by private companies (non-government) and provide hospital and outpatient coverage that replaces the coverage under Medicare Parts A and B, with the exception of hospice care. Medicare Part A, or Hospital Insurance, covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health care. On the other hand, Medicare Part B, or Medical Insurance, covers doctor visits, outpatient care, medical supplies, and preventive services. Medicare Advantage plans are required to offer the same benefits as Medicare Part A and Part B, and they often provide additional benefits to enhance your healthcare experience.
Individuals with end-stage renal disease became eligible for Medicare Advantage Plans in 2021. It is important to compare the costs and benefits of different coverage options available to them.
Additional coverage options like dental, vision, and hearing
Many Medicare Advantage health plans go beyond the standard coverage of traditional Medicare by offering additional benefits such as dental, vision services, hearing coverage, and Medicare Part D for prescription drug coverage. These benefits can include routine dental care like cleanings and exams, eye exams and glasses, and hearing aids. Some plans also offer extra perks like fitness programs, wellness services, and transportation to medical appointments. These added benefits can make Medicare Advantage plans an attractive option for those looking for more comprehensive healthcare coverage.
Comparison of out-of-pocket costs with Original Medicare
One of the significant advantages of Medicare Advantage plans is their typically lower out-of-pocket costs compared to traditional Medicare. Medicare Advantage plans have a maximum out-of-pocket limit, which caps the amount you pay for healthcare expenses in a calendar year. For instance, in 2025, the maximum out-of-pocket limit for Medicare Advantage plans is $9,200 for single coverage and $18,400 for family coverage. In contrast, traditional Medicare does not have a maximum out-of-pocket limit, meaning you could be responsible for paying 20% of the cost of medical services after meeting the deductible. This cap on out-of-pocket costs can provide significant financial protection and peace of mind.
Many plans have specific requirements related to provider networks, geographic service areas, and approval processes, which can impact the flexibility and accessibility of medical care for enrollees.
What is a Medicare Advantage HMO?
HMO stands for Health Maintenance Organization. Health Maintenance Organizations are designed to maintain the health of their patients in a cost-effective manner. The HMO is local healthcare coverage with a network that may be confined by your county or a local area the size of most counties.
Typically, you must stay within the plan’s network of medical providers contracted with the HMO. Outside of the network, you have no insurance, except for emergency and possibly urgent care. In other words, if you see a doctor not in the HMO network, you will pay 100% of the cost.
There are some exceptions offered by some plans. It’s up to the consumer to understand and follow these exceptions.
With most HMO’s you must designate a Primary Care Physician (PCP). That Physician will control your healthcare, is contracted with the HMO and typically rewarded for helping the HMO control their costs.
You must obtain permission from your Primary Care Physician to see another doctor like a specialist. Without permission, the HMO will not pay for your care.
What Is a Medicare Advantage PPO?
The term PPO stands for Preferred Provider Organization, a type of Medicare Advantage plan. A PPO is designed to save money by encouraging the consumer to use medical providers and facilities that have contracted with the insurance company. Those providers are grouped as a network and are contracted to offer their services at a low rate in turn for being a preferred provider. The medical providers and facilities get more business, and the insurance company saves money. Note, neither benefit necessarily includes the consumer.
With a PPO the consumer is allowed to see medical providers out-of-network. However, there are two major drawbacks to the out-of-network option. The first drawback is that the out-of-network medical provider must agree to accept your insurance. If they do not accept your insurance, then the insurance company will not pay for their services. If you see that medical provider, you will bear the full cost.
The second drawback is that if the medical provider agrees to accept your insurance, you will still pay more than you would if they were in network.
Many Medicare Advantage PPOs require a referral from your primary care physician to see specialists, which can be a limitation compared to Original Medicare.
Most Medicare Advantage PPOs have a separate MOOP for approved out-of-network services. Typically, that MOOP is much higher than in-network services. Of course, any procedure that is not approved or is performed by an out-of-network doctor that does not agree to accept your insurance is not included in your MOOP.
Coverage Options and Benefits
Prescription drug coverage and other additional benefits
Most Medicare Advantage plans include prescription drug coverage, also known as Medicare Part D. This coverage helps pay for prescription medications and may offer additional benefits such as lower copays and coinsurance for certain medications. Beyond prescription drug coverage, many Medicare Advantage plans also offer a range of additional benefits, including:
Routine dental care
Eye exams and glasses
Hearing aids
Fitness programs
Wellness services
Transportation to medical appointments
Some Medicare Advantage plans offer a Part B giveback, which reduces the premium that enrollees pay for Medicare Part B, making these plans more appealing.
It’s important to note that not all Medicare Advantage plans offer the same benefits, and some plans may have different levels of coverage for certain services. Therefore, it’s essential to review the plan’s benefits and coverage details before enrolling to ensure it meets your healthcare needs.
Why Choose Medicare Advantage Plans?
Why would a person trade in their Original Medicare Parts A and B for a Medicare Advantage plan?
Primarily to limit financial risk in the case of a medical event. Original Medicare Part A and Medicare Part B on its own has no limit to your financial exposure. A medical event can be costly enough to create financial hardship.
In Medicare, the two ways a person can limit their financial risk is to either increase their insurance coverage by selecting a Medicare supplement plan or by trading in their original Medicare coverage for a Medicare Advantage plan.
For those eligible for both Medicare and Medicaid, Medicare Advantage Plans can also include Medicaid services, offering additional benefits and potentially lower costs. Medicaid eligibility is determined by income and asset criteria, which vary by state, and losing Medicaid eligibility can impact one’s participation in Medicare Advantage Plans.
This is an important difference between Medicare Advantage plans and a Medicare Supplement insurance. With a Medicare supplement you do not give up anything to limit your financial risk. You get additional insurance coverage to limit your financial risk. With a Medicare Advantage plan, you give up the benefits of Original Medicare in order to have limited financial risk.
It is very important to understand that a Medicare Advantage plan is not a Medicare supplement. It is not Medicare supplemental coverage. It is a Medicare replacement.
If you purchase a Medicare Advantage plan, you can only switch back to Original Medicare during select periods and if you qualify medically.
In addition to limiting financial risk, Medicare Advantage plans provide an aura of convenience to the consumer. They will often bundle a Medicare Part D prescription drug plan and throw in some extra services that give the appearance of greater coverage. For example, some throw in basic or preventative dental services, hearing tests and services and things like gym memberships.
These are benefits not provided by Original Medicare. But when it comes to providing hospital or outpatient care, the Medicare Advantage Plan is, by law, the actuarial equivalent of Original Medicare.
What Is an Actuarial Equivalent?
By law a Medicare Advantage plan is an actuarial equivalent of Medicare A and Medicare B. That means it is intended to provide a benefit of equal value to Medicare Part A and Medicare Part B without a supplement. Medicare pays a fixed amount each month to these plans for each enrollee’s care, which is different from the payment structure of traditional Medicare. I have linked my CMS source for this information below. But the consumer must give up something in order to get this annual limit on their financial risk plus these other added benefits.
Prospective enrollees must provide their Medicare number along with the start dates of their Medicare Part A and B coverage when signing up for a Medicare Advantage Plan.
It is very important to understand that a Medicare Advantage plan is not a Medicare supplement. It is not Medicare supplemental coverage. It is a Medicare replacement.
Disadvantage of Medicare Advantage Plans
If you keep Original Medicare, you have the right to see any doctor or go to any hospital in the US as long as they accept Original Medicare. You have national insurance coverage. In addition, Medicare’s intent is to cover everything that is medically necessary. To determine medical necessity, they lean on your doctor’s diagnosis and opinion.
Individuals with certain health issues may face challenges when trying to switch back to Original Medicare with a Medigap plan due to the need for medical qualification after the initial enrollment period.
When you enroll in a Medicare Advantage plan you lose that freedom of choice, and your doctor must get each service or procedure approved by the insurance company. Prior authorization for each procedure can have a meaningful negative impact on your healthcare. Unfortunately, insurance companies never ask for your doctor’s guidance when defining what is or is not medically necessary.
There are a number of different types of Medicare Advantage plans. Some do allow a person to see medical providers out-of-network. However, it would be at a higher cost to you. Staying in a hospital that is out-of-network is often cost prohibitive. In addition, even though the insurance agent may tell you that you can “See any doctor in Medicare” with some plans. What is not said (and often not understood) is that you can only see an out-of-network doctor if they decide to accept your insurance. More often than not, the Medicare provider will reject your insurance and decline to see you.
It’s also very important to understand that with a Medicare Advantage plan the insurance company is the arbiter of what is and is not covered by their insurance. They are supposed to cover everything that Original Medicare would cover, but that is proven not to be the case.
I the problem with Medicare Advantage Plan denying service and the first of two Inspector General Reports on the subject here: Medicare Advantage Denial of Service
Let’s stop there for a moment.
First, I feel like I am beating up on Medicare Advantage plans, but I don’t mean to be.
Our Philosophy on Medicare
In addition to offering all Medicare supplement plans, my company also offers Medicare Advantage plans in almost every state. No matter what your choice, we make certain the consumer knows what they are getting and what they are giving up. It is important to consult with your employer or union about existing coverage to avoid losing benefits when transitioning to a Medicare Advantage Plan. We will go over in a moment who should be considering these plans and why. What I am trying to lay out here is a simple truth that is brushed over by most insurance agents that sell Medicare
Some Agents Are Motivated by Commissions
Medicare Advantage plans are high commission products. The insurance agent selling Medicare Advantage Plans is paid two to five times more than what is paid for a Medicare supplement. Sadly, this creates a financial incentive to brush over the truth. I have a video that details how you can identify when an agent is financially motivated, and their advice is tainted. It titled Do I Need a Medicare Insurance Agent.
Still, some consumers choose the Medicare Advantage plan because of other conveniences. These will typically include a bundled Medicare Part D plan and may also include health activities like a gym membership, limited dental services and hearing aid benefits and so on.
When joining a Medicare Advantage plan, consumers should be aware of the potential loss of employer or union coverage. It is crucial to consult with benefits administrators before making a decision.
Because Medicare Advantage plans are less insurance than a Medicare supplement and because the consumer must give up some of the greatest benefits of Medicare when they trade it in for a Medicare Advantage plan, I have a strict philosophy on how we approach advising consumer. I believe the consumer should first look at the Medicare supplement plans that are available. Only if there is no Medicare supplement that fits the consumer’s needs and budget do we move to examine Medicare Advantage Plan options.
I believe the consumer should first look at the Medicare supplement plans that are available. Only if there is no Medicare supplement that fits the consumer’s needs and budget do we move to examine Medicare Advantage Plan options.
Please Watch the Medicare Advantage Video for More
In the video linked to this article I reveal many other facts that every consumer should know before choosing a Medicare Advantage Plan. The links below are the ones promised and discussed in detail in the video. I encourage you to peruse the links and, if you are so inclined, to watch the video.
To join a Medicare Advantage Plan, individuals must be eligible for Medicare Parts A and B. It’s important to understand that joining these plans may have implications, such as the potential loss of previous coverage.
A Dozen Facts About Medicare Advantage Plans. https://www.kff.org/medicare/issue-brief/a-dozen-facts-about-medicare-advantage/
Less than half of all Physicians choose to work with Medicare Advantage Plans. https://www.kff.org/medicare/press-release/medicare-advantage-networks-included-46-percent-of-physicians-in-a-county-on-average/
Inspector General Report on Medicare Advantage Plans. This report is of a study the Inspector General did that ran from 2014-2016. In brief, the report found that each year more than half of all Medicare Advantage plans were denying Services or payment for procedures that are medically necessary and should have been performed. While most of the denials that were appealed were approved as a result of the appeal, the report found that only 1% of the beneficiaries that were denied service even attempted to appeal the process. This is huge. This means that people are harmed by not receiving the medical treatment they need, deserve and expect from their Medicare insurance. https://medigapseminars.org/wp-content/uploads/2022/03/Medicare-Advantage-Appeal-Outcomes-and-Audit-Findings-Raise-Concerns-About-Service-and-Payment-Denials-OEI-09-16-00410-09_18.pdf
When Medicare Advantage Drops Doctors… https://khn.org/news/when-medicare-advantage-drops-doctors-some-members-can-switch-plans-2/
FAQ
Your first opportunity to purchase a Medicare Advantage Plan is during your Medicare Initial Enrollment Period. That is a seventh month window that includes your birthday month and the three months before and after.
Every year between October 15and December 07 a Medicare eligible person can purchase a Medicare Advantage Plan for the first time, or switch from one Medicare Advantage Plan to another. Your new plan will then start on January 01. You can also use this time period to switch from an Advantage plan back to Original Medicare.
The Annual Open Enrollment for Medicare Advantage Plans is from January 01 through March 31. During this time period you can 1. Trade your Medicare Advantage Plan back to Original Medicare Part A & B. 2. Make one (1) change in your Medicare Advantage Plan if you don’t like your current plan.
Most Medicare Advantage Plans come with a bundled Part D prescription drug plan. These are referred to as Medicare Advantage Prescription Drug Plans (MAPD). Some do not have a prescription drug plan. If your Medicare Advantage HMO or PPO does not have a Part D plan bundled with it, you cannot purchase a standalone Part D Plan. If you do, you will lose your Medicare Advantage Plan.
If you move out of the service are of a Medicare Advantage Plan, you will have a 60-day Special enrollment Period to get a new plan based on your new address.
