What Is A Medicare Advantage Plan?

What is Medicare Advantage – Key takeaways:

  • Medicare Advantage Plans replace original Medicare with a privatized version, managed by a for-profit insurance company.

  • Although you trade in Medicare A & B for the Medicare Advantage plan, you must still pay Medicare’s Part B monthly premium.

  • Medicare Advantage Plans are required to offer benefits from all the same categories as offered by traditional Medicare, but do not offer the same benefits.

  • Many Medicare Advantage Plans include a bundled Part D prescription drug plan as well as offering limited dental benefits, gym membership and other features.

  • Many Medicare Advantage Plans are premium free, making them attractive to those who retire with limited incomes.

  • A Medicare Advantage Plan is one of two ways the Medicare beneficiary can set a maximum annual limit on out of pocket costs for Medicare services.

What is Medicare Advantage?

Medicare Advantage plan, also known as Medicare Part C, is a type of health coverage option available to individuals who are eligible for Medicare. These plans are offered by private insurers approved and regulated by Medicare.

Unfortunately, there’s a lot of misconception, confusion and disappointment around this medical insurance. This article is meant to clear the air and shed light on the many, often overlooked points…

Medicare Advantage Plans Replace Medicare

A Medicare Advantage Plan replaces Original Medicare with similar coverage. It is not a supplement or enhancement of Medicare health benefits. They replace both Part A and Part B, and typically include a bundled Part D prescription drug plan.

Medicare Advantage Plans are required to offer benefits in all the same benefit categories as Original Medicare Parts A and B, but do not offer the same benefits. This is important and a source of confusion for many beneficiaries as well as insurance agents.

A good example of this is with physical therapy. With Original Medicare, if your doctor prescribes 20 physical therapy sessions, you get 20 physical therapy sessions. With an Advantage Plan, your doctor must ask permission from the insurance company before prescribing physical therapy. Even then, if they approve they are likely to only approve half or fewer of the sessions your doctor recommends. They both offer physical therapy (the benefit category) but not the same amount of benefit.

In exchange for handing over control of health decisions to the insurance company, the Medicare Advantage plan will set an annual maximum out of pocket limit.

By enrolling in a Medicare Advantage Plan, you forfeit the freedom to choose any doctor who accepts Medicare and are instead restricted to a plan’s network of providers. You’ll be limited to in-network doctors and in-network services or pay more for your coverage or pay the entire amount billed.

Out of network services received without insurance company approval are not typically covered by the insurance company and the out of pocket costs not included in your maximum out of pocket limit.

Your doctor will need pre-authorization from the insurance company before proceeding with non-urgent recommended treatments, and the insurance company retains the authority to delay or deny coverage. This means that the insurance company has a significant level of control over your healthcare decisions and coverage.

What Is a Medicare Advantage Plan?

What’s the difference between various Medicare Part C plans?

Part C, or Medicare Advantage, offers different plans with variations in networks, provider options, coverage, and additional benefits like prescription drugs, dental, and vision. Plan types include HMOs, PPOs, PFFS (private fee for service), SNPs, and MSAs (medical savings account).

Almost 90% of all Medicare Advantage Plans are either HMOs or PPOs. Other Medicare advantage plans are available in limited areas.

What is a Medicare Advantage HMO?

HMO (Health Maintenance Organization) is a cost-effective healthcare coverage that focuses on maintaining patient health. It operates within a limited network of medical providers, typically confined to a specific local area. Medicare Advantage enrollees must stay within the network for coverage, except for emergencies or urgent care.

Choosing a Primary Care Physician (PCP) is required, and the PCP coordinates care while helping the HMO plans control costs. Typically, permission from the PCP is necessary to see specialists or other doctors, as the HMO will not cover the cost without it.

What Is a Medicare Advantage PPO?

PPO (Preferred Provider Network) is a cost-saving insurance option that encourages consumers to use contracted medical providers. These health care providers offer services at a reduced rate, benefiting both the providers and the insurance company. With a PPO, consumers have the option to see out-of-network providers, but there are drawbacks.

Out-of-network providers must accept the insurance, and if they don’t, the consumer bears the full cost. Even if accepted, out-of-network care is typically more expensive than in-network care. Medicare Advantage PPOs often have a higher maximum out-of-pocket limit for out-of-network services, and some services may not be covered if performed by an out-of-network provider who doesn’t accept the insurance.

What Does Medicare Advantage Cover?

This is often a point misunderstood by both consumers and agent. Advantage plans are required to cover benefits from the same benefit categories offered by Original Medicare (Parts A and Part B). This includes hospital stays, doctor visits, preventive care, lab tests, and medically necessary procedures.

However, an Advantage is not required to offer the same benefits as Original Medicare. If that were the case, there wouldn’t be over 4,000 different Advantage plans across the country, each with different benefits and costs.

Even if an Advantage plan offers an identical benefit, it may be with a completely different cost and cost structure than Original Medicare.

Medicare Advantage plans often offer additional benefits which vary between plans but may include coverage for prescription drugs (Part D), limited dental care, vision care, hearing aids, wellness programs, and fitness memberships. Many agents focus their sales pitch on these “additional benefits” leaving the consumer to assume the health insurance is identical to Original Medicare.

What are some advantages of Medicare Part C?

1) A cap on out-of-pocket costs

The out-of-pocket maximum means once you reach that limit, the MA plan covers all additional costs for covered services.

2) Extra benefits

These plans may include supplemental benefits like routine dental coverage and vision care, hearing aids, gym memberships, transportation services, and over-the-counter allowances for medications and health supplies.

3) Part D (prescription drug coverage) included

Some Medicare Advantage plans include prescription drug benefits coverage (Part D) as part of their offering. But there are no structural differences between a stand-alone Part D plan and the one bundled with an Advantage plan. The same guidelines, deductibles, and maximum out-of-pocket still apply to prescription coverage.

You cannot purchase a stand-alone Part D plan if you have a Medicare Advantage HMO or PPO.

4) Lower or no monthly premium

For 2023, the Centers for Medicare & Medicaid Services project the average monthly MA plan premium to be $18.  This is why they are popular most amongst those with limited incomes.

Advantage plans have a low monthly premium and about 69% of the Medicare Advantage plans offered in the United States have no monthly premiums. But each plan still has its own cost-sharing rules – deductibles, copays, and coinsurance that the beneficiary is responsible for. While the plan covers a portion of the healthcare costs, there is a limit to the benefits provided, resulting in a higher potential maximum out-of-pocket cost compared to traditional Medicare plus Medicare supplement insurance.

Medicare Advantage plan enrollees are still required to pay their additional monthly premium for Medicare Part B medical insurance. Income Related Monthly Adjustment Amount (IRMAA) surcharge will still apply, if relevant for your Medicare Part B premium.

5) Special Needs Plans

These are for people needing Institutional Care (I-SNP), Chronic Condition plans (C-SNP), and Dual-Eligible Special needs Plans (D-SNP for people eligible for both Medicaid services and Medicare). However, they aren’t available everywhere.

6) No medical underwriting

When applying for a Medicare Advantage plan, your health history is never considered.

What are the Disadvantages of Medicare Part C?

1) Hard to plan your personal finance

Medicare Advantage plans are annual plans that end on December 31st each year. This means that every new year brings a new plan with different benefits, costs, and potentially changed network of healthcare professionals and services. Over the past three years, maximum allowed out-of-pocket costs have increased by more than 25%.

2) Potential Risk

Each year, some Medicare Advantage insurers cease operations, leading to a decline in quality service for beneficiaries. To protect your healthcare, we recommend avoiding new Medicare Advantage plans and plans from small carriers, as they are more vulnerable to unexpected exits from the Medicare program.

3) Network limitations and local coverage

Medicare Advantage offers local coverage unlike Original Medicare and Medicare supplemental plans. These plans, such as HMOs and PPOs, rely on local networks of doctors to manage healthcare. In some cases, you must use only in-network providers, while in others, you can ask out-of-network providers to accept your insurance, but they often decline.

According to KFF.org, only 46% of doctors in the US accept Medicare Advantage plans and even then, they may not accept your specific plan. Unlike Original Medicare and Medicare supplements, Medicare Advantage limits your choice of medical professionals.

4) Prior authorization hurdles

When enrolled in a Medicare Advantage Plan, unlike Original Medicare with Medicare supplement insurance, your doctor must obtain prior authorization before providing any non-urgent services.

This can delay or deny your healthcare needs.

5) May need a referral

Most Medicare Advantage plans require prior permission from your Primary Care Physician before seeing a specialist, who must also be within the plan’s network. This limits your choices and freedom to choose a healthcare provider.

Without a referral, your visits may not be considered covered services. As a result, you would be responsible for paying the full cost without any maximum out-of-pocket limit.

6) Can’t change Part D (drug coverage) easily

Another drawback of Medicare Advantage is the bundled connection between prescription drug coverage and primary healthcare. Changing one requires changing the other. Unlike Medicare supplement plans, Medicare Advantage does not allow you to have a separate stand-alone Part D prescription drug plan. This means you need to consider how switching your Advantage plan affects both your doctor’s and prescription drug coverage.

7) Inpatient hospital care

According to a study conducted by Kaiser Family Foundation, over 50% of Medicare Advantage plan recipients ended up paying more for inpatient care compared to if they had Medicare Part A hospital insurance. Medicare Part A entails a $per event deductible followed by 100% coverage for up to 60 days of hospital services. With a Medicare supplement, one can spend an entire year in the hospital without incurring any expenses.

8) Medicare Advantage Cancer Coverage

In most Advantage Plans, beneficiaries are responsible for paying 20% of their cancer treatment expenses up to the plan’s annual out-of-pocket maximum limit, which resets each January 1st.  Much more expensive than traditional Medicare plus a supplement.

Cancer treatment often involves Medicare Part B-covered drugs, which would typically have no cost with a supplement. However, with an Advantage plan, you will be responsible for paying 20% of the expenses until reaching your maximum allowed limit.

To make matters worse, a study published in the Journal of Clinical Oncology in 2022 revealed that enrollment in Medicare Advantage plans increased mortality rates for certain cancers due to the limited ability to choose more experienced oncologists from provider networks.

Medicare Advantage vs Medicare Supplement

With a Medicare supplement plan, you retain two crucial benefits of Original Medicare: the freedom to choose any doctor and visit any medical facility in the US or its territories that accept Original Medicare – without interference from a private insurer in your healthcare decisions.

Also, Medicare supplement plans cover the deductibles, copays, and coinsurance that would otherwise be your responsibility under Medicare Part A & B. This significantly reduces your out-of-pocket expenses for Medicare bills, often totaling just a few hundred dollars per year. With a Medicare supplement plan, you also enjoy comprehensive hospital insurance coverage as an inpatient.

You can go back to Original Medicare during the Annual Enrollment Period (October 15 – December 07), during the annual Medicare Advantage Open Enrollment Period (January 01 – March 31), or if you have a Special Enrollment Period (if you move out of your service area or if your Advantage Plan stops services in your area).

Contact our helpful team today if you’d like to switch to Medigap coverage or discuss which Medicare plan might be best for your health care.




Matthew Claassen, CMT and CEO of Medigap Seminars Insurance Agency. Medigap Seminars is an award winning premier national Medicare Insurance Brokerage, ranked among the top in the U.S.A. Matthew is considered a leading national expert on Medicare and Social Security. Mr. Claassen is a distinguished member of the Forbes Business council, an invitation only organization of business leaders and entrepreneurs. He and his team have received awards from many of the countries largest insurance companies including Mutual of Omaha, Aetna, Humana, Cigna, United American, United Healthcare and others. His videos have become the most popular Medicare educational videos on YouTube with millions of views. As a financial analyst Matthew lead a team of researchers to win the 2009 Best Equity Research & Strategy Award from The Technical analysis magazine.


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