The Pros and Cons of Switching to a Medicare Advantage Plan

Calendar Icon Updated May 24, 2019
Medicare

There are two basic ways to get health insurance under Medicare: through Original Medicare (Part A and Part B) or through a Medicare Advantage Plan (Part C). This article explores the pros and cons associated with switching from Original Medicare to a Medicare Advantage Plan.

Original Medicare Explained

Medicare Part A and Part B make up “Original Medicare.” Part A pays for most of the cost of hospital stays and other in-patient care. Those who qualify for Part A are not required to pay a premium for coverage. Medicare Part B, which requires a premium, covers doctor’s visits and various other types of medical care.

Medicare Advantage Plans Explained

A Medicare Advantage Plan is basically an alternative to Original Medicare (Medicare Parts A and B). Medicare Advantage Plans (also called Medicare “Part C”) offer everything that Original Medicare offers, at minimum, and may offer additional services, like vision and dental insurance without additional charge to the enrollee.

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A few different types of Medicare Advantage Plans are:

  • Health Maintenance Organizations (HMOs). Often, people select to participate in an HMO plan because these plans usually have the lowest premiums. With most HMOs, you must get your basic care from the HMO’s contracted providers. However, in emergency or urgent care situations, you can go elsewhere. Typically, with an HMO, you must have a primary care physician and get a referral before you can visit a specialist. And, there are consequences if you go outside of the network for your routine care without getting a referral first. You could end up being held responsible for the entire cost of the care. Sometimes, though, the HMO may have a Point of Service Plan (HMO POS) that allows you to get certain services (like visiting an out-of-network specialist) at a higher cost.
  • Preferred Provider Organizations (PPOs). PPOs provide the option of visiting a provider that is within the PPO network (for a lower cost), or you can go outside of the network and pay more. You will not need a referral to see a specialist, but the co-payment will probably be higher.
  • Special Needs Plans (SNPs). SNPs are only for individuals with particular chronic diseases or disabling conditions, those who reside in nursing homes (or certain other institutions), or who are covered by both Medicare and Medicaid.
  • Private Fee-for-Service (PFFS). PFFS plans permit you to visit Medicare-approved providers that have agreed to accept the plan’s payment terms. Not every provider will agree to the plan’s terms and payments.
  • Medical Savings Accounts (MSA plans). MSA plans combine a high deductible health plan that covers Medicare Parts A and B services with a bank account. The bank account is funded by Medicare deposits and is used to pay for health care services throughout the year. Typically, the amount that gets deposited by Medicare is not enough to cover the deductible.

Cost of a Medicare Advantage Plan

The out-of-pocket costs that you will have to pay if you select a Medicare Advantage Plan vary quite a bit depending on the plan selected. The following are a few potential costs that are associated with Medicare Advantage Plans:

  • Premium. There could be a monthly premium to participate in the plan that is in addition to your Part B premium.
  • Deductible. There could be a yearly deductible.
  • Co-payments and Co-insurance. The plan may have a copayment or coinsurance for services. The co-payment is often a fixed amount (for example, $20 per visit or prescription). The co-insurance is usually a percent (say 20%) that you must pay after the deductible is met.

Pros and Cons to Medicare Advantage Plans

Depending on your health and any ongoing medical conditions that you have, it might make more sense to select a Medicare Advantage Plan rather than Original Medicare.

Pros to Medicare Advantage Plans

  • Certain insurance companies that provide Medicare Advantage Plans offer plans with a no-cost ($0) premium. (However, there could be other costs to offset this “pro” though. For example, you might have to pay the Medicare Part B premium, prescription drug costs, coinsurance, copayments, and deductibles.)
  • There is a yearly limit on out-of-pocket costs that you must pay for medical services under Medicare Advantage Plans. After you hit the limit, you don’t have to pay anything for covered services. (The limit varies between Medicare Advantage Plans.)
  • Some Medicare Advantage Plans offer benefits that aren’t offered under Original Medicare, such as prescription drug coverage, dental coverage, and vision coverage.
  • Most plans, but not all, include prescription drug coverage.

Cons to Medicare Advantage Plans

  • Because private companies administer the various Medicare Advantage Plans, the coverage and restrictions can vary from plan to plan. This means that the Medicare Advantage Plan that you select could require higher out-of-pocket costs than Original Medicare. Also, your premiums, benefits, and copayments under the plan could potentially change each year.
  • Private insurance companies often have strict rules that you must follow. For example, you might have to get a referral to see a specialist or you may have to go to a doctor or hospital within the Medicare Advantage Plan’s network, rather than going to the doctor or hospital that you prefer.
  • Medicare Advantage Plans contract with Medicare, and may choose not to renew their contract at some point in the future. If your plan eventually decides to quit participating in Medicare, you will have to find another Medicare health plan or go back to Original Medicare.
  • Medicare Advantage plans can change their benefits and coverage each year. Even if you stay in the same plan from one year to the next, the plan could change and might not meet your needs for the upcoming year.

How to Join a Medicare Part C Plan

If, after reviewing all of the pros and cons, you have determined that you want to join a Medicare Advantage Plan, you must opt in to the plan at certain times. You can enroll during the following time periods.

  • During your initial enrollment period.
  • Between October 15 through December 7, when there is an open enrollment period for joining, switching, or dropping a Medicare Advantage Plan.
  • If you have Part A, and you get Part B for the first time during the general enrollment period (January 1 through February 14), you can join a Medicare Advantage Plan between April 1 to June 30.
  • You may enroll during certain special enrollment periods if you meet certain qualifications (such as you moved out of your plan’s service area or if your plan changed its contract with Medicare, among other reasons).
  • You can switch to a 5-star Medicare Advantage Plan (or Medicare Cost Plan, or Medicare Prescription Drug Plan) one time, between December 8 and November 30.

How to Disenroll from a Medicare Advantage Plan

If you have already enrolled in a Medicare Advantage Plan and have decided that the “cons” outweigh the “pros”, you can leave the plan during a special disenrollment period that occurs from January 1 until February 14 each year.

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If you leave your Medicare Advantage Plan during this time period, you are required to switch to Original Medicare—not a new Medicare Advantage Plan.

Selecting a Medigap Policy and Part D Instead

Instead of selecting a Medicare Advantage Plan, some people opt to go with Original Medicare and a Medigap policy, as well as a Part D plan.

Private companies offer Medigap policies to cover some of the gaps that exist in coverage when it comes to Original Medicare (Part A and Part B). The Medigap policy may cover amounts not paid by Original Medicare such as deductibles, coinsurance, and copayments. Also, some Medigap policies offer coverage for services that Original Medicare does not provide. For example, a particular Medigap policy might cover your medical expenses if you become ill while traveling overseas.

Medigap policies sold on or after January 1, 2006, do not include prescription drug coverage (though some previous policies covered prescription drugs.) So, it may also make sense to sign up for Medicare Part D as well.

Medicare Part D is a prescription drug plan that is only available through an insurance company or other private company that has been approved by Medicare. These plans cover brand-name and generic prescription drugs so long you are enrolled in Medicare Part A and/or B. The cost of Part D prescription drug plans (as well as the types of drugs covered under the plans) varies. The actual cost you will have to pay will primarily depend on:

  • the monthly premium for the plan (which is in addition to the Part B premium that you must pay)
  • the yearly deductible, if one exists; and
  • any copayments/coinsurance (these will vary depending on the plan you choose).

The Bottom Line

You’ll have to figure out which type of coverage is the right option for you. If you are considering a Medicare Advantage Plan, be sure to review the details of each plan that you are considering so that you can appropriately compare the various benefits, costs, and restrictions of plans available in your area.

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