This post discusses Medicare Advantage Plans, how they work, pros and cons, and what they cost.

Medicare Advantage Plans

Medicare Advantage plans, also called Part C, are one of the ways you can limit your financial risk with Medicare. Private insurance companies offer all healthcare solutions bundled together: your hospital stays, physican care, lab tests, imaging, prescription drugs, usually dental, vision, and hearing, plus some extra benefits the insurance company adds to attract you to their plan. It’s not necessary to buy each part separately like with the Medicare Supplement solution, also called MediGap (discussed here).

Medicare Advantage Plans are offered by for-profit insurance companies who have contracts with the federal government to provide your healthcare. If the insurance company can meet your healthcare needs for less money than the government is paying them to do so, they’ll make a profit. Therefore, there are many cost constraint rules and regulations associated with Medicare Advantage plans.

Pros of Medicare Advantage Plans

  • Most plans have a $0 or low monthly premium.
  • No health qualifying, no medical questions.
  • Prices are the same for everyone, not higher for people who are older or sicker.
  • Usually bundled to include prescriptions, and at least a modest amount of coverage for dental, vision, and hearing.
  • Some plans include extra benefits not normally part of Medicare, like gym memberships, transportation, and over-the-counter benefits.
  • Works with state Medicaid programs for people with low income to special plans with very generous benefits.

Cons of Medicare Advantage Plans

  • Copays or coinsurance for each service you receive. This makes budgeting hard since you don’t know in advance what care you’ll need.
  • Most require provider networks, but some plans allow out-of-network providers for an extra fee.
  • Referrals are often required to see a specialist.
  • Prior authorization is required for surgeries, procedures, and diagnostic tests, etc.
  • There are very specific date restrictions about signing up, changing plans, or dropping a plan.

Plan Types

Most Medicare Advantage plans are Health Maintenance Organizations (HMOs), which require you to use only in-network providers—not just doctors and specialists but also hospitals, urgent care centers, labs, imaging centers, physical therapists, cardiac rehab, etc. HMOs have more restrictive provider networks than other plan types, but generally have lower copays for services, and often lower Maximum Out of Pocket limits too.

Preferred Provider Organizations (PPOs), Point of Service (POS) plans, and Private Fee For Service (PFFS) plans are less common. All of them will allow you to see out-of-network providers for a higher price than in-network providers. However, out-of-network providers will not always agree to bill your insurance company; they may require you to pay up front and get reimbursed by your insurance company later.

In addition to plans for the general population, there are some special needs Medicare Advantage plans:

Dual Special Needs Plans – for people who are eligible for both Medicare and Medicaid through their state’s Medicaid program for low-income people. Medicare Advantage plans have very generous benefits for those who reach certain qualifications within the Medicaid program.

Chronic Special Needs Plans – for people with chronic medical needs like diabetes or heart disease.

Institutional Special Needs Plans – for those who live in a nursing home or other institution.

Special Needs Plans aim to have more relevant benefits for their target audience, but one of the best things about them is the more lenient special election periods for enrollment, discussed in more detail below.

$0 or Low Monthly Premiums

One of the features people find most attractive about Medicare Advantage is that there are many plans for $0 premium. (This doesn’t mean free care, though, which we’ll discuss below.)

The Kaiser Family Foundation published a chart that shows monthly premiums for Medicare Advantage plans during the year 2020. A full 60% of Medicare Advantage enrollees paid a $0 monthly premium, and additional 5% paid $20 or less. Notice, though, that there are 6% of enrollees who paid $100 premium or more.

Why do people pay a high premium for Medicare Advantage? Many of these people have not reviewed their plan each fall and prices have increased over time. Some people have intentionally enrolled in a particular plan with a high premium because it offers a specific benefit that they value. Anyone paying a high monthly premium should be doing so intentionally and fully aware of what they’re getting in exchange for that premium.

Cost of Care

Medicare Advantage plans are a “pay as you use” plan, which means you pay a copay or coinsurance as you use each medical service. If you use a lot of medical services, you’ll pay a lot of copays or coinsurance. If you hardly ever use medical services, then you won’t pay much.

  • Copay — a fixed dollar amount that is associated with each service offered by the Medicare Advantage plan.
  • Coinsurance — a percentage of the total that you’ll pay for certain services, equipment, or supplies. 20% is common for chemotherapy, radiation, dialysis, insulin pumps, oxygen tanks, prosthetics, and more.
  • Medical Deductible — (not to be confused with the Drug Deductible that some plans have) the amount of money you will pay FIRST before the insurance starts to cover costs. Many plans have a $0 deductible.

Dental benefits that are included in some Medicare Advantage plans have coinsurance of 20%, 50%, even 70%. Other Medicare Advantage plans have copays of $20 to $50 for dental benefits. That’s a big difference if you’re having an expensive procedure done. People who have high coinsurance amounts for dental benefits might be better off with a separate dental plan, depending on dental needs.

Maximum Out of Pocket Limit

An important feature of every Medicare Advantage plan is their stated “Maximum Out of Pocket” (MOOP) limit — This is your financial risk in any given calendar year: the max in a worst-case scenario that you will need to pay for your Part A and B services. Most people do not reach their maximum out of pocket during the year.

For 2022, the highest legal maximum out of pocket limit is $7,550 for HMOs. For other types of plans that will allow you to go out of network, the legal maximum is $11,300. Many plans have Maximum Out of Pocket amounts that are lower than the legal limit.

The fastest way to reach your maximum out of pocket is to get cancer and need chemotherapy and/or radiation. These services usually have a 20% coinsurance that you will pay until you reach your MOOP limit (does not apply to people who have a dual eligible plan for both Medicare and Medicaid). Dialysis, multiple or extended hospital stays, and skilled nursing facility stays can also drive costs up to your limit.

What Expenses are Factored Into the MOOP Calculation?

Costs Included

  • copays
  • coinsurance
  • medical deductible

Costs NOT Included

  • Monthly premium
  • Prescriptions
  • (usually) dental, vision, hearing expenses

Summary of Benefits

All Medicare Advantage plans are required to publish a summary of benefits that lists what the copay or coinsurance amounts for each particular service type listed here. This makes it really easy to compare plans side by side to see which might meet your health needs for the lowest cost. No plan is generous in every way, so we look for a plan that’s generous in the ways that matter to you. The highlighted benefits are those that are not generally part of the Medicare program but are often included in Medicare Advantage plans.

Dates Matter with Medicare Advantage

One of the ways insurance companies control their costs is by restricting when you can enroll in a plan and when you can drop it. If they allowed people to enroll at will, then many people would wait until they’re sick to enroll. They need healthy people in the plan to offset the costs of the sick people. With Medicare Advantage, you can’t just sign up whenever you want or drop a plan whenever you want. You must have an “election period” in order to enroll in or disenroll from a Medicare Advantage Plan.

People new to Medicare have an “Initial Election Period” to sign up for a Medicare Advantage or Prescription Drug Plan for the first time.

  • If you’re turning 65, that seven-month period will be around your 65th birthday.
  • If you’re joining Medicare because you have a disability, you’ll want to sign up for your Medicare Advantage plan the month before starting Medicare so it will start the day your Medicare starts.
  • If you delayed your part B start date because you had other insurance at the time, then your Initial Election Period will be three months prior to when you start Part B.

If you choose not to enroll in a Medicare Advantage Plan during your Initial Election Period, then you will need to wait until the next Annual Election Period to sign up.

Annual Election Period” is every fall from October 15 to December 7. This is when you can sign up for a new plan, drop your plan, or change to a different plan that will go into effect on January 1st for the next calendar year. During Annual Election Period, you will be bombarded by TV commercials, internet ads, phone calls, and mailers. If you choose me as your Medicare agent, you will have an appointment with me for your annual Medicare Review and you can ignore all of those ads and callers. During this appointment, we will discuss the changes coming to your existing plan for the following year, compare those benefits with your medical needs, and see if anything else on the market might better meet those needs or save you money.

Open Enrollment Period” is every January 1 to March 31. Existing Medicare Advantage enrollees can make one switch to a different plan during the quarter. This is an important election period because sometimes people start their new plan in January and realize it’s not going to meet their needs.  If you change plans during Open Enrollment Period during the first quarter, you won’t be able to change your plan again until Fall’s Annual Election Period (except in rare circumstances) so it’s important to get it right.

In addition to the election periods listed above, there are many Special Election Periods for certain life circumstances:

  • Moving to a different region where your plan is not available.
  • Moving to a different region that has new options that better meet your needs.
  • Losing group health insurance or else being able to add group health insurance.
  • Being approved for Medicaid coverage or else losing Medicaid coverage.
  • Moving into or out of an institution such as a nursing home.
  • A natural disaster in your area (or the area of someone who makes decisions for you) kept you from enrolling in a plan when you were supposed to.
  • Being diagnosed with a chronic illness or else being cleared of a chronic illness.
  • Receiving incorrect information from a federal employee.
  • Returning to the United States after living in a foreign country.
  • Getting released from jail.
  • Your insurance company lost their Medicare contract or went out of business.

If there is some reason that you need to change your Medicare Advantage plan right away, go ahead and contact me to see if there’s an election period that might work for you. If there’s not, then you’ll have to wait until the Annual Election Period to make a change.

There is a notable exception about special election periods for those who are dual eligible—that is they qualify for both Medicare and Medicaid. This population can change their Medicare Advantage plan once per quarter during the first nine months of the year.

Other Ways to Limit Risk

One of the fastest ways to reach your maximum out of pocket limit is to have cancer or to have multiple or extended hospital stays. To address these concerns, there are some products you can add on to Medicare Advantage to provide funds if you need them. These policies are especially important for people with Maximum Out of Pocket amounts that are high enough to hurt their wallet.

Special policies exist for:

  • cancer
  • cancer, heart attack, and stroke
  • hospital indemnity
  • critical illness
  • short term care
  • short term home health care

Any of these policies send you a check if you are diagnosed with certain conditions or have a hospital stay of any length.

These policies are available for people ages 18-80, but SOME have no medical questions if you apply between the ages of 64 and a half and 65 and a half.

Competition Drives Prices Down

Medicare Advantage plans are available on a county-by-county basis, and there is a wide discrepancy among counties in the United States about what plans are offered, what they include, how much they cost, and what the maximum out of pocket limits are. Just to illustrate the big discrepancy, see this map that was published by the Kaiser Family Foundation based on Medicare Advantage participants in the year 2020.

The counties in green, yellow, orange, and red have the highest amount of participation in Medicare Advantage plans, so these counties generally have more generous benefits, lower copays, and lower maximum out of pocket limits. The counties with the lowest participation in Medicare Advantage are in gray, followed by navy, medium blue, and light blue. These counties are likely to have fewer plans available, and more that have maximum out-of-pocket limits at the highest that’s allowed ($7,550 for HMOs and $11,300 for other plan types in 2022).

Let’s take a look at two examples from a comparison done in 2021.

  • Miami Dade County, Florida, where is 73% participation, meaning that 73% of people in that county are enrolled in a Medicare Advantage plan.
  • Baltimore County, Maryland, where there’s only 14% participation in Medicare Advantage programs

Notice how many more plans are available in Miami Dade County and how low the Maximum Out of Pocket limits go, compared with Baltimore County. It’s interesting that there are still plans with the highest legal MOOP in Miami Dade County.

The main message here is that where you live has a lot to do with how attractive the Medicare Advantage Plans are.


Medicare Advantage plans are great for many people. They do come with a lot of rules and regulations, but if you can live with those, then you might save some money on your health insurance, especially if you’re healthy. If you have high medical needs, and you’re in a plan with a high maximum out of pocket, you won’t necessarily save money by being on a Medicare Advantage plan.

I’ve provided general information Medicare Advantage, but the particular plans that are available in your county is what matters more to you. I encourage you to book an appointment with me so that we can take a look at what the options are where you live to see what will best meet your healthcare needs and budget.

Choosing a Medicare Advantage plan often comes down to drugs and doctors. We’ll find the plan that offers the best prices on your prescriptions and includes your doctors, if that’s important to you.

Help is free!

I’m Laraine Sookhoo and I’m passionate about helping you understand your Medicare options so you can get the most out of your Medicare benefits. My help is free, so book an appointment to get started!

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