Private insurance companies offer Medicare Advantage that helps pay for health care. Medicare Advantage plans are similar to health plans that people have with their jobs.

Medicare provides health insurance coverage to people 65 and over. It also covers Americans with disabilities who receive Social Security disability benefits for a period and people with end-stage renal failure.

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People who are eligible for Medicare choose between Original Medicare and Medicare Advantage plans.

Understanding Medicare

Most Americans have Original Medicare, but the percentage of beneficiaries with Medicare Advantage increases annually. The latest figures show that about one-third of beneficiaries have Medicare Advantage.

Original Medicare has been around since 1965. It covers Part A (hospitals) and Part B (physicians and outpatient care). The federal government pays providers for Part A and B services. People with Original Medicare can also get Part D for prescription drug coverage, which private companies provide.

Meanwhile, Medicare Advantage, also called Part C, covers health services, as well as prescription drug benefits and supplemental benefits, such as vision, dental, hearing and gym memberships. Lindsay Engle, Medicare expert at MedicareFAQ, said more than 90% of Medicare Advantage plans also include transportation assistance and more than 95% cover meals. Some plans also have telehealth support and reimburse for in-home services. Medicare Advantage plans can additionally provide long-term care benefits, which aren’t found in Original Medicare. 

UnitedHealthcare and Humana make up a large portion of Medicare Advantage plans. However, in recent years, more insurers have moved into or expanded Medicare Advantage offerings.

This competition has led to dozens of choices for beneficiaries.

Types of Medicare Advantage plans

Most Americans have access to nearly 40 Medicare Advantage plans.

Let’s take a look at two common types of Medicare Advantage offerings.

Type of planPremiumsDeductiblesNetworkOut-of-network care?Require primary care physician?Require PCP referral to see specialist
Health maintenance organization (HMO) plansLower than PPOsAbout the same as PPOs usuallyRestrictedHMO usually doesn't pay for itYesYes
Preferred provider organization (PPO) plansHigher than HMOsSimilar to HMOsWider networkPPO often pays portion of billNoNo

Make sure to read the fine print before agreeing to a plan. You’ll want to understand a plan’s deductibles, coinsurance and out-of-pocket costs before signing up.

Which type of plan is better for you depends on your health care needs, finances and preferences.

How Medicare Advantage works

Medicare Advantage insurers cover you for health care. These plans contract with providers on payments and the federal government pays the private insurers monthly for the Medicare Advantage plans.

You’ll notice many similarities between a Medicare Advantage plan and an employer-sponsored plan. In both cases:

  • A private insurer handles the coverage.
  • You can often choose between benefit designs, such as HMO and PPO plans.
  • You have a network of doctors and hospitals. Depending on your plan, you may or may not get any help paying health care costs if you receive out-of-network care.
  • You pay a co-pay at a doctor’s visit.
  • The provider bills the insurer, which pays its portion. You then pay your share depending on your deductibles, coinsurance and out-of-pocket costs.

Choosing a Medicare Advantage plan goes beyond merely looking at premiums. 

The average monthly Medicare Advantage premium is $23, but many Medicare Advantage plans offer zero-premium plans. That doesn’t mean you should automatically pick a plan without premiums, though

“Before you enroll in an Advantage plan, it’s important to understand why these plans have low- to zero-dollar premiums,” said Engle. “They come with many additional out-of-pocket costs in the form of copays, deductibles and coinsurance.”

Most Americans have multiple Medicare Advantage plan options and some states have more members. For instance, Engle said Pennsylvania, Wisconsin, Florida, Minnesota and Oregon all have more than 40% of Medicare beneficiaries in an Advantage plan. 

However, rural areas may have limited choices -- some counties don’t even have a Medicare Advantage plan.

Another issue you may have with a Medicare Advantage plan is if you need care while traveling. Original Medicare covers you no matter where you are in the country. That’s not always the case with Medicare Advantage. Instead, you might be out of the plan’s service area and you may need to get a primary care provider referral to see a specialist. 

Not all doctors take specific Medicare Advantage plans, so you want to check a plan’s provider network before signing up. 

One other potential drawback for Medicare Advantage is that some plans require prior authorization before tests and treatments. In that case, you would need health plan approval before getting some tests like MRIs. 

There are pros and cons with both Medicare Advantage and Original Medicare. Compare those pros and cons when deciding on a plan. 

“If you’re comfortable paying as you go, aren’t concerned with what doctors you see, and don’t travel outside the state you live in, then an Advantage plan may work for you,” Engle said. 

When you can sign up for Medicare Advantage

You can sign up for Medicare Advantage when you become eligible at 65 years old.

As you approach your 65th birthday, you’ll receive information from Medicare about your options. After that, you’ll be able to make changes each year to your plan during Medicare open enrollment period, which runs from Oct. 15-Dec. 7.

At that time, you can:

  • Move from Original Medicare to Medicare Advantage.
  • Change from Medicare Advantage to Original Medicare.
  • Swap Medicare Advantage plans.
  • Get a Medicare prescription drug plan if you have Original Medicare.
  • Change or cancel Part D plans.

There is also a Medicare Advantage open enrollment period from Jan. 1-March 31. During that period, you can

  • Change Medicare Advantage plans.
  • Switch from Medicare Advantage to Original Medicare.

You can also make changes to your plans if you have a qualifying life event, which starts a special enrollment period. Those life events include a spouse’s death, retirement or change of job. In those instances, you’re able to make changes to your Medicare coverage.