Private insurance companies provide Medicare Advantage plans, which usually have more supplemental benefits than Original Medicare.
Medicare Advantage plans are a type of Medicare offered by private companies. The companies contract with Medicare to provide you insurance.
Nearly all Medicare Advantage plans are health maintenance organizations (HMOs) or preferred provider organizations (PPOs). HMOs and PPOs have provider networks. In most HMOs, you can only see providers in your network or pay the full costs of health care services. In PPOs, you can go outside your provider network but will usually pay more for care.
How do Medicare Advantage plans work?
Medicare Advantage plans are similar to private health insurance plans. You buy coverage through a private insurer, who contracts with doctors, hospitals and other facilities.
The provider bills the insurer, which reviews the medical claim and decides how much to pay. The member pays the rest of the bill.
That’s different from Original Medicare. In Original Medicare, also called Parts A and B, the government pays your healthcare providers.
- Medicare Advantage payers have provider networks and contract with doctors and facilities for payment.
- Medicare Advantage, also known as Part C, provides supplemental benefits not found in Original Medicare, such as vision and dental care.
- Private insurers also offer benefits like hearing aids, meal delivery, housekeeping and transportation.
- Medicare Advantage plans usually provide prescription drug coverage as part of their standard benefits. Original Medicare members have to get a Part D prescription drug plan to get help with prescription drugs.
- People with Medicare Advantage can make changes to their coverage during open enrollment.
Medicare parts explained
Medicare is broken down into two types of coverage: Original Medicare and Medicare Advantage.
- Original Medicare is Parts A and B.
- Medicare Advantage is Part C.
- Medicare Part D is prescription drug benefits for Original Medicare members.
Here are the differences between each part.
Medicare Part A
What is Medicare Part A?
Part A is paired with Part B to make up Original Medicare.
Part A is for inpatient care, such as hospital, skilled nursing facilities, hospice care and home health care in some instances.
Part A is free for most Americans. You don’t pay for Part A as long as you paid at least 10 years’ worth of Medicare taxes. If you didn’t pay Medicare taxes for at least 40 quarters, you have to pay a monthly premium of $422 for Part A.
Part A also has a deductible of $1,484. Members must meet the deductible before Medicare begins paying for care.
Medicare Part B
What is Medicare Part B?
Part B is the second part of Original Medicare.
It covers doctor visits, outpatient care, medical supplies and preventive services.
Part B costs $158.50 monthly for most Americans. However, premiums can be more than double that cost for higher-income people.
Part B’s annual deductible is $2017. After you reach the deductible, you’re responsible for 20% of the costs.
Medicare Part C
What is Medicare Part C?
Part C is another name for Medicare Advantage. Private insurance companies contract with the federal government to offer Medicare Advantage plans.
Medicare Advantage premiums vary based on coverage. The average monthly Medicare Advantage in 2022 is $19. Deductibles vary by plan, but they’re often much higher than Part B deductibles.
Make sure to look at deductibles and out-of-pocket costs when comparing plans. The cost of the plans can also vary depending on where you live. Also, you will pay more or all of the costs for services outside your plan’s provider network, so make sure your providers accept that specific Medicare Advantage plan.
Medicare Advantage plans offer more supplemental benefits than Original Medicare. These additional benefits include vision, hearing, dental, prescription drugs, telehealth, expanded palliative care, adult day care services, food delivery and transportation to appointments.
There are also Medicare Advantage plans that focus on particular health issues like diabetes and congestive heart failure.
Not all Medicare Advantage plans have these supplemental benefits, so check to make sure to ask the plan about supplemental benefits before enrolling.
Find out more about Medicare costs.
Medicare Part D
What is Medicare Part D?
Part D is prescription drug coverage for people with Original Medicare. Medicare Advantage members aren’t eligible for Part D. However, most Medicare Advantage plans have prescription drug benefits already in the plan.
Separate Part D plans average $33 a month in 2022. Part D plans can only have annual deductibles up to $480.
What are the advantages and disadvantages of Medicare Advantage plans?
Medicare Advantage plans have their pluses, but also some minuses.
Here are the pros and cons of Medicare Advantage plans:
- Chance to find the right plan for you — Most parts of the country have multiple Medicare Advantage options with myriad plan options, including different plan types and cost structures. This is unlike Original Medicare, which is a one-size-fits-all.
- Expanded benefits –– Medicare Advantage plans have additional benefits not found in Original Medicare. Private insurers in Medicare Advantage can offer vision, hearing and dental care and a host of other benefits not in Original Medicare.
- Prescription drug benefits — Medicare Advantage plans usually include prescription drug benefits as part of their coverage offerings. Meanwhile, Original Medicare beneficiaries must sign up for a Part D plan to get prescription drug benefits.
- Managed care — Medicare Advantage is managed care, which means your providers and health plan coordinate your care.
- Familiarity — If you previously had a private insurer from your employer, a Medicare Advantage plan will feel very familiar. Medicare Advantage also has private insurance companies that provide the plans, so you may like to continue with a private insurer.
- Smaller provider networks — Medicare Advantage plans have smaller provider networks than Original Medicare. So, you may have more trouble finding a provider with a Medicare Advantage plan. It’s a good idea to check a plan’s provider network before signing up for a plan.
- More out-of-pocket costs — Depending on the Medicare Advantage plan, you may pay well more in out-of-pocket costs than Original Medicare. Medicare Advantage plans may have higher deductibles, which means more costs when you need care.
- Few plan choices in some areas — Some parts of the country don’t have many Medicare Advantage plan options, so you may have trouble finding one that fits your needs.
Why are some Medicare Advantage plans free?
Sixty percent of Medicare Advantage plans with prescription drug benefits don’t have any premiums. Only 18% of Medicare Advantage plans have monthly premiums of $50 or more. The trade-off to a low premium is that you might have higher deductibles and coinsurance when you need healthcare.
So, you don’t pay more when you use health care services.
Medicare Advantage plans without premiums can save healthy seniors money but can cost more in the long run if they use many health care services, including doctor visits and prescription drugs.
Frequently asked questions
How do you join a Medicare Advantage plan?
You can join a Medicare Advantage plan when you turn 65 or during two annual open enrollment periods:
- Medicare open enrollment is Oct. 15 to Dec. 7
- Medicare Advantage open enrollment is Jan. 1 to March 31
During those periods, you can sign up for or switch Medicare Advantage plans.
Here’s what to know when choosing a Medicare Advantage plan:
- Look at what doctors and hospitals are in the plan’s network. Provider networks can change each year and even mid-year. If you visit particular doctors or hospitals, make sure they’re part of the plan you choose.
- Not all providers accept Medicare Advantage. Your long-time doctor may accept Original Medicare, but that doesn’t mean the physician accepts a specific Medicare Advantage plan. It’s best to check with your physician’s office before signing up with a plan just to make sure.
- Look at drugs and your usage when selecting a plan. If you’re taking prescription drugs, examine the plan’s list of covered medications carefully. It may be worth your time to set up a spreadsheet with your medications and the costs under your different Medicare Advantage and Original Medicare options.
- Consider the plan’s maximum out-of-pocket costs. You may want a plan that has a low out-of-pocket maximum. If you’re healthy and don’t plan to use much health care, you might want to risk a higher out-of-pocket maximum.
- Compare plans. A good resource for choosing the best Medicare Advantage Plan is the Medicare Plan Finder.
After determining the Medicare Advantage plans in your area, go to the plan’s website to double-check what suits your needs.
You also can call the plan and talk to a plan representative. If you speak with a representative to confirm that the plan you want covers all your drugs and that the doctors, hospitals and pharmacies you want to use are in its network, take notes. Keep a record of whom you spoke with and what was said.
Visit the plan’s website to see if you can sign up online.
You can also call Medicare directly: 1-800-MEDICARE (1-800-633-4227).
You can’t buy Original Medicare or Medicare Advantage plans on state health insurance exchanges. The exchanges sell only individual and family health insurance.
Who can enroll in a Medicare Advantage plan?
Anyone eligible for medicare can sign up for a Medicare Advantage plan.
Those eligible for Medicare include:
- People 65 and over
- People with disabilities
- People with End-Stage Renal Disease
- People with Lou Gehrig’s Disease
When can I join, switch or drop a Medicare Advantage plan?
You can make changes during open enrollment periods.
Medicare open enrollment runs between Oct. 15 and Dec. 7. During that time, you can:
- Switch from Original Medicare to Medicare Advantage
- Change from Medicare Advantage to Original Medicare
- Swap Medicare Advantage plans
- Get a Part D plan if you have Original Medicare
- Change or cancel Part D plans
There’s also a limited Medicare Advantage open enrollment period from Jan. 1 to March 31. During that open enrollment, you can only:
- Switch Medicare Advantage plans
- Move from Medicare Advantage to Original Medicare
If you don’t make changes during these times, you won’t be able to switch until the next the open enrollment period unless you qualify for a special enrollment period. A qualifying life event includes a spouse’s death, retirement or change of job.
If you’re satisfied with your plan, you don’t have to do anything during open enrollment. But if you’re dissatisfied or want to change to a different Medicare Advantage plan, open enrollment is the time.
What if my plan decides to stop participating in Medicare?
If your Medicare Advantage plan is no longer available, you can switch to another Medicare Advantage plan in your area.
The Centers for Medicare and Medicaid Services estimated that Americans have an average of 57 Medicare Advantage choices in 2021. That’s an increase from 39 alternatives on average in 2020.
Overall, CMS said there are more than 4,800 Medicare Advantage plans in 2021, so you should be able to find a plan right for you even if your plan stops offering coverage.
Do most Medicare Advantage Plans offer prescription drug coverage?
Most Medicare Advantage plans provide prescription drug coverage. You may pay more for a Medicare Advantage plan with prescription drug coverage, but getting help paying for your prescriptions can be a huge help.