Are Medicare Advantage Plans Bad?

There has been a lot of discussion about Medicare Advantage plans this year. You’ve all seen the ads on TV and heard about them on the radio. You’ve probably gotten tons of mail and multiple phone calls from agents trying to sell you a Medicare Advantage plan.

We want to caution you before jumping into one of these plans. There are a few very important things to consider and you need to make sure you understand how these plans work, especially if you currently have a Medicare supplement. The two are very different in terms of the coverage they offer and their limitations.

We won’t say Medicare Advantage plans are bad. In fact, they can be very beneficial to lots of people. We will say they are not a good fit for everyone. In this article, we’ll help you understand the pros and cons of these plans and how you can decide if they’re the right option for you.

An Overview of Medicare Advantage Plans

Medicare Advantage plans replace the coverage you receive from Original Medicare. Medicare Advantage plans, also known as Part C plans, are sold by private insurance companies. If you enroll in a Part C plan, your coverage will come from the insurance company, not the federal government.

Every Medicare Advantage plan offers at least as much coverage as you had under Original Medicare – Parts A and B. Most of the time, they also provide extra benefits like those for dental, vision, and hearing services as well as prescription drug coverage.

Since these plans are offered by private insurance companies and are not standardized like Medicare supplements, the coverage and premiums for each plan will vary. Some plans offer premiums as low as $0 per month. They are able to offer the low monthly premium because the government gives these insurance companies funding to supply Part C plans.

Sounds pretty good so far, right? Let’s start talking about the pros and cons of Medicare Advantage plans.

The Pros

There are four notable “advantages” of Medicare Advantage plans.

1. All your coverage is bundled into one plan. If a Medicare beneficiary does not choose to enroll in an MA plan but still wants extra coverage, they will choose a Medicare supplement (Medigap plan) instead. However, these plans do not offer dental, vision, and hearing benefits or prescription coverage. Two separate policies are needed for that coverage. So, the individual must keep track of four policies: Original Medicare, Medigap, DVH, and Part D. This can get confusing.
2. Medicare Advantage offers additional benefits like those we’ve discussed for dental, vision, and hearing services. There are some plans that offer gym memberships, transportation to doctor’s offices, and even meal delivery.
3. These plans are inexpensive. Some MA plans even have a $0 monthly premium. Assuming the beneficiary qualified for premium-free Part A, the only premium they may have is the Part B premium.
4. Most Medigap plans do not have a limit on out-of-pocket costs. MA plans usually do. They offer two or three limits on out-of-pocket spending – one for in-network medical expenses, one for out-of-network medical expenses, and one for the Part D prescription costs.

You can see why Medicare Advantage plans are so attractive for many people. With very low rates and a wide variety of services, they seem too good to be true. Are they?

The Cons

There are quite a few disadvantages to these Advantage plans.

1. Most Medicare Advantage plans require you to stay within a network of doctors. This doesn’t seem like such a bad thing, especially if your current doctor happens to fall into your plan’s network. However, beneficiaries need to consider how much they travel outside of their plan’s service area.
   Medicare beneficiaries with Original Medicare and Medigap plans can receive care from any provider in the United States. The only requirement is that the provider accepts Medicare assignment. That is not usually a problem since about 95% of U.S. providers fall into this category. Most MA plans are HMO plans. HMO stands for Health Maintenance Organization. These plans have a narrow network, which means that there is a small group of providers in the service area.
   There are PPO (Preferred Provider Organization) plans in Medicare Advantage that allow members to see a broader network of providers, but these will come at a much higher premium.
   MA plans can decide to drop providers from the network at any time and without cause. A provider who is in your network now may be out of your network at any time. This causes a disruption in the continuity of care and can harm the health of individuals.
2. Medicare Advantage plans are managed care plans. What does “managed care” mean? Original Medicare and Medigap plans are fee-for-service programs. As long as Medicare approves the procedure you need, it will be covered. Managed care plans, however, will first look for low-cost providers of the procedure. They will also require the member to get pre-authorization from their plan. At that time, the plan may only approve a less expensive alternative to treatment – not what your provider (who has an MD) recommended.
3. The extra benefits may not turn out to be as helpful as promised. There may be so many stipulations and limitations on these additional benefits that members find them impossible to utilize.
4. There have been MA plans that were not financially stable and suddenly ceased coverage. Sure, members will get to choose new coverage, but it will cause confusion and be a big problem if the member is currently undergoing care. Doctors may even cancel appointments for members who have insolvent plans.
5. Services can end up costing more to both the patient and the federal budget than it would with Original Medicare. This is often the case if a member has a serious medical problem.

Overall, Medicare Advantage plans do not offer the same kind of comprehensive coverage as Original Medicare with a Medigap plan. But are they bad?

The answer to that question really depends on your situation, including where you live. An HMO Medicare Advantage plan in a rural area where you will have to drive an hour to see an in-network provider is probably not a great option. But if you live in an urban area, don’t have a preference for specific providers, and are relatively healthy, these plans could be a great value for a very low price.

Another thing to consider is the future of Medicare Advantage plans. Each year, more and more providers are joining Advantage networks, making them much more expansive than they once were. We may find out that very soon, these plans are a great option for everyone.