Types of Medicare Advantage Plans

Types of Medicare Advantage Plans

The most common type of Medicare Advantage plan is a Health Maintenance Organization, or HMO.

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Medicare Advantage (MA) plans, also known as Part C, are provided by private insurance companies. They cover everything Original Medicare (Part A and Part B) does, but most offer additional benefits as well. Part C plans may include prescription drug coverage (MA-PD plans), routine vision exams, routine dental care, fitness programs, and more.

Exact benefits and costs vary from plan-to-plan, and each also has nuances when it comes to their provider network and drug coverage. Knowing the different types of MA plans, including pros, cons, restrictions, and rules, as well as how to choose the right MA plan for you, can help ensure you have the coverage and benefits that fit your needs.

Medicare Advantage plan types

There are five main types of MA plans to choose from: health maintenance organizations (HMO), preferred provider organizations (PPO), private fee-for-service (PFFS) plans, medical savings accounts (MSA), and special needs plans (SNPs).

Health Maintenance Organization plans

With HMO plans, you must generally get your care and health care services from providers that are in the plan's network, except for:

  • Emergency care
  • Out-of-area urgent care
  • Out-of-area dialysis

In most cases, care received from providers outside of the network are not covered, and you'd have to pay those costs out-of-pocket. Otherwise, care from in-network providers is covered.

Usually, you must choose a primary care provider (PCP) to help coordinate your care. Your PCP can also refer you to a specialist, which in most cases is required for coverage. You may also have to get prior authorization for certain services.

Pros of HMO plans

  • Typically have lower monthly premiums and out-of-pocket costs (including deductibles, co-pays, and co-insurance)
  • Having a PCP as an advocate to help coordinate and manage your care
  • Billing is less complicated since you don't have to file claims for in-network care
  • May cover prescription drugs

Cons of HMO plans

  • Must stay in-network or risk paying for all costs out-of-pocket
  • May have to choose a new PCP if your current one isn't in-network
  • Need referrals to see a specialist
  • Prior authorization needed for certain services

Preferred Provider Organization plans

PPO plans also have a network of doctors, hospitals, and other providers, and you will pay less if you use the providers within the plan's network. Unlike an HMO plan, you can also use out-of-network providers for covered services, though the costs may still be higher than if you stay in-network.

Urgent and emergency care are also always covered in- or out-of-network.

In most cases, you can get your health care from any doctor, specialist, or hospital, and you do not need to choose a PCP to coordinate your care. You also typically do not need a referral to see a specialist.

Pros of PPO plans

  • You can see both in- and out-of-network providers
  • Costs are lower for in-network services
  • No referrals necessary to see a specialist
  • You do not have to choose a PCP
  • May cover prescription drugs

Cons of PPO plans

  • Costs are higher for out-of-network services
  • Typically more expensive than other managed care options (including higher premiums and out-of-pocket costs)
  • Co-pay and co-insurance costs can be different for in-network and out-of-network

Private Fee-for-Service plans

PFFS plans are different from other types of MA plans because the plan determines how much it will pay doctors, hospitals, and providers, and how much you must pay when you get care.

Most PFFS plans have a contracted network of providers, and you can see any of the network providers who have agreed to always treat plan members. If you go to a provider that's not in the plan's network (not including for urgent or emergent services), your plan may not cover the services and your costs may be higher.

Out-of-network doctors may decide not to treat you, even if you've seen them before. It's important to make sure your providers agree to treat you under the plan and accept the plan's payment terms prior to getting any services. Each time you see a health care provider, you must show your plan membership ID card.

You do not need to choose a PCP with these plans, and you also don't need a referral to see a specialist. Some PFFS plans offer prescription drug coverage.

Pros of PFFS plans

  • You'll pay less for care when using in-network providers
  • Out-of-network care is covered
  • You do not have to choose a PCP
  • Referrals are not required to see a specialist
  • May cover prescription drugs

Cons of PFFS plans

  • You'll pay higher costs for out-of-network care
  • Providers must agree to treat plan members or services may not be covered
  • Typically have higher premiums
  • Some providers may not accept your plan, or some services may be covered while others are not

Medicare Medical Savings Accounts

Similar to a health savings account plan (HSA) available outside of Medicare, MSA plans combine a high-deductible insurance plan with a medical savings account that you can use to pay for your health care.

The plan only begins to cover costs once you've met the yearly deductible, which varies by plan but is typically higher than other types of MA plans. Additionally, the MSA plan deposits money in a special savings account that you can use to pay for qualifying health care expenses. The amount of the deposit also varies by plan, but it can cover costs prior to meeting the deducible.

MSA plans do not cover prescription drugs, so you must join a standalone Part D plan for coverage.

To use an MSA plan:

1. Choose and join an MSA plan

2. Set up an MSA with a bank the plan selects

3. Medicare gives the plan an amount of money each year for your care

4. Plan deposits some money into your account

5. You can use the money in the account to pay for health care costs

If you use all the money, you'll have to pay for your Medicare covered services out-of-pocket until you reach the deductible. Once you reach the deducible, the plan will cover the Medicare-covered services.

Money left in the account at the end of the year will roll over and can be used in the next year.

Pros of MSA plans

  • No premium, though you must pay your Part B premium (this is true of all Medicare Advantage plans)
  • Allows you to save for health care costs
  • Can use MSA funds to pay for health care costs not covered by the plan
  • Funds roll over each year

Cons of MSA plans

  • High deductible
  • No prescription drug coverage
  • If you use all funds in the account, you must pay for services out-of-pocket

Special Needs Plans

Medicare SNPs are a type of MA plan, but membership is limited to people with specific diseases or characteristics. Most SNPs tailor their benefits, provider network, and drug formularies to meet the specific needs of the groups they serve.

Some SNPs cover out-of-network services, but others do not, so be sure to check with the individual plan for more information. Typically, they do have specialists in the diseases or conditions that affect plan members.

All SNPs must provide Part D drug coverage, and you typically must have a PCP or care coordinator to help with your care. You also generally must have a referral to see a specialist.

To be eligible, you must:

  • Live in certain institutions, like a nursing home, or live in a community but require nursing care at home; OR
  • Are eligible for both Medicare and Medicaid (dual eligible); OR
  • Have certain specific chronic or disabling conditions, such as diabetes, ESRD, HIV/AIDS, chronic heart failure, or dementia

Pros of SNPs

  • Tailored benefits, providers, and formularies to meet specific needs of members
  • May cover out-of-network services
  • Include Part D drug coverage
  • Coordinated care from your PCP or health care team
  • Lower costs, and limits on out-of-pocket costs

Cons of SNPs

  • Must choose a PCP
  • Must have a referral to see a specialist
  • Must meet certain eligibility criteria to qualify
  • Not all types of SNPs are available in all areas
  • Limited coverage options if you need care when traveling

How to choose a Medicare Advantage plan

Each beneficiary has unique needs and concerns when it comes to health care coverage. When determining which type of MA plan is right for you, it's important to look beyond just the cost. Other factors to consider and questions to ask yourself include:

  • What plans are available in my area?
  • Look at the provider network. Are your current doctors in-network? Do you want or need to see out-of-network providers?
  • Do you need a referral to go to a specialist?
  • Do you need to choose a PCP? Do you already have a PCP, and are they in-network?
  • What other additional benefits are offered?
  • How far are the doctors and hospitals?
  • Is there travel coverage?
  • Do they offer prescription drug coverage?

Related readingHow to Compare Medicare Advantage Plans

If you need help finding a plan to fit your needs, use our Find a Plan tool or call us toll-free to speak with a licensed agent.

Additional reading

After retiring from a career as an executive travel counselor in 2006, Donna Frederick embarked on a second career as a licensed insurance agent. During that first year, many clients told Donna how overwhelmed they felt by Medicare, but that her assistance helped them finally understand the Medicare program. That experience inspired Donna to focus her efforts on educating her clients to ensure they fully understand their Medicare options. Today, Donna takes pride in providing outstanding customer service and going the extra mile to make sure each client knows all of their options and has a sound understanding of their Medicare plan, from costs to coverage and all points in between.


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