Why Medicare Advantage Plans Are Bad...Maybe

Why Medicare Advantage Plans Are Bad

Few things in life are one-size-fits-all and Medicare is certainly no different. What's best for one person may not be best for another.

Like anything to do with healthcare, there are many conflicting opinions about Medicare Advantage (MA). One group tells you why Medicare Advantage plans are bad while another sings their praises. As is often the case, what's true depends on your individual situation. For some people, Medicare Advantage plans ARE bad. Others, though, get exactly what they need from an MA plan.

This post explains the pros and cons of Medicare Advantage to help you make the right choice for your healthcare needs.

Wait, What's Medicare Advantage?

Before we start, we need to break down the difference between Original Medicare and Medicare Advantage.

Original Medicare

Original Medicare includes Parts A and B. Medicare Part A is also known as hospital insurance, because it helps pay for inpatient services. This includes hospitals, skilled nursing facilities (SNF), and hospice care. Medicare Part B is sometimes called medical insurance, because it covers outpatient services. Doctor visits, lab work, durable medical equipment (DME), clinical therapy, and more are included with Part B.

Original Medicare coverage does not include medications. You get prescription drug coverage with a Medicare Part D prescription drug plan.

Original Medicare pays around 80 percent of your healthcare costs. That leaves beneficiaries responsible for the remaining 20 percent. Those costs can add up quickly, particularly if you need major surgery. In addition, there is no annual out-of-pocket maximum with Original Medicare, which is why most beneficiaries choose to supplement their coverage in some way.

One option is joining a Medicare Supplement Insurance plan, more commonly known as Medigap. There are 10 standardized plans, offered by private insurance companies. At a minimum, every Medigap plan pays your Part A coinsurance and gives you 365 additional lifetime reserve days for inpatient care. Some Medigap plans, though, pay practically all of your out-of-pocket costs.

Please note that you cannot have both Medigap and a Medicare Advantage plan.

Medicare Advantage

More commonly known as Medicare AdvantageMedicare Part C covers everything you get with Parts A and B. However, most Advantage plans – over 90 percent – also offer additional benefits. Common add-ons include:

  • Prescription drugs (known as a Medicare Advantage Prescription Drug plan or MA-PD)
  • Routine eye exams and prescription lenses (e.g. glasses and/or contact lenses)
  • Routine dental care
  • Hearing aids
  • Fitness programs

As with Medigap, private insurance companies contract with Medicare to offer Advantage plans.

You need to review Medicare Advantage plan details carefully to understand which benefits are included and at what price. The biggest reason people are unhappy with their Advantage plan is that they didn't do enough research before joining.

Unlike Original Medicare, Medicare Advantage plans have an annual out-of-pocket maximum. The federal max for in-network services is $8,300 in 2023 and $11,300 for out-of-network services, but many plans set a lower limit.

Now, let's look at the biggest complaints people have about Medicare Advantage.

Even Premium-Free Isn't Free

This complaint mainly comes down to a misunderstanding. Many Advantage plans advertise that they have a $0 premium. And many do – but you still have to pay the Medicare Part B premium. In 2023, the standard Part B premium is $164.90.

Now, here's how Medicare Advantage premiums are determined:

Following a bidding process, the Medicare program pays the insurance companies that offer Advantage plans a set amount for every enrollee. Insurance carriers base their bids on what they estimate their cost per enrollee is. If that estimate is below local benchmarks, the plan has a $0 monthly premium. If it's higher, that difference becomes the plan's monthly premium.

So, if the plan bids $90 and the benchmark is $100, there's no premium. Reverse those numbers and your premium would be $10.

Out-of-Pocket Costs Can Feel Endless

If you switch to a Medicare Advantage plan after having Original Medicare and a Medigap plan, it can feel like you're being nickel-and-dimed to death. There's the copayment for your primary doctor, a second one for that specialist referral, and then another charge at the lab. (Maybe two if your doctor orders diagnostic tests beyond a blood workup.)

Of course, you had these same charges when you had Original Medicare and Medigap – you just didn't see them. The bills went straight to Medicare and then to your Supplement plan. With Part C, you have a (probably) lower premium for your MA plan than what you owed for your Medigap plan.

When comparing your options, make sure you look beyond the monthly premium to understand the full cost of an Advantage plan.

Our Find a Plan tool makes it easy to compare Advantage, Medigap, and Part D plans in your area. Just enter your location and coverage start date to review your Medicare plan options.

The Out-of-Pocket Max Is Too High

When new Medicare Advantage beneficiaries notice the yearly out-of-pocket maximum is $8,300, they may feel a bit of sticker shock. Of course, that ignores the fact that there is NO out-of-pocket maximum with Original Medicare. But, if you had one of the more comprehensive Medigap plans, you didn't really have to worry about out-of-pocket maximums.

The out-of-pocket max with Medicare Advantage is actually a benefit. However, if you have chronic health conditions or expect to undergo any type of treatment, you may be better served by Original Medicare and a Medigap plan. Part C is really best for beneficiaries who are relatively healthy.

Provider Networks, Referrals, and Similar Plan Restrictions

Original Medicare covers an enormous array of services and is accepted by over 90 percent of non-pediatric primary physicians. Medicare Part C plans, on the other hand, nearly always come with a provider network. And just because your doctor accepts Medicare does NOT mean they will also accept your Advantage plan.

Provider networks can include any entity you'd go to for healthcare. This includes doctors, nurse practitioners and RNs, labs, hospitals, medical equipment providers, clinics, therapists, and more. Before enrolling in an MA plan, always check with your doctor to be sure they accept it. If not, you either need a different plan or a different doctor.

When verifying whether a provider accepts a plan, use the full name of the plan; don't just ask "Do you accept ABC Insurance Company?" Provider networks may vary between plans – even when they're from the same insurer.

The majority of MA plans are health maintenance organizations, or HMOs, which use a variety of restrictions to help manage costs. For example, most HMO plans require referrals to see a specialist. And, of course, you must also choose a primary care physician who will provide those referrals.

You can avoid some of these restrictions by joining a preferred provider network, or PPO plan. PPOs usually have higher out-of-pocket costs than HMOs do, but they give you a bit more freedom of choice. This includes seeing out-of-network providers for a higher copay and not needing referrals to see a specialist.

Prior Authorization Requirements

At the end of the day, health insurance companies are a business. Their ultimate goal is making a profit. That means controlling costs whenever and wherever possible (preferably without negatively impacting patient care).

One of the more common cost-saving devices is the prior authorization requirement. It's most frequently found in Medicare Advantage Prescription Drug plans. Many drug formularies include guidelines that limit quantities or have a pre-authorization requirement. Taking the time to thoroughly review the fine print of an MA-PD plan – or any other Advantage plan – ensures you understand how the plan works, including the restrictions.

Plans Change Throughout the Year

Medicare changes occur pretty much every year. Most changes are centered around out-of-pocket costs – deductibles, premiums, coinsurance, and copays. But there are also coverage changes, such as Medicare recently adding chiropractor services to its list of Part B benefits.

Advantage plans also get to switch things up every year. Common changes include:

  • Ancillary benefits (these are the items not included with Parts A and B, such as vision coverage)
  • Out-of-pocket costs
  • Changes to the drug formulary
  • Providers leaving and entering the plan's network

You get the Annual Notice of Change (ANOC) in the fall (usually in September), which outlines any changes coming to your plan next year.

It is imperative that you take the time to review the documents your insurer sends. The ANOC and other notifications contain vital information about your plan. And you don't qualify for a Special Enrollment Period (SEP) just because you didn't read the notice that your plan no longer covers one of your medications.

The ANOC is timed to arrive before the Annual Enrollment Period (AEP). It gives you ample opportunity to compare your coverage options and any changes to your plan. Annual Enrollment begins on October 15 and lasts through December 7.

Medicare Advantage Plans Don't Travel

One of the great things about Original Medicare is that, since nearly every doctor accepts it and you don't have a provider network, your Medicare coverage follows you from state to state. The same is rarely true with Medicare Advantage plans. Most only cover out-of-network services in the event of a medical emergency.

The Centers for Medicare & Medicaid Services (CMS) has been rolling out MA changes, including expanding benefits to include items like transportation and home-delivered meals. Recent years have also seen more MA plans that cover out-of-network medical care.

You May Not Be Able to Join a Medigap Plan Later

One reason Original Medicare plus Medigap coverage remains popular is that your Medigap Open Enrollment Period (OEP) is one of the only times you can get a Supplement plan without answering medical questions. This is called guaranteed issue rights, and it means your Medigap application cannot be denied – even if you have preexisting medical conditions. The only way you get this same protection after leaving a Medicare Advantage plan is if both of the following are true:

  • This is the first time you joined an Advantage plan
  • You make the switch back to Original Medicare within 12 months

If neither of those apply, your application could be denied based on medical underwriting. Or, you could be offered a plan but charged a higher premium. Age, medical history, and tobacco use are common reasons Medigap insurers deny coverage or charge higher premiums.

So, Are Medicare Advantage Plans Bad?

It's hopefully clear by now that whether Medicare Advantage plans are good or bad depends on your unique situation. If you travel a lot, you probably want to stick to Original Medicare. The same is true if you have a litany of chronic conditions or other health concerns. Or, if you're considered high-risk for certain costly conditions, you may want to start with Original Medicare plus a Supplement plan just to avoid medical underwriting later.

But for millions of Medicare beneficiaries, an Advantage plan gives them the extra coverage they need and convenience they prefer. Instead of having to join a Medicare Part D plan, or buy dental and/or vision insurance, they just choose an MA-PD plan that includes those benefits.

So, consider your personal needs and budget and then compare your Medicare plan options carefully.

Additional Resources

Donna Frederick
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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