Medicare Advantage is a bundled plan that, in most instances, combines Medicare parts A, B, and D. This can help people secure additional benefits while getting Medicare coverage from a private insurance company.
However, some types of Medicare Advantage plans can be quite restrictive in terms of the network of healthcare providers a person may be allowed to use.
If a person qualifies for Medicare, they can choose between Medicare Advantage and Original Medicare. This article covers some advantages and disadvantages to consider regarding Medicare Advantage.
Glossary of Medicare terms
We may use a few terms in this article that can be helpful to understand when selecting the best insurance plan:
- Out-of-pocket costs: An out-of-pocket cost is the amount a person must pay for medical care when Medicare does not pay the total cost or offer coverage. These costs can include deductibles, coinsurance, copayments, and premiums.
- Deductible: This is an annual amount a person must spend out of pocket within a certain period before an insurer starts to fund their treatments.
- Coinsurance: This is the percentage of treatment costs that a person must self-fund. For Medicare Part B, this is 20%.
- Copayment: This is a fixed dollar amount a person with insurance pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
Medicare Advantage plans must cover all services that Original Medicare includes. A person will not have any less coverage if they enroll in a Medicare Advantage plan.
Most Medicare Advantage plans offer additional benefits besides Original Medicare’s basic level of coverage. These vary by plan and may include:
When a person chooses a Medicare Advantage plan, they are still responsible for paying their premium. They will also continue to pay their premium for Medicare Advantage benefits.
In return, Medicare contributes a set amount of money to the participant’s plan that covers healthcare services.
Insurance companies are able to profit from this setup by creating networks of healthcare providers. These providers agree to a set fee or discount for the plan’s members, and to receive treatment outside of this network, people with a Medicare plan will need to pay more.
As a result, the insurance company saves money, and the healthcare provider gets more custom from the plan.
An estimated 54% of people enrolled in Medicare have Medicare Advantage plans, according to the Kaiser Family Foundation (KFF).
However, many Medicare Advantage plans are not available across the whole country. In fact, there are 77 counties in the United States where no insurance companies offer a Medicare Advantage plan.
| Medicare Advantage | Pros | Cons |
| Additional benefits | Coverage that extends beyond Original Medicare’s benefits (e.g. dental, vision, fitness). | Benefits can vary by plan. |
| Prescription drug coverage | Most plans include prescription drug coverage. | Prescription drug coverage and costs may vary. A person may have to pay a deductible. |
| Out-of-pocket spending limits | Annual cap on out-of-pocket spending limits. | Limits can be high; additional out-of-network expenses may apply. |
| Provider networks | Managed care can lead to better care coordination. | Limited provider networks. A person may need referrals (HMOs) or face higher costs for out-of-network services. |
| Supplemental coverage | Bundled coverage with various benefits in one plan. | No Medigap coverage to help with additional out-of-pocket costs. |
| Authorization requirements | Streamlined care through plan networks. | Prior authorization is required for some procedures. This may cause a delay in receiving care. |
Medicare Advantage has a number of benefits. The following sections will discuss these in more detail.
Additional benefits
Medicare Advantage plans usually offer coverage that extends beyond Original Medicare’s benefits.
Some examples of extra benefits include:
- bathroom safety equipment
- caregiver support
- dental care
- fitness
- hearing care
- in-home support
- meal benefits
- telemonitoring services
- transportation assistance
- vision care
Although not all Medicare Advantage plans offer all of these benefits, each will usually offer some additional forms of coverage.
However, a plan may state that a person is responsible for copayments or coinsurances.
Prescription drug coverage
In addition to many supplemental benefits, the vast majority of Medicare Advantage plans offer some form of prescription drug coverage, according to the KFF.
Medicare requires that all enrollees have some form of prescription drug coverage. Through a Medicare Advantage plan, a person can secure a prescription drug plan.
There are other factors to consider in terms of coverage for individual medications, which may vary by plan. People should ask to see the formulary for their Medicare Advantage prescription drug plan, which lists all covered medications.
Some people view having a Medicare Advantage prescription drug plan as a lower cost alternative to Original Medicare with a Part D prescription drug plan.
Out-of-pocket spending limits
Medicare Advantage plans have an out-of-pocket spending limit. This is an annual cap on how much a person will pay in out-of-pocket expenses.
The average out-of-pocket limit for in-network services $4,882, and it comes to $8,707 for both in-network and out-of-network services, according to the KFF. Typically, health maintenance organizations (HMOs) have a lower out-of-pocket limit than other plan types.
Although the out-of-pocket limits represent thousands of dollars, they do offer some assurance to a person that they will not have to spend more than a certain amount.
For example, if a person pays a 20% coinsurance on doctor’s visits but has an out-of-pocket limit of $5,500, they will not be responsible for any further out-of-pocket costs once they have paid $5,500 in coinsurances.
Medicare resources
For more resources to help guide you through the complex world of medical insurance, visit our Medicare hub.
Medicare Advantage plans may also have some drawbacks. The sections below will cover these in more detail.
Limited provider networks
Several different Medicare Advantage plan types are available. The most common are preferred provider organizations (PPOs) and HMOs.
Each of these works by defining in-network and out-of-network providers as a way to bring down costs.
An HMO usually involves a person visiting an in-network primary care physician about most health concerns.
If they have a health condition that requires specialist care, they will usually see their primary care provider. This doctor must then refer them to an in-network specialist before an HMO covers the cost at their reduced rate.
A PPO varies slightly in that a person does not usually need a specialist referral. However, these types often have a fixed network of providers.
Under Original Medicare, a person can see any provider who accepts assignments from Medicare. Some people prefer this option, as they have more freedom to choose their providers and specialists.
Supplemental coverage is not available
When a person has Original Medicare, they can purchase a supplemental insurance policy called Medigap. This helps them reduce out-of-pocket costs by covering deductibles, coinsurances, and copayments.
People with significant out-of-pocket costs cannot get a Medigap policy if they also have Medicare Advantage.
However, it is possible to switch plans during one of several enrollment windows.
Authorization is necessary before procedures
In most instances, as long as Original Medicare covers a particular service or procedure, a person does not have to get authorization for coverage before receiving treatment.
However, Medicare Advantage may require a person to request prior authorization for a procedure to make sure that the provider and the facility are in-network.
Although doing so may not delay care, a person could end up waiting before they can get clearance for their procedure.
Private insurers offer thousands of Medicare Advantage plans, which vary by price and coverage level.
Some areas have multiple plans available, while others may have a few. It is best to carefully review the plans available and consider whether or not they meet budgetary constraints and healthcare needs.
Both Original Medicare and Medicare Advantage offer benefits to their providers and plan holders.
If a person finds that a Medicare Advantage plan does not fit their healthcare needs, they can revert to Original Medicare or choose a different Medicare Advantage plan during one of the enrollment periods.
We will update the 2025 costs as soon as possible after the Centers for Medicare and Medicaid Services (CMS) have released them.
We last updated the costs on this page on September 5, 2024