As Americans reach retirement age, one of the most important financial and health decisions they make is choosing between Medicare and another option known as Medicare Advantage.

Unlike traditional Medicare, where the government program acts as your insurer, Medicare Advantage benefits are provided by private companies. Most are Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs). The plans cover Medicare Part A costs (hospital expenses) as well as Part B (outpatient treatments), and most offer prescription drug benefits.

Below are several features of Medicare Advantage that you should know before deciding which option is best for you.

1. Pricing and Coverage Vary

With traditional Medicare, pricing is simple. No matter where you live, you have a standard Part B premium to pay each month and uniform deductibles for hospital and doctor fees. Co-pays likewise follow a fairly rigid formula.

With Medicare Advantage, however, multiple insurance carriers are competing for patients. Recipients contribute the usual Part B premium, but they generally pay an additional premium on top of that.

Depending on where you live, you'll generally have access to multiple plans. Compare them based on premium amounts, deductibles and co-pays. The Medicare.gov website allows you to compare different plans in your area. You should also enter the medications you currently use to help calculate your estimated out-of-pocket expenses.

2. Customer Satisfaction is Key

Cost shouldn’t be the only factor when considering different health insurance options. Receiving quality care and getting reliable help with your claims also goes a long way toward ensuring a positive experience.

The Medicare website is a great resource in this regard, too. It uses a star system to rate different insurers, with five representing a top mark. Among other factors, the site takes into account member experiences and how plans manage chronic conditions and provide health screenings.

Another site worth checking out is the National Committee for Quality Assurance (NCQA) website, which also ranks various Advantage plans. Consumers can quickly look up scores for customer service, prevention and treatment.

3. Watch Limits on Choosing Doctors – in Your Home State or Other States

Most private plans restrict coverage to certain doctors and medical facilities or, in the case of a PPO, charge more for out-of-network providers. That means, if you have specific health care professionals you’d like to see, you’ll want to check whether they’re part of the system ahead of time.

This feature can also complicate things for people who live in another state for part of the year or travel frequently. They could find that their plan refuses coverage if they get sick while out of town – or charges considerably more.

4. Out-of-Pocket Expenses Are Capped

One of the major benefits of Medicare Advantage is that there’s a cap on the out-of-pocket expenses a recipient has to pay in a given year. Under the Affordable Care Act, that limit is $6,700 annually. Traditional Medicare coverage has no such cap, so there’s always a risk that patients will have to pay more if they require significant care.

5. You May Need to Wait for Open Enrollment

When people first sign up for Medicare, they’re automatically enrolled in the traditional program. Those who prefer a private plan can join Medicare Advantage at that time. Otherwise, they have to wait for the open enrollment period between Oct. 15 and Dec. 7 each year to make the switch.

The Bottom Line

Whether Medicare Advantage is right for you depends on your unique circumstances. Checking out the Medicare website is a good way to get the details on plans in your area, including pricing and quality ratings. Remember to consider where you'll need healthcare, as well as which doctors you'd prefer to visit, when deciding which way to go.

Related Articles
  1. Insurance

    Medicare Vs. Medicaid

    Medicare and Medicaid are often confused with one another, because they are both public health-care programs. This confusion likely arises from the similarities between the two programs. After ...
  2. Retirement

    Income Relating: A New Concept In Medicare

    You can retire, but you can never retire from income tax planning.
  3. Budgeting

    The Future Of Medicare: Why You Should Be Worried

    Younger generations might want to start preparing for retirement now. Some things may not last that much longer.
  4. Options & Futures

    Getting Through The Medicare Part D Maze

    Having trouble sorting through your prescription drug coverage options? We offer some solutions to the confusing process of selecting the right Medicare Part D coverage for you.
  5. Options & Futures

    What's The Difference Between Medicare And Medicaid?

    One program is for the poor; the other is for the elderly. Learn which is which.
  6. Insurance

    What Does Medicare Cover?

    Don't assume you're insured. Find out what you can expect from this healthcare program.
  7. Insurance

    Filling In The Medicare Gaps

    Basic Medicare is not a perfect fit for everyone - sometimes, extra policies are required to suit a person's needs.
  8. Stock Analysis

    2 Catalysts Driving Intrexon to All-Time Highs

    Examine some of the main reasons for Intrexon stock tripling in price between 2014 and 2015, and consider the company's future prospects.
  9. Mutual Funds & ETFs

    ETF Analysis: ProShares UltraPro Nasdaq Biotech

    Obtain information about an ETF offerings that provides leveraged exposure to the biotechnology industry, the ProShares UltraPro Nasdaq Biotech Fund.
  10. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Insurance

    Learn about the SPDR S&P Insurance exchange-traded fund, which follows the S&P Insurance Select Industry Index by investing in equities of U.S. insurers.
RELATED TERMS
  1. Medicare And Medicaid Fraud

    Illegal practices aimed at getting unfairly high payouts from ...
  2. Medicare Hold Harmless Provision

    A legal statement prohibiting an increase to Medicare B premiums ...
  3. Medicare Part B Premiums

    A monthly fee that Medicare participants pay for medical insurance ...
  4. Medicare Part D

    A prescription drug benefit program that was created through ...
  5. Net Collections

    A term used in medical accounting to describe the amount of money ...
  6. Corridor Deductible

    Expenses that are paid by the insured in excess of an insurance ...
RELATED FAQS
  1. Will Medicare pay for long-term costs?

    Long-term care refers to a variety of care services (medical and non-medical) that helps meet the needs of people who have ... Read Full Answer >>
  2. What role does the agency problem play in the modern Health Care industry?

    Agency problems vary from health care system to health care system, and not all economists agree on the degree and desirability ... Read Full Answer >>
  3. What happens if my insurance claim falls below the deductible level?

    Though the ins and outs of health insurance are often confusing, the concept of the insurance deductible is relatively straightforward. ... Read Full Answer >>
  4. How is the deductible I paid for my insurance claim treated for tax purposes?

    The deductible you pay on your health insurance policy may be tax-deductible if you meet certain conditions. However, whether ... Read Full Answer >>
  5. What are the main factors that impact share prices in the insurance sector?

    The main factors that impact share prices in the insurance sector are interest rates, earnings and actuarial risk. In the ... Read Full Answer >>
  6. Why do insurance policies have deductibles?

    Insurance policies have deductibles for behavioral and financial reasons. Moral Hazards Deductibles mitigate the behavioral ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!