Pitfalls of Medicare Advantage Plans

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A Medicare Advantage Plan, also called a Part C or an MA Plan, may sound enticing. It combines Medicare Part A (hospital insurance), Medicare Part B (medical insurance), and usually Medicare Part D (prescription drug coverage) into one plan. These plans cover all Medicare services, and some offer extra coverage for vision, hearing, and dental. They are offered by private companies approved by Medicare.

Still, while many offer low premiums—sometimes as low as $0 per month—the devil is in the details. You will find that many plans unexpectedly won't cover certain expenses when you get sick—resulting in unforeseen out-of-pocket costs for you—and what they pay can differ depending upon your overall health. Here's a look at some of the disadvantages of Medicare Advantage Plans.

Key Takeaways

  • A Medicare Advantage (MA) Plan, known as Medicare Part C, provides Part A and B benefits, and sometimes Part D (prescription drugs), and other benefits.
  • All Medicare Advantage providers must accept Medicare-eligible enrollees.
  • Sick participants may find that medical care costs skyrocket under a Medicare Advantage plan due to copayments and out-of-pocket expenses.
  • Medicare Advantage Plan customers can switch back to Original Medicare during an annual Open Enrollment Period.
  • Prospective Medicare Advantage customers should research plans, copays, out-of-pocket costs, and eligible providers.

Coverage Choices for Medicare

If you're older than 65 (or turning 65 in the next three months) and not already getting benefits from Social Security, you have to sign up for Medicare Part A and Part B. It doesn't happen automatically. However, if you already get Social Security benefits, you'll get Medicare Part A and Part B automatically when you first become eligible (you don't need to sign up).

There are two main ways to get Medicare coverage:

  1. Original Medicare
  2. A Medicare Advantage Plan

Original Medicare

Original Medicare includes Part A (hospital insurance) and Part B (medical insurance). To help pay for things that aren't covered by Medicare, you can opt to buy supplemental insurance known as Medigap (or Medicare Supplement Insurance).

These policies are offered by private insurers and cover things that Medicare doesn't, such as copayments, deductibles, and healthcare when you travel abroad.

Medigap policies vary and the most comprehensive coverage offered was through Plan F, which covers all copays and deductibles. Unfortunately, as of January 1, 2020, Plan F and Plan C, the two plans that covered deductibles cannot be sold to new Medicare beneficiaries. However, if you were eligible for Medicare prior to that time but haven't yet enrolled, you still may be able to get Plan F or Plan C.

Be aware that with Original Medicare and Medigap plans, you will still need Part D prescription drug coverage. If you don't buy it when you first become eligible for it—and are not covered by a drug plan through work or a spouse—you will be charged a lifetime penalty if you try to buy it later.

Medicare Advantage Plans

A Medicare Advantage Plan is intended to be an all-in-one alternative to Original Medicare. These plans are offered by private insurance companies that contract with Medicare to provide Part A and Part B benefits, and sometimes Part D (prescriptions).

Most plans cover benefits that Original Medicare doesn't offer, such as vision, hearing, and dental. You have to sign up for Medicare Part A and Part B before you can enroll in Medicare Advantage Plan.

The private insurers receive a fixed amount each month for Medicare Advantage plan care. In turn, these companies can charge out-of-pocket costs to policyholders and are able to establish their own rules for service such as the need for referrals or provider networks for both non-urgent care and emergency services.

$0 to $7,550

The range of 2022 Medicare Advantage plans' maximum out-of-pocket limits, according to Q1Medicare.com, a Medicare educational site.

Medicare Advantage Plans do have a yearly limit on your out-of-pocket costs for medical services, called the maximum out-of-pocket (MOOP). Once you reach this limit, you’ll pay nothing for covered services.

Each plan can have a different limit, and the limit can change each year, so that's a factor to consider when purchasing one. Not surprisingly, there's often an inverse relationship between the amount of a plan's deductible and premium, and the size of its MOOP.

Disadvantages of Medicare Advantage Plans

In general, Medicare Advantage Plans do not offer the same level of choice as a Medicare plus Medigap combination. Most plans require you to go to their network of doctors and health providers.

Since Medicare Advantage Plans can’t pick their customers (they must accept any Medicare-eligible participant), they discourage people who are sick by the way they structure their copays and deductibles. Many enrollees have been hit with unexpected costs and denial of benefits for various types of care deemed not medically necessary.

Consider Your Other Costs

To see how a Medicare Advantage Plan cherry-picks its patients, carefully review the copays in the summary of benefits for every plan you are considering. To give you an example of the types of copays you may find, here are some details of in-network services from a popular Humana Medicare Advantage Plan in Florida, Humana Honor HMO:

  • Hospital stay—$225 per day for the first 5 days
  • Outpatient surgery—$225 copay
  • Diagnostic radiology—$125-$225 copay
  • Lab services—up to $50 copay
  • Outpatient x-rays—up to $110 copay
  • Emergency Room—$90 copay

As this non-exhaustive list of copays demonstrates, out-of-pocket costs will quickly build up over the year if you get sick. The Medicare Advantage Plan may offer a $0 premium, but the out-of-pocket surprises may not be worth those initial savings if you get sick. “The best candidate for Medicare Advantage is someone who's healthy," says Mary Ashkar, senior attorney for the Center for Medicare Advocacy. "We see trouble when someone gets sick."

$19

The average monthly premium for Medicare Advantage plans in 2022, compared to $21.22 in 2021.

Switching Back to Original Medicare

While you can save money with a Medicare Advantage Plan when you are healthy, if you get sick in the middle of the year, you are stuck with whatever costs you incur. If you decide that the Medicare Advantage Plan isn't for you, you have the right under federal law to purchase any Medigap plan if you switch to Original Medicare within 12 months of the date that you joined a Medicare Advantage Plan for the first time.

You may also switch from your Medicare Advantage Plan to Original Medicare during the annual Open Enrollment Period or if you qualify for a Special Enrollment Period. However, you may not be able to purchase a Medigap policy (if you switch after the aforementioned 12-month limit). If you are able to do so, it may cost more than it would have when you first enrolled in Medicare.

Keep in mind that an employer only needs to provide Medigap insurance if you meet specific requirements regarding underwriting (if this is after the 12-month period). The wait time for Medigap coverage can be avoided if you have what is called a "guaranteed issue right."

A thorough breakdown of what is considered a "guaranteed issue right," where an insurance company can't refuse to sell you a Medigap policy, can be found on the Medicare website or by clicking this link.

Most Medigap policies are issue-age rated policies or attained-age rated policies. This means that when you sign up later in life, you will pay more per month than if you had started with the Medigap policy at age 65. You may be able to find a policy that has no age rating, but those are rare.

Why Is Medicare Advantage a Bad Choice?

Medicare Advantage can become expensive if you're sick, due to uncovered copays. Additionally, a plan may offer only a limited network of doctors, which can interfere with a patient's choice. It's not easy to change to another plan. If you decide to switch to a Medigap policy, there often are lifetime penalties.

Why Should I Choose Medicare Advantage?

A Medicare Advantage plan covers some of the gaps of Original Medicare (Part A and Part B) and usually offers a $0 premium through a private company. It can be an affordable option for patients who are not currently sick or in need of intense medical care. If a patient's situation worsens, it might be difficult or expensive to switch plans.

Can I Choose Any Doctor With Medicare Advantage?

Most Medicare Advantage plans work with a limited network of healthcare providers, so double-check to make sure your doctor visit is covered.

The Bottom Line

Shop very carefully if you are thinking of using a Medicare Advantage plan. Be sure to read the fine print. Get a comprehensive list of all co-pays and deductibles before choosing one.

Also, be sure to find out if all your doctors accept the plan and that all the medications you take (if it's a plan that also wraps in Part D prescription drug coverage) will be covered. If the plan doesn't cover your current physicians, be sure that its doctors are acceptable to you and are taking new patients covered by the plan.

Correction—May 5, 2022: A previous version of this article failed to explain the intricacies present when switching from a Medicare Advantage plan to a Medigap policy.

Article Sources

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  1. Medicare.gov. "What's Medicare Supplement Insurance (Medigap)?"

  2. Q1Medicare.com. "2022 Medicare Advantage Plan Maximum Out-of-Pocket (MOOP) Limits Are Changing and Can Reach $7,550."

  3. MyElder. "Medicare Advantage Is an Oxymoron. More Disadvantages Than Advantages."

  4. Centers for Medicare & Medicaid Services. "CMS Releases 2022 Premiums and Cost-Sharing Information for Medicare Advantage and Prescription Drug Plans."

  5. Medicare.gov. "Medigap & Medicare Advantage Plans."

  6. Medicare Interactive. "Medigaps and Prior Medical Conditions."