Medicare Advantage plans may sound enticing. Many offer $0 premiums, but the devil is in the details. You will find that most have unexpected out-of-pocket expenses when you get sick and only want you as a customer when you’re healthy.
Also known as Part C, these plans, which private insurers provide as an alternative to traditional Medicare, must provide the coverage required by Medicare at the same overall cost level. However, what they pay can differ depending upon your overall health.
Coverage Choices When You Qualify for Medicare
When choosing medical coverage as a senior citizen 65 years old and over, you can make one of three choices:
Most Comprehensive Coverage
The most comprehensive coverage, which will likely result in the fewest unexpected out-of-pocket expenses, is a traditional Medicare plan paired with a Medigap policy. Medigap policies can vary, and the most comprehensive coverage is offered through Medigap Type F, which is sold by different insurers but must offer Medicare-specified coverage. With Medigap Type F, all co-pays and deductibles are covered, and you even get some coverage when you travel outside the country. With this combination, you can go to any doctor who accepts Medicare. (For more, see When to Get a Medigap Insurance Plan.) Be aware that with traditional Medicare and Medigap, you will also need part D prescription drug coverage (see Getting Through the Medicare Part D Maze).
The Devil Is in the Details
Medicare Advantage plans do not offer this level of choice. Most plans require you to go to their network of doctors and other health providers. Since Medicare Advantage plans can’t cherry-pick their customers because they must accept any Medicare-eligible enrollee, they discourage people who are sick by the way they structure their co-pays and deductibles. (For more, see Five Distinct Features of Medicare Advantage.)
Author Wendell Potter explains how many Medicare Advantage enrollees don’t find out about the limitations of their Medicare Advantage plans until they get sick:
“Although Mom saw her MA premiums increase significantly over the years, she didn’t have any real motivation to disenroll until after she broke her hip and required skilled care in a nursing facility. After a few days, the nursing home administrator told her that if she stayed there, she would have to pay for everything out of her own pocket. Why? Because a utilization review nurse at her MA plan, who had never seen or examined her, decided that the care she was receiving was no longer ‘medically necessary.’ Because there are no commonly used criteria as to what constitutes medical necessity, insurers have wide discretion in determining what they will pay for and when they will stop paying for services like skilled nursing care by decreeing it ‘custodial.’”
You can see how a Medicare Advantage Plan cherry-picks its patients by carefully reviewing the co-pays in the summary of benefits for every plan you are considering. To give you an example of the types of co-pays you may find, here are some details pertaining to in-network services from a popular Humana Medicare Advantage Plan in Florida:
- Ambulance - $300
- Hospital stay - $175 per day for first 10 days
- Diabetes supplies – up to 20% co-pay
- Diagnostic radiology – up to $125 co-pay
- Lab Services – up to $100 co-pay
- Outpatient x-rays – up to $100 co-pay
- Therapeutic radiology – $35 or up to 20% co-pay depending on the service
- Renal dialysis – 20% of the cost
As this short list of co-pays 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."
Switching Back to Traditional Medicare
While you can save money with Medicare Advantage when you are healthy, if you get sick in the middle of the year, you are stuck with whatever costs you incur until you can switch plans during the next open season for Medicare. At that time you can switch to traditional Medicare with a Medigap, but Medigap can then charge you a higher rate than if you had initially enrolled in a Medigap policy when you first qualified for Medicare.
Most Medigap policies are issue-age-rated policies or attained-age rated policies, which 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. (For more, see Medicare Changes for 2016.)
A Doctor’s Experience With Medicare Advantage Plans
In 2012, Dr. Brent Schillinger, former president of the Palm Beach County Medical Society Services Foundation pointed out a host of potential problems he encountered with Medicare Advantage plans as a physician. Here's how he describes them:
Care can actually end up costing more, to the patient and the federal budget, than it would under original Medicare, particularly if one suffers from a very serious medical problem.
Some private plans are not financially stable and may suddenly cease coverage. This happened in Florida in 2014 when a popular MA plan called Physicians United Plan was declared insolvent, and people were called by doctors who canceled their appointments.
One may have difficulty getting emergency or urgent care due to rationing.
The plans only cover certain doctors, often drop providers without cause, breaking the continuity of care.
Members have to follow plan rules to get covered care.
There are always restrictions when choosing doctors, hospitals and other providers, which is another form of rationing that keeps profits up for the insurance company but may limit patient choice.
It can be difficult to get care away from home.
The extra benefits offered can turn out to be less than promised.
[Plans that include coverage for Part D prescription drug costs] may ration certain high-cost medications.
The Bottom Line
Shop very carefully if you are thinking of using a Medicare Advantage plan. Be sure to read the fine print, and 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 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. For more information, see Medigap vs. Medicare Advantage: Which Is Better?