What Is Medicare Advantage?

Medicare Advantage is part of the Medicare program offered to senior citizens and disabled adults who qualify. Also referred to as Part C plans, Medicare Advantage plans are provided by private insurance companies instead of the federal government. They generally include the same Part A hospital, Part B medical coverage, and Part D prescription drug coverage that Medicare does, with the exception of hospice care. Anyone who joins an advantage plan still has Medicare.

Key Takeaways

  • Medicare Advantage or Medicare Part C is offered to senior citizens and disabled adults who qualify.
  • Plans are provided by Medicare-approved private insurance companies.
  • Coverage is the same as Part A hospital, Part B medical coverage, and Part D prescription drug coverage, with the exception of hospice care.
  • Companies receive a fixed amount each month for plan care and may charge out-of-pocket costs to policyholders.

How Medicare Advantage Works

Medicare Advantage is a type of Medicare health plan offered by private companies that are Medicare-approved. They are considered an alternative to Medicare and cover all the expenses incurred under Medicare. There are some Medicare Advantage plans offered that cover additional costs not paid for by Medicare including vision, dental, and hearing expenses. Medicare pays the premiums for participants in Medicare Advantage plans. Medicare Advantage plans don't work with Medigap or Medicare Supplemental Insurance.

The average premium for a Medicare Advantage plan in 2020 was expected to be around $23.00. Private companies 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.

Regional preferred provider organizations (PPOs) were established to provide rural beneficiaries greater access to Medicare Advantage plans and cover entire statewide or multi-state regions. Regional PPOs accounted for 6% of all Medicare Advantage enrollees in 2019. About 22 million people, or 34% of those receiving Medicare benefits, were enrolled in a Medicare Advantage plan. That number is expected to climb to 24 million in 2020.

Special Considerations

Medicare’s online plan-finder tool includes information about Medicare Advantage plans. To enroll in a Medicare Advantage plan, a consumer must provide the information on their Medicare card, including their Medicare number along with the dates when their Part A and Part B coverage began. People can change their Medicare Advantage plans during a specified open enrollment period in the fall that typically spans from mid-October to early December.

Like other types of health insurance, each Medicare Advantage plan has different rules about coverage for treatment, patient responsibility, costs, and more. Joining a Medicare Advantage plan may make someone ineligible to continue receiving health care coverage through their employer or union, so if employer-based coverage fits a person's needs, they may want to hold off on enrolling in Medicare.

All Medicare Advantage plans have annual limits on out-of-pocket costs.

All Medicare Advantage plans have an annual limit on out-of-pocket costs which may make them more cost-effective for certain beneficiaries. Medicare is generally available for people age 65 or older, younger people with disabilities, and people with end-stage renal disease—permanent kidney failure requiring dialysis or transplant—or amyotrophic lateral sclerosis (ALS). The 2020 monthly premium and annual deductible for Medicare Part B are $144.60 and $198 respectively.

Types of Medicare Advantage Plans

The most common types of Medicare Advantage plans are health maintenance organization (HMO) plans, which account for the majority of total Medicare Advantage enrollments, preferred provider organization (PPO) plans, private fee-for-service (PFFS) plans, and special needs plans (SNPS). The basic qualifications to join one of these plans are living in the plan’s service area, having Medicare Parts A and B, and not having end-stage renal disease. HMO point-of-service (HMOPOS) plans and medical savings account (MSA) plans are less common.