Medicare Advantage: What It Is, How It Works, and Different Plan Types


Medicare Advantage (MA), also known as Medicare Part C, offers privately administered healthcare plans that replace traditional Medicare coverage. These plans provide an alternative, often more comprehensive, and cost-effective solution, but with some limitations regarding network providers and referrals. Understanding the features, types, enrollment considerations, and associated costs can significantly benefit those eligible for Medicare.

What is medicare advantage?

Medicare Advantage, or Medicare Part C, constitutes a category of healthcare plans managed by private insurers under a contract with Medicare. These plans offer an alternative to traditional Medicare coverage, combining hospital, outpatient, and prescription drug benefits in one package. They often present additional benefits that exceed what’s provided by Medicare parts A, B, and D.

How medicare advantage works

Medicare Advantage plans work as approved policies provided by private companies. They replace hospital and outpatient benefits typically covered under Medicare parts A and B, while most also incorporate prescription drug coverage (Part D). In 2022, over 28 million people—almost half of Medicare beneficiaries—opted for Medicare Advantage plans. Providers receive a fixed fee per participant and can charge out-of-pocket costs, although coverage might be limited to in-network providers.

These plans might extend coverage beyond traditional Medicare, encompassing dental, vision, and hearing-related expenses. However, they are not compatible with Medigap, also known as Medicare Supplement Insurance. Medicare Advantage participants pay a separate premium in addition to the standard Medicare Part B premium.

Types of medicare advantage plans

The most prevalent Medicare Advantage plan is the Health Maintenance Organization (HMO), enrolling the majority of participants. Other types include Preferred Provider Organizations (PPOs), Private Fee-for-Service (PFFS) plans, and Special Needs Plans (SNPs). To enroll in any MA plan, one must live within its service area and have Medicare parts A and B. In 2021, individuals with end-stage renal disease gained eligibility for these plans.

Special considerations

When considering Medicare Advantage plans, individuals should compare costs, benefits, and provider networks with those of traditional Medicare. Enrollment may affect eligibility for employer or union-based healthcare coverage. There is an annual limit on out-of-pocket costs for all Medicare Advantage plans, offering cost-efficiency for certain beneficiaries.

Medicare star ratings

Medicare Star Ratings serve as an essential tool for comparing and selecting Medicare Advantage plans. Ranging from one to five stars, these ratings are based on various quality and performance measures, assisting in decision-making during the enrollment period.

Weigh the risks and benefits

Here is a list of the benefits and the drawbacks to consider.

  • Comprehensive coverage beyond traditional Medicare
  • Potential lower out-of-pocket costs
  • Additional benefits like dental, vision, and hearing care
  • Limitations on provider networks
  • Requirement for referrals to see specialists
  • Incompatibility with Medigap plans

Frequently asked questions

What are the disadvantages of medicare advantage?

Medicare Advantage may become expensive due to copays, limited provider networks, and incompatibility with Medigap plans.

Can I sign up for medicare advantage with a preexisting condition?

Yes, Medicare Advantage offers coverage for individuals with preexisting conditions.

Key takeaways

  • Medicare Advantage provides comprehensive coverage beyond traditional Medicare.
  • There may be limitations in provider networks and the necessity of referrals to see specialists.
  • Enrollment considerations include eligibility, costs, and annual limits on out-of-pocket expenses.
View article sources
  1. Medicare Advantage for All, Perhaps? – JAMA Network
  2. Medicare, Medicare Advantage Physician Reimbursement Rates Nearly Equal – University of Southern California
  3. What’s a Medicare Advantage Plan? – Medicare
  4. Medicare Advantage Plan Fact Sheet – Centers for Medicare & Medicaid Services
  5. Does Medicare Cover Funeral Expenses? – SuperMoney