Free Guide to Medicare Advantage Plans at MD Anderson

What Medicare Advantage Plans Are and How They Work

Medicare Advantage plans, also called Part C plans, are an alternative way to receive your Medicare benefits. Instead of using Original Medicare (Part A and Part B), you can choose to enroll in a Medicare Advantage plan offered by a private insurance company. These plans are approved and regulated by Medicare, but they are run by private insurers.

When you enroll in a Medicare Advantage plan, you still have Medicare coverage, but the private insurance company administers your benefits. You pay a monthly premium to the insurance company, and you receive your hospital insurance (Part A) and medical insurance (Part B) through that plan. Most Medicare Advantage plans also include prescription drug coverage (Part D), which means you do not need to purchase a separate prescription drug plan.

Medicare Advantage plans must cover all the services that Original Medicare covers. However, they can organize how you receive care differently. Many plans require you to use doctors and hospitals within their network, meaning doctors and facilities that have agreed to work with that specific plan. Some plans may require you to get a referral from your primary care doctor before seeing a specialist. Other plans may not require referrals.

The main types of Medicare Advantage plans include Health Maintenance Organization (HMO) plans, Preferred Provider Organization (PPO) plans, Private Fee-for-Service (PFFS) plans, and Special Needs Plans (SNPs). Each type has different rules about which doctors you can see and how much you might pay out of pocket.

One important feature of Medicare Advantage plans is the out-of-pocket maximum. This is a limit on how much money you have to pay in one year for covered services. Once you reach this maximum, the plan pays 100% of your covered services for the rest of that year. Original Medicare does not have an out-of-pocket maximum, which means your costs could continue to grow throughout the year.

Practical Takeaway: Understanding that Medicare Advantage is a managed care alternative to Original Medicare helps you compare whether this option might fit your healthcare needs and budget. Learning about plan types and out-of-pocket maximums gives you a foundation for evaluating specific plans.

Key Differences Between Medicare Advantage and Original Medicare

When considering whether a Medicare Advantage plan is right for you, it is important to understand how these plans differ from Original Medicare. Original Medicare consists of Part A (hospital insurance) and Part B (medical insurance), and you can add Part D (prescription drug coverage) separately. Original Medicare is run by the federal government, while Medicare Advantage is run by private insurance companies.

One major difference is how you pay for care. With Original Medicare, you pay a monthly Part B premium, and then you pay costs when you receive care, such as deductibles and coinsurance. Many people purchase supplemental insurance (Medigap) to help cover these out-of-pocket costs. With Medicare Advantage, you typically pay a lower or sometimes zero monthly premium, but you may face higher out-of-pocket costs when you use healthcare services. However, Medicare Advantage plans have an out-of-pocket maximum that Original Medicare does not have.

Network restrictions are another key difference. Original Medicare is accepted by nearly all doctors and hospitals nationwide. With Medicare Advantage, you generally must use doctors and hospitals in the plan's network. If you travel frequently or live part of the year in multiple locations, this could be an important factor. PPO plans in Medicare Advantage allow you to see out-of-network doctors, but you will pay more. HMO plans typically require you to stay in-network.

Prescription drug coverage differs too. With Original Medicare, you need to enroll in a separate Part D plan for drug coverage. With most Medicare Advantage plans, prescription drug coverage is already included. You do not need to shop for a separate drug plan, though you should review what drugs are covered.

Prior authorization and referrals are more common with Medicare Advantage. Some Medicare Advantage plans, particularly HMOs, require you to choose a primary care doctor and get a referral to see a specialist. Original Medicare does not have this requirement—you can see any doctor who accepts Medicare without a referral.

Practical Takeaway: Comparing these differences side-by-side helps you decide whether you value lower premiums and out-of-pocket maximums (Medicare Advantage) or prefer the flexibility and nationwide network access of Original Medicare.

How to Read and Understand Plan Documents

Medicare Advantage plan documents contain important information about what you will pay and what services are covered. Learning to read these documents helps you make an informed decision about which plan might work for you. The most important documents to review are the Summary of Benefits and Coverage and the Evidence of Coverage.

The Summary of Benefits and Coverage is a one or two-page document that shows you the basics. It lists the monthly premium you will pay, the deductible (the amount you must pay before the plan starts paying), copayments (a fixed amount you pay for a service), and coinsurance (a percentage of the cost you pay). For example, a plan might have a $0 monthly premium, a $250 annual deductible for primary care services, a $25 copay for doctor visits, and 20% coinsurance for hospital stays. This document also shows the out-of-pocket maximum, which is the most you would pay in a year.

The Evidence of Coverage is a longer document that provides all the details about what is covered and what is not. It explains the rules about using specialists, getting prior authorization, and using out-of-network providers. It also lists covered drugs if the plan includes prescription coverage. While this document is lengthy, reading sections that matter to you—such as your medications or specific services you use—helps you understand your actual costs.

When reviewing plan documents, pay attention to several key numbers: the monthly premium, the deductible, the copays and coinsurance amounts, and the out-of-pocket maximum. Add these up mentally for the healthcare you think you will need in a year. For example, if you take three prescription drugs, see your doctor four times a year, and might need blood work, try to calculate what you might pay. Compare this estimate across different plans.

Also review the drug formulary, which is the list of prescription medications covered by the plan. If you take specific medications, check whether they are on the formulary and at what tier (usually tier 1 is cheapest, and higher tiers cost more). Some drugs may require prior authorization, meaning the doctor must get approval from the insurance company before you can fill the prescription.

Practical Takeaway: Creating a simple spreadsheet with your current medications, doctor visits, and anticipated services, then comparing costs across plan documents, gives you a realistic picture of which plan may cost less for your situation.

Costs and Premiums in Medicare Advantage Plans

Understanding the costs of Medicare Advantage plans involves looking at several different fees and payments. Many Medicare Advantage plans offer $0 monthly premiums, which means you do not pay money each month to the insurance company beyond what you already pay for Medicare Part B. However, a $0 premium does not mean healthcare is free. You still pay when you receive care.

The deductible is the amount you must pay out of your own pocket before the plan begins to pay for services. Medicare Advantage plans can have different deductibles for different types of services. For example, a plan might have a $250 deductible for primary care and specialist visits but no deductible for preventive care. Some plans have no deductible at all. Preventive services—such as annual wellness visits, cancer screenings, and vaccines—are covered at no cost by law, regardless of the deductible.

Copayments and coinsurance are what you pay when you actually receive a service. A copay is a fixed amount, such as $25 for a doctor visit or $10 for a generic prescription drug. Coinsurance is a percentage of the cost, such as 20% of hospital charges. Different plans have different copays and coinsurance amounts. A plan with a lower monthly premium might have higher copays.

The out-of-pocket maximum is important because it caps your total spending. In 2024, the out-of-pocket maximum for Medicare Advantage plans cannot exceed $8,050 for in-network services in most plans. Some special plans may have different limits. Once you reach this maximum in a year, the plan pays 100% of your covered services for the rest of that year. This protection does not exist in Original Medicare