The Pros and Cons of Medicare Advantage Plans

Video: The Pros and Cons of Medicare Advantage Plans.

If you're debating on whether a Medicare Advantage plan is the right choice or not, this video is for you. Don't go it alone...give us a call.

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Steve Thurmond here with Medigap Tennessee. Your source for Medicare Supplement, Medicare Advantage, Prescription Drug and Dental plans in Tennessee & 29 other states.

As they grow in popularity, I often get asked about Medicare Advantage plans. They appear very attractive upon first glance, but there are a lot of “gotcha’s” to be mindful of. So this video will be outlining some of the pros and cons of these managed care plans that are being offered by more and more companies across the nation.

First, a little history on these plans. Since 1966 Original Medicare has been the main option for healthcare coverage for seniors in this country. Shortly thereafter, many insurance companies started offering Medigap plans (also called Medicare Supplemental plans) to pick up the other 20% that original Medicare doesn’t cover. In the 1970s, Medicare beneficiaries had the option to receive their Medicare benefits through private health plans, mainly HMOs, as an ALTERNATIVE to Original Medicare. These were called Medicare+Choice plans.

Then the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 renamed them “Medicare Advantage” which is what they’re presently called today.

  • Medicare Advantage Plans ARE NOT Supplemental plans.
  • Medicare Advantage Plans ARE NOT Medigap plans.
  • Medicare Advantage Plans ARE NOT Secondary insurance plans.
  • Medicare Advantage Plans are Managed Care plans and are often referred to as Medicare Part C.
  • Medicare Advantage is a US health insurance program of managed health care that serves as a substitute for “Original Medicare” Parts A and B. That is, Medicare Advantage plans replace original Medicare as your primary healthcare coverage. In other words, you cannot have original Medicare AND a Medicare Advantage Plan at the same time…you may only have one or the other.

If you choose to go with a Medicare Advantage plan, you will NOT have Original Medicare as your primary coverage. Medicare Advantage plans are comprised of PPO plans (which stands for preferred provider organization), and HMO plans (which stands for health maintenance organization).

While I typically don’t recommend Medicare Advantage plans as a first choice, they CAN be a good fit for certain individuals. Let’s take a look at the pros and cons of these managed care plans so you can make a better decision regarding this option for primary coverage.


1.) By law, Medicare Advantage plans have to cover everything that original Medicare covers, so you know you’re getting the same level of coverage as you’d get if you just had Original Medicare.

Also, there are many Medicare Advantage plans on the market that are $0 premium plans… that means that some Medicare Advantage plans in the market won’t cost you anything extra on a monthly basis.

2.) Medicare Advantage plans often cover extra benefits that original Medicare doesn’t cover (hence the word “Advantage”).

It varies from company to company and plan to plan, but these extra benefits can be things like preventive dental coverage, yearly allowances for glasses or contacts, fitness or gym memberships like SilverSneakers or Silver & Fit, and a monthly or quarterly allowance for over the counter products such as vitamins, first aid supplies, skin care products, etc…

3.) All Medicare Advantage plans have what’s called a Maximum Out of Pocket.

This is just what it sounds like…it’s a maximum out of pocket expense that you can’t go over even in a worst case scenario. For someone that just has original Medicare (without a supplemental plan) they are responsible for the other 20% that original Medicare doesn’t cover… and there is no limit or cap on that amount. With a medicare Advantage plan’s Maximum out of Pocket, you at least have a bit of a safety net there in the event you find yourself in a catastrophic medical situation or an extended hospital stay. For most Medicare Advantage Plans, the maximum out of pocket cost ranges from about $4000 to presently no more than $6700 maximum out of pocket cost per year. This is certainly a better scenario than finding yourself on the paying end of a $100,000 hospital bill that you have to pay 20% of. $6700 is much less than $20,000, so in this regard, a Medicare Advantage plan is certainly better than having JUST original medicare.

4.) You can enroll into a Medicare Advantage plan regardless of almost any health condition you may have…

the one exception being ESRD (end stage renal disease). That being said, there are only certain TIMES that you can enroll into a Medicare Advantage plan such as during AEP (the Annual Election Period of Oct. 15th-Dec. 7th) or when you initially start your Medicare Part B benefits. There are some exceptions to this rule depending on whether or not you receive extra help from Social Security for your drug costs or if you receive Medicaid benefits from the state such as TennCare or the pink QMB card.

5.) Drug Coverage: While there are Medicare Advantage plans without Drug coverage, there are also many that INCLUDE Drug coverage at no additional cost.

These are called MAPD plans (Medicare Advantage/Prescription Drug) plans. They usually have robust formularies and most have zero deductibles to meet annually. These MAPD plans essentially combine your Medicare Parts A, B, and D…and again, are referred to as Medicare Part C.

Sounds great, right? Well…let’s also take a look at some of the drawbacks. Here are a few CONS to having a Medicare Advantage plan.

1.) You still have to pay your Medicare Part B premium:

Just because you’re substituting your original Medicare with a Medicare Advantage plan, doesn’t mean you get out of paying your Medicare Part B premium… which is currently $121.80/month unless you’re getting state subsidy, in that case it could be lower, or unless you’re in an upper income bracket, in which case it could be higher than $121.80/month. Regardless of which Medicare Advantage plan you choose, you’ll still have to pay your Part B premium each month. This is so Medicare can pay your Medicare Advantage plan company to administer your healthcare coverage. If you haven’t figured this out already, it’s called having a “middle man”…or, to be politically correct, it’s called having a Managed Healthcare plan. Medicare pays the Medicare Advantage plan company and the Medicare Advantage plan company pays your medical bills and handles every aspect of your healthcare coverage.

2.) Networks: The nice thing about original Medicare combined with a Medigap plan is that you can see over 95% of doctors in the united states and not have to deal with any networks.

This gives you the ability to travel freely about the country and rest assured knowing you’ll be able to see a doctor in most any given city or town in the US. Conversely, all HMO Medicare Advantage plans have networks to deal with. Is your doctor in network? Will they stay in network? How about your specialists? How about your hospital? Sometimes there’s no issue, but when there is a network issue, it can be a real hassle to deal with. If you go outside of your HMO plan’s network, your Medicare Advantage plan will not cover you and because you no longer have Original Medicare as your primary coverage, you WILL pay full price for any services or procedures you receive. Even the PPO Medicare Advantage plans have “Preferred Provider Networks.” Yes, you do have the option of going outside of the PPO network, but you will pay up to 50% more and it’s up to the doctor if they want to accept your particular PPO plan as payment. If they won’t…you’ll be paying full price there as well, just like with an HMO Advantage plan outside of network.

3.) Referrals: Not all, but most of the Medicare Advantage plans on the market require referrals to see a specialist of the plan’s choosing, not your choosing.

This is the main reason they’re called “Managed Care” plans. It’s a way for the insurance companies and medical providers to manage costs and care. This is great for them, not always great for you. Do you want to see the best specialist in your market or do you want to be stuck with the one your primary care physician has to refer you to? Also, referrals take extra paperwork and time, often prolonging your much needed specialist visit by days or sometimes several weeks. Are you OK with waiting around for an urgent test, consultation or procedure?

4.) Copays and Coinsurance: With the exception of Special Needs Plans that are exclusively for those with Medicare and some form of Medicaid (Such as TennCare or QMB), all Medicare Advantage Plans have ongoing out of pocket costs.

You’ll pay copays for Primary Care Physician visits, Specialist visits, Urgent Care visits, and the big one…hospital visits which will cost you upwards of $300+ per day for the first 4-6 days you’re in the hospital. Add to that large copays or coinsurance for things like Advanced Imaging (CT Scans or MRI’s) X-rays, Blood-work, Labs, Tests, Diagnostics, Ambulance rides, the list goes on and on and this is where things can add up quickly to that $6700 maximum out of pocket cost each year that I mentioned previously. Don’t let the zero dollar premium per month plan fool you…they always get their money one way or another.

5.) Stability: Between coverage, copays, benefits and networks…these plans change in some or all ways literally every year.

Sometimes for the better, but sometimes for the worse. If you’re OK with your plan being in flux annually…or OK with your plan’s company possibly being bought out by a competitor and your plan just vanishing into thin air, then you should be fine. If you like a product that’s a bit more stable, there are absolutely better options than Medicare Advantage plans. Generally speaking, I always recommend sticking with Original Medicare, picking up a Medigap plan for the other 20% and adding a Stand-Alone Prescription Drug plan for your medications, but some individuals simply cannot afford the extra cost of a Medigap plan and a Stand Alone Prescription Drug plan. In those situations, I do recommend going with a Medicare Advantage plan rather than having JUST original medicare as your only coverage. You have the added protection of that Maximum Out of Pocket safety net and the included drug plan and extra benefits Medicare Advantage plans provide can be a real asset if you’re on a tight, fixed income. If cost isn’t a huge concern or you simply want the best coverage, original Medicare with a Medigap Plan and a Stand Alone Prescription Drug plan is simply the best coverage your money can buy. It gives you the best options for doctor and hospital choice without having to worry about networks or referrals and adding the small extras like dental coverage and a gym membership isn’t terribly expensive.

If you’d like more clarification on these plans or want to know all of your options, just give us a call for a free, no obligation consultation.

We are THE source for Medicare Supplemental, Medicare Advantage, Prescription Drug and Dental plans in Tennessee.
Remember, Medicare doesn’t cover everything…so call us at 1-800-431-5431 and let us help you zap the gap.

Comments 2

  1. Hello I’m 57 and have Medicare in Tenn but I only have Qmb with it which is great but I need something to help pay transportation to drs

    1. Post

      Hi Linda.

      There are many Medicare Advantage Plans available to individuals that have both Medicare and QMB. They are called “Special Needs Plans” and they provide transportation as well as many other extra benefits not provided by Medicare or QMB. Give us a call at 1-800-431-5431 and we’ll be happy to help you explore your options.

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