How Do Medicare Advantage Plans Work? A Brief Guide

Private health insurers offer Medicare Advantage plans, which provide many of the same coverages as Original Medicare, but with additional benefits.

Janet Berry-Johnson
Janet Berry-Johnson
  • 8+ years writing about insurance, taxes, and personal finance

  • Certified public accountant

Janet applies her experience in personal finance, taxes, and accounting to make complex financial topics accessible. Her byline has appeared on numerous web media.

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Ashley Cox
Edited byAshley Cox
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Ashley CoxManaging Editor
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  • 5+ years in insurance and personal finance content

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Updated February 14, 2023 at 11:00 AM PST

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Medicare Advantage (MA) is a Medicare insurance product, but it works more like private insurance. In 2022, almost half of Medicare beneficiaries enrolled in Medicare Advantage plans, according to the Kaiser Family Foundation.[1] Medicare Advantage includes Medicare Parts A and B of original Medicare, and often Part D (prescription coverage). Many MA plans also include benefits such as dental, vision, hearing, and gym membership discounts.

Like regular health insurance, coverage options vary with different MA plans, as does the cost. So it’s important to shop around and find the plan that’s most cost-effective for you.

How do Medicare Advantage plans work?

Private health insurance companies sell Medicare Advantage Plans, also known as Medicare Part C. As of 2023, 3,998 MA plans are available, and the average beneficiary has 43 plans to consider.[2] 

Companies that offer MA plans contract with Medicare to provide the same services as Medicare Parts A (hospitalization) and B (medical insurance), plus other benefits Original Medicare beneficiaries typically don’t get.

The main differences between Medicare Advantage and Original Medicare are the extra benefits offered and the cost. Rather than having just medical, hospital, and prescription coverage, you may also get coverage for things like hearing, vision, or dental.[3] With everything under one plan, it’s easier to understand your deductibles and what is or isn’t covered.

To purchase a Medicare Advantage plan, you first need to find an MA plan provider in your state. Medicare Advantage plans don’t offer nationwide coverage. You can use the search tool at Medicare.gov to find Medicare Advantage plans available in your state.

Learn More: What Is Medicare Advantage and Is It Right for You?

What do Medicare Advantage plans cover?

Like private insurance plans, all Medicare Advantage plans have different benefits, but most include Medicare Parts A, B, and sometimes D.[4] 

  • Medicare Part A: This is hospital insurance and covers inpatient hospital care, skilled nursing facility care (short-term), and some home healthcare or hospice services.

  • Medicare Part B: This medical insurance covers medical visits, preventive services, diagnostic services and testing, and treatments. It also covers durable medical equipment, such as wheelchairs, walkers, and hospital beds.

  • Medicare Part D: This plan covers your prescription drugs. Most Medicare Advantage plans include it.

In addition to all the Original Medicare coverages, Medicare Advantage may offer benefits including:[5]

  • Vision

  • Hearing 

  • Dental

  • Transportation to medical appointments

  • Over-the-counter drugs not covered by Part D

  • Gym memberships and other wellness programs

See Also: Could Medicare Plan G Save You Money?

What do Medicare Advantage plans exclude?

Medicare Advantage plans include Parts A and B, but they typically don’t cover the following:

  • Clinical trials and clinical research studies

  • Hospice services

  • Cosmetic surgery and other services that aren’t medically necessary

  • Concierge care

Each plan is different and has different rules. Read the fine print to ensure you enroll in the coverage you need.

How much do Medicare Advantage plans cost?

Understanding the premiums is an integral part of your decision. For example, Medicare Part A is free for most people, but Medicare Part B has a standard monthly premium of $164.90 and Medicare Part D has a projected average monthly premium of $43 for 2023.[6] [2] But the exact premium depends on your income and could be higher.

The projected average premium for Medicare Advantage plans — which are in addition to Medicare Parts B and D premiums — is $18 a month for 2023.[7] However, some enrollees will have $0 premiums, and others may pay $200 per month or more, according to the National Council on Aging.[8] 

Many factors affect your Medicare Advantage costs, including:

  • Co-insurance or copayments: Like standard insurance, each Medicare Advantage policy has different co-insurance or copayment requirements. Plans with higher co-insurance or copays may have lower premiums and vice versa. Keep in mind that co-insurance or copayments are the portion of the bill you’re responsible for before insurance covers anything.

  • Doctor availability: Some plans restrict you to certain doctors and hospitals, while others have a wider network. The larger the network, the higher the premiums may be.

  • Coverage: Different MA plans have different coverages. Selecting a plan with broader coverage may increase your premiums.

As you investigate your Medicare Advantage options, consider these factors:

  • How much are the premiums? Premiums are what you pay monthly to have insurance. You pay them whether you use the insurance or not that month, and you could lose coverage if you don’t pay them.

  • What are the deductibles? Medicare Part A and Part B on Original Medicare have separate deductibles. The deductible for Medicare Part A is $1,600 per benefit period, and Part B is $226 per year.[9] However, only some Medicare Advantage plans have deductibles, and many MA plans that include prescription drug benefits have a separate deductible for drug coverage.[8] It’s important to review your options and understand how much you might be required to pay out of pocket when selecting a Medicare Advantage plan.

Check Out: Medigap vs. Medicare Advantage: Which Plan Is Best for You?

Pros and cons of Medicare Advantage plans

Like most insurance plans, Medicare Advantage plans have pros and cons. Let’s consider a few of them. 

Pros
  • You may receive more benefits than Original Medicare. Original Medicare offers comprehensive coverage for services and treatments related to medical care, such as inpatient hospitalization and doctor’s visits. However, it doesn’t provide full protection against out-of-pocket costs. Medicare Advantage plans are an alternative to Original Medicare that can offer better protection against unexpected medical bills.

  • You may have less cost sharing if you have lower copays. Copayments may be lower than those found in Original Medicare and can help you save money on medical expenses.

  • There’s a limit to your out-of-pocket expenses. Medicare Advantage plans have different maximum out-of-pocket costs. This is the most you’ll pay, including premiums, health insurance deductibles, and copays. The maximum out-of-pocket cost for any MA plan is $8,300 in 2023, but some plans offer a lower maximum.[8]

Cons
  • You may be limited in the doctors or facilities you can use. Some MA plans restrict the doctors and facilities you can use. If you choose one of these plans, it’s important to know which providers and facilities are in network. 

  • You’re restricted to the plans available in your state. Medicare Advantage plans are offered through private insurance companies and are only available in states where the insurance company provides coverage. As such, you can’t purchase a Medicare Advantage plan in another state, even if it’s more affordable or provides broader coverage.

  • You may have higher deductibles. Medicare Advantage plans may have higher deductibles than Original Medicare in order to lower your monthly premiums. Deductibles are the amount you have to pay before Medicare benefits kick in. Higher deductibles can help you save money on your monthly premiums but can result in higher overall costs if you need a lot of services during the year.

What are the rules for Medicare Advantage plans?

All Medicare Advantage plans must include Medicare Part A and B and cover everything both plans would cover except hospice care. MA plans must also provide emergency care outside its service area but not outside the United States.

Rules and coverage options change yearly, so it’s important to revisit the plan’s documents before renewing during open enrollment. 

Before choosing a plan, determine what it covers and if the premium is worth the benefits it offers. For example, pay attention to the doctors included in the plan. If you see a doctor outside the plan, your visits might not be covered — or you may have to pay a higher copay, making the plan worthless. 

Read More: How To Switch Back to Medicare From Advantage Plans

How to enroll in a Medicare Advantage plan

To enroll in a Medicare Advantage plan, you must be enrolled in both Medicare Parts A and B. You can enroll in Medicare starting three months before your 65th birthday and for three months after you turn 65. 

You can enroll or change enrollment during the open enrollment period of Oct. 15 to Dec. 7 each year. The open enrollment period for Medicare Advantage runs from Jan. 1 to March 31 each year. During that time, you can also enroll in Medicare Advantage or switch to a different MA plan.

Once enrolled in Medicare Part A and B, you can enroll in Medicare Advantage with these steps:

  1. Use the Medicare Advantage plan finder to find a plan in your area.  

  2. Determine if you can enroll in the plan, complete the information online, and enroll.

You can also:

  1. Call Medicare at 1-800-633-4227.

  2. Obtain the paperwork needed to get coverage and return it to the provider.

You must provide your Medicare Part A and B insurance plan numbers when you enroll in Medicare Advantage.

See Also: The 10 Best & Worst Medicare Advantage Plans

Medicare Advantage plan FAQs

Medicare Advantage may help you get more coverage than standard Medicare or help you streamline your coverage. Here are answers to a few common questions about Medicare Advantage plans.

  • Who might need a Medicare Advantage plan?

    Medicare Advantage plans can be financially beneficial, especially for chronic conditions requiring frequent medical care. People who see the doctor often need lower deductibles and fewer fee-for-service options to keep their costs down. MA can also be good for seniors looking for other benefits, such as vision and dental, rather than paying out of pocket.

  • How do Medigap plans policies work with Medicare Advantage?

    You can’t simultaneously enroll in Medigap (supplemental insurance to help with the cost of what Parts A and B don’t cover) and Medicare Advantage. If you currently have an MA plan and want to enroll in Medigap, you have to demonstrate that you’re switching back to Original Medicare.[10]

  • What’s the difference between Medicare Advantage and Original Medicare?

    Original Medicare Part A covers hospital stays and skilled nursing, and Part B covers medical visits. Medicare Advantage covers the same things as Medicare Parts A and B, but many plans also include Part D and other benefits, such as vision and dental.

  • Can you enroll in an MA plan with a pre-existing condition?

    Yes, you can enroll in an MA plan if you have a pre-existing condition, including End Stage Renal Disease.

  • Do Medicare Advantage plans have deductibles and copays?

    Yes, each plan differs, but expect deductibles and copays for each type of coverage included in your Medicare Advantage plan. However, some plans offer no-deductible options.


Sources

  1. Kaiser Family Foundation. "Medicare Advantage in 2022: Enrollment Update and Key Trends." Accessed February 13, 2023
  2. Kaiser Family Foundation. "Medicare Advantage 2023 Spotlight: First Look." Accessed February 13, 2023
  3. U.S. Department of Health & Human Services. "What is Medicare Part C?." Accessed February 13, 2023
  4. Medicare.gov. "Parts of Medicare." Accessed February 13, 2023
  5. Medicare.gov. "How do Medicare Advantage Plans work?." Accessed February 13, 2023
  6. Medicare.gov. "Medicare Advantage Plans cover all Medicare services." Accessed February 13, 2023
  7. Center for Medicare & Medicaid Services. "Biden-Harris Administration Announces Lower Premiums for Medicare Advantage and Prescription Drug Plans in 2023." Accessed February 13, 2023
  8. National Council on Aging. "What Are the Costs of Medicare Advantage?." Accessed February 13, 2023
  9. Medicare.gov. "Costs." Accessed February 13, 2023
  10. Medicare.gov. "Medigap & Medicare Advantage Plans." Accessed February 13, 2023
Janet Berry-Johnson
Janet Berry-Johnson

Janet Berry-Johnson, CPA is a freelance writer with a background in accounting and income tax planning and preparation. She's passionate about making complicated financial topics accessible to readers. She lives in Omaha, Nebraska with her husband and son and their rescue dog, Dexter. Visit her website at www.jberryjohnson.com.

Ashley Cox
Edited byAshley CoxManaging Editor
Headshot of Managing Editor Ashley Cox
Ashley CoxManaging Editor
  • 7+ years in content creation and management

  • 5+ years in insurance and personal finance content

Ashley is a seasoned personal finance editor who’s produced a variety of digital content, including insurance, credit cards, mortgages, and consumer lending products.

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