I. What Is a Medicare Advantage Plan?

Medicare Advantage plans are healthcare plans provided by private insurance companies, and which serve as alternatives to Original Medicare. These plans roll together coverage equivalent to or more comprehensive than Medicare Parts A (Hospital Insurance), B (Medical Insurance), and, usually, also Part D (Prescription Drug Coverage ). Additionally, they often include extras like vision or dental coverage. Patients who purchase Medicare Advantage plans pay monthly Medicare Part B premiums in addition to any premium their Medicare Advantage plan charges, but many Medicare Advantage plans have low premiums ranging from $0-$20.

Medicare Advantage plans are popular because their coverage bundling reduces the number of policies that consumers need to manage. They’re also financially appealing because they all have out-of-pocket spending limits, unlike Original Medicare. In the event of an accident or other crisis, spending limits can save patients from entering into several thousands of dollars of medical debt. The amount of these limits ranges from about $3,000 to $10,000 in most cases, and the legal upper limit for spending caps can change year to year. This article provides a deeper explanation of how out-of-pocket spending limits work.

II. What Are the Basic Types of Medicare Advantage?

Our table below will help you understand the four most common plan types that Medicare allows private companies to offer. Below the table, we’ve included expanded definitions of these plan types as well as resources for understanding two less common plan styles.

 

Health Maintenance Organizations

(HMO)

Preferred Provider Organizations

(PPO)

Private Fee-for-Service Plans

(PFFS)

Special Needs Plans (SNP)
Primary Doctor RequiredYesNoNoYes, or a care coordinator
Referrals RequiredYes*Not usuallyNoYes*
Network TypeStrict network-only coverage except in emergenciesPreferred network coverage alongside higher-cost out-of-network care.Some PFFS have a discounted preferred network, but the patient may also use any provider who accepts the plan’s payment terms.Networks are tailored to the needs of the group served by the plan.
Prescription Drug Coverage Offered**Most plansMost plansMany plansAll plans

Notes:

* Patients may be able to set up yearly mammograms and pap tests without a referral

**If a plan doesn’t include prescription drug coverage, the patient may choose to select a separate Part D plan for prescription drug coverage.

Health Maintenance Organizations (HMO)

An HMO is one of the most strictly organized Medicare Advantage plans. These plans only cover medical costs within a pre-approved network of doctors and hospitals, except in case of emergencies and for some dialysis needs. These plans also won’t approve patients to see a specialist unless they first get a referral from their primary doctor. Most but not all HMOs include drug coverage.

Preferred Provider Organizations (PPO)

PPOs are a step down in strictness from HMOs. They have networks, but they also provide limited coverage for out-of-network healthcare. Unlike HMOs, they don’t require primary doctors or referrals in most cases. Those who have to see a specialist won’t need to jump through hoops to do so. The majority of PPOs include drug coverage.

Private Fee-for-Service Plans (PFFS)

Of all the types of Medicare Advantage in our list, PFFS plans provide the patient with the most flexibility in care options. Technically speaking, some- not all- PFFS plans do have preferred provider networks that offer discounts, but going out of network is easy and still cost-effective for patients. Many PFFS plans include drug coverage.

With a PFFS plan, patients can go to any other doctor or hospital as long as that provider agrees to accept the plan’s payment terms (doctors and hospitals do have the right to refuse except in emergencies). The downside to these plans is that if a patient makes an error and sees a doctor that didn’t agree to the payment terms, then the patient may be left with the entire bill as if she or he were an uninsured patient.

Special Needs Plans (SNP)

Special Needs Plans offer Medicare Advantage to those who are eligible for both Medicare and Medicaid (Dual Eligible SNP), those who live in institutions like nursing homes or who require in-home care (Institutional SNP), and those who have certain chronic illnesses (Chronic Condition SNP). The Medicare website provides more eligibility terms for all of these SNPs.

All SNPs are required to provide drug coverage, and they all have networks that are tailored to the needs of the special group. These plans aren’t available in all locations, and companies can choose which special groups their SNP serves. For example, a Chronic Condition SNP might serve diabetes patients but not dementia patients, and they are allowed to make that distinction.

Less Common Medicare Advantage Plans

HMO Point of Service (HMO-POS)

Some companies offer HMO-POS plans. These plans are essentially the same as HMOs except that they allow limited out-of-network coverage at a higher cost. Exact terms will vary by company.

Medicare Medical Savings Account (MSA)

The defining features of MSA plans, according to Medicare, are “high” deductibles and a medical savings bank account that the plan deposits money in for the patient to use when the need arises. Medicare provides some funds to these plans. MSA plans do not cover prescription drugs. Medicare’s article “10 steps to use a Medicare MSA Plan” provides more information on how MSAs work.

III. What Should You Consider when Comparing Medicare Advantage Plans?

With such a variety of plans available for Medicare Advantage, it’s important for those who are shopping to be clear about their own priorities. We’ve provided some questions below that will help you consider your own needs and narrow your search.

Key Questions for Evaluating Plans

1. Do you value low upfront costs or low long-term costs more?

For low long-term costs, you’ll want to look for as low of an out-of-pocket spending limit as you can find, keeping in mind that premiums will not count toward that limit. You are unlikely to find a limit lower than $3,000. For low short-term costs, you’ll want to look for a plan with low or even $0 deductibles and premiums.

2. Do you mind having a healthcare network?

HMOs, PPOs, and SNPs all have networks, though the networks of HMOs are perhaps the most strict. If you don’t mind using a healthcare network, choose any of these, but if you want to freedom to use any doctor or hospital that will agree to the payment terms of your insurance, then you’ll want to select a PFFS.

3. Do you want extras?

All that most Medicare Advantage plans are required to offer is coverage equivalent to Medicare Parts A and B, but most plans offer extra forms of coverage as well.

Commonly offered extras:

  • Prescription drug coverage (required for SNPs)
  • Vision coverage
  • Dental coverage
  • Fitness programs
  • Hearing coverage
  • Transportation
  • Telehealth
  • Over the counter drugs
  • In-home support
  • In-home medical equipment
  • Emergency response devices
  • Worldwide emergency coverage

You may pay a fee for optional extras, or their cost may be included in the base cost of a plan. Check to see if the cost of extras compares favorably to the cost of such services purchased independently in your community.

4. How much do your current medications, specialists, and tests cost with this plan?

If you have a condition that requires regular check-ups, tests or medication, look into the copays and coinsurance for those services. Medicare’s plan finder shows these costs under “Plan Details.” When considering costs for your condition, keep in mind that all copays and coinsurance should count toward your out-of-pocket spending limit. To be safe, you may want to call the company and ask if there are any exceptions.

5. How would this plan perform in case of severe illness?

Another way to compare the value of plans is to compare the costs of inpatient hospital stays, ambulance rides, and other services associated with severe illnesses and accidents. Insurance typically covers days 5-90 of inpatient hospitalization, but the cost of the first four days varies by hundreds of dollars for different plans, so it’s wise to shop around. Unnecessarily high copays combined with a high out-of-pocket spending limit could make an emergency situation unduly stressful.

IV. Other Resources for Choosing a Medicare Advantage Plan

Website or ArticleHostInformation Type
Joining a health or drug planMedicare.govDetailed information on enrollment periods for Medicare Advantage as well as for other types of Medicare.
Find a Medicare Plan Medicare.govSearch engine for comparing plans from many companies. Searches by zip code with optional log-in abilities for those who want to customize or save searches.
Medicare & You: Understanding Your Medicare Choices (video) Official YouTube Channel for the Centers

for Medicare & Medicaid Services (CMS)

Information to help consumers understand the differences between different forms of Medicare, including Original Medicare and Medicare Advantage, as well as Medicare Supplements.
Seniors & Medicare and Medicaid EnrolleesMedicaid.govInformation on Dual Eligibility and how Medicaid can help some seniors pay for Medicare Part C Premiums.
What if I have End-Stage Renal Disease (ESRD)? Medicare.govInformation on what kind of Medicare (including Medicare Advantage) that patients with ESRD can qualify for.