I’m New to Medicare. Should I Sign Up for a Medicare Advantage Plan?

May 2, 2016

By: The My Medicare Matters Team

This is the first article in our New to Medicare series. You can read the second article here: “I’m New to Medicare. Should I Sign Up For A Medigap/Medicare Supplement Plan?

Are you turning 65 soon? There are so many considerations that go into choosing the right Medicare plan for your needs. It can be more than a little overwhelming! Luckily, we are here to help.

No matter what your situation, it all starts with deciding between two main options. Option one is Original Medicare (potentially combined with Part D and/or Medigap). Option two is Medicare Advantage (MA).

1. What is the difference between Original Medicare and Medicare Advantage?

Original Medicare and Medicare Advantage are two different ways of covering many of the same services.

Original Medicare (i.e. Medicare Part A plus Medicare Part B) covers basics like hospital services (Part A) and doctor’s visits (Part B). It is called Original Medicare because it was the first type of Medicare program created by the federal government in 1965. You can add an optional Part D plan to your Original Medicare to get your prescription drugs covered, and you can also add a Medigap plan (aka supplemental coverage) to cover the cost gaps in Original Medicare. If you choose Original Medicare, it is strongly recommended that you add both Part D (to get prescription drug coverage) and Medigap (to help pay the costs of Original Medicare). Without these two additions, it can be very difficult to afford prescriptions and other medical expenses.

Or you can go with option two, the Medicare Advantage (MA) plan. MA is a privately managed alternative to Original Medicare (which is run by the federal government). An MA plan covers all of the services of Original Medicare, and usually includes Part D (drug coverage) as well. An MA plan may even offer additional services that Original Medicare does not cover–such as dental, hearing or vision coverage.

So is an MA plan the better option? Or should you go with Original Medicare combined with Part D and Medigap? Let’s take a look at some of the key considerations for determining whether an MA plan is right for you.

2. What are some of the advantages of choosing a Medicare Advantage plan (versus Original Medicare)?

Lower costs

Although you pay the Part B premium with both options, additional premiums with a Medicare Advantage plan are less expensive (sometimes $0) than premiums for a Medigap policy combined with Original Medicare. Additionally, look at the MA plan’s “Maximum Out-of-Pocket Expense,” which sets a limit (or “cap”) on the maximum amount you will have to pay out-of-pocket. These caps vary from plan to plan, but range from about $3,000 to $6,700. Once you’ve spent that maximum amount, you’ll pay nothing for covered services for the remainder of the year. Original Medicare does not offer an out-of-pocket max, so your expenses are limitless (and could therefore be much higher).

Similar to employer health insurance

If you are leaving a job where health insurance was offered, a Medicare Advantage plan will look a lot like what you are used to. Deductibles, co-insurance, drug coverage, physician networks, etc are all part of the package.

One system versus several

An MA plan can feel more cohesive. There’s most likely only one card (your Medicare Advantage card) to keep track of– not three. Some beneficiaries prefer to deal with one system versus the separation of Original Medicare, Part D, and Medigap.

(Potentially) more coordinated care

HMO MA plans require you to choose a Primary Care Physician (PCP). She or he is the gatekeeper for your care, and is responsible for making sure that everyone on your healthcare team is talking to everyone else about how best to treat you. For beneficiaries with complicated, multi-specialist health problems, this can be invaluable.

Additional benefits (that Original Medicare doesn’t cover)

MA plans often include prescription drug coverage, plus vision, hearing and dental benefits—all of which are not part of Original Medicare. Sometimes you pay an additional premium for these, but that is not true for all plans.

3. What are some of the disadvantages of choosing a Medicare Advantage plan (versus Original Medicare)?

Getting coverage for procedures can be more complicated

MA plans are not for everyone. Because managed care plans aim to keep healthcare costs within budget, they try to prevent overuse through various means—such as “prior authorization” for surgery, home health care, hospital stays, and medical equipment. Your doctor will need to provide additional proof before your MA plan will pay for these services.

Billed before you receive treatment

How’s your healthcare budget looking? With MA you pay copays before treatment. So if you find yourself in need of multiple physician visits, you may end up incurring significant copays upfront before you even see the doctor or receive any care (versus owing a 20% coinsurance that would be paid by your Medigap policy if you had Medicare-plus-Medigap).

Less freedom in choosing healthcare providers

With Original Medicare, you can choose to see any physician who accepts Medicare. This means that you can access major medical centers nationwide. On the other hand, MA plans are more restricted in terms of the provider networks they work with. A network is a list of doctors, hospitals, or pharmacies that negotiate prices with insurance companies. Depending on where you live, it can be difficult to find a local doctor or hospital that works with MA. If you see a doctor or visit a hospital that isn’t “in-network” with your MA plan, you will have to pay higher medical fees.

Not as compatible with other forms of retiree coverage

There are also some limitations in how MA works with other types of retiree coverage. For example, beneficiaries with Tricare for Life need to enroll in Original Medicare (versus MA) in order to keep their Tricare coverage. Before you enroll in an MA plan, be sure to explore how it will work with other types of retiree coverage you may be using.

4. What if I sign up for Medicare Advantage and then change my mind? Can I switch to Original Medicare?

You can only switch between an MA plan and Original Medicare once a year, during the annual 7-week Medicare Open Enrollment period from October 15 through December 7. During this time, anyone with MA can drop it and switch to Original Medicare.

However, this leaves out a key fact. In most states, if you have been enrolled in an MA plan for more than one year, you are not likely to be able to enroll in the all-important Medigap policy, which helps many people fill the cost gaps in Original Medicare. At the very least, you may be subject to additional “underwriting” – an evaluation of your risk as a beneficiary. So be aware that if you stay on your MA plan for more than one year and then try to switch to Original Medicare, your Medigap choices may be limited or nonexistent.

The key takeaway? It’s important to look before you leap when choosing your Medicare plan! Take time to read and discuss these options with a licensed Medicare benefits adviser. You can access their help for free by taking the Medicare Questionnaire assessment. Or call your local State Health Insurance Assistance Program (SHIP) for federally-funded Medicare counseling. Although wading through all of this information can be frustrating, it can make a huge difference to your health and finances for years to come.