Medicare Advantage Plans offer quality health care coverage at an affordable monthly premium. With traditional Medicare alone, you will have a co-payment of 20% of the Medicare-approved amount out of your own pocket, each time you use a medical service, which can amount to a big medical bill very fast. With a Medicare Advantage plan, you will have the same if not better benefits at much lower annual out-of-pocket costs.
Advantage plans are offered by private insurance companies, and must follow specific regulations set by the federal government, which ensures that all plans do provide benefits which are at least equal to, and many times better than original Medicare Part A and B. When it comes to price, however, the insurers are free to set their own rate.
This means you will find a wide variety of Medicare advantage plans with different benefits and different costs on the market. One plan may include additional benefits such as wellness programs and prescription drug coverage, while another plan doesn’t. One company will have a large network of medical providers, while you will have a much smaller provider list to choose from at the next plan. The premium not only depends on the benefits that are included in the advantage plan, but also on the deductibles or co-payment requirements. Depending on the provider and the plan you select, your monthly premium may even be as low as zero dollar per month, and you will also find significant differences in co-payments.
In general, costs for advantage plans are less than what you will pay for a Medicare supplemental insurance, as your annual out-of-pocket costs are capped for your protection, and you will get better medical and sometimes even prescription drug benefits that original Medicare.
Your annual costs for a Medicare Advantage Plan depend on several factors: the monthly premium, the annual deductible and the plan’s yearly limit on your out-of-pocket costs, your co-payments or co-insurance (= how much you have to pay for each visit or service), the type of health care services you need and how often you need them. It also matters whether you use the plan’s network providers.
No matter which Medicare advantage plan you select, you have to keep paying your Medicare Part B premium. Even with a ‘zero premium’ advantage plan, you are still required to pay your Medicare Part B premium every month.
Medicare advantage plans usually have an annual out-of-pocket limit, which caps the maximum amount you have to co-pay out-of-pocket at a certain limit, typically between $500 and several thousand dollars. Lower monthly premiums usually come with higher annual deductibles. While low monthly premiums help you save money if you don’t need any unforeseen medical care, a high deductible may haunt you in case you might develop a chronic condition or experience a serious illness that needs extensive care during the year.
As a rule of thumb, if you don’t go to the doctor a lot, the lower monthly premium/high deductible option may be for you, risking that you need to pay out of pocket if you fall sick. Keep in mind that even when you have reached your annual deductible, you are still required to pay co-insurance, which is usually between 20 and 30 % for the use of in-network services (HMO or PPO plans), but can be as high as 50%, depending on the plan.
When you compare Medicare advantage plan costs, make sure to compare the total amount of costs for each plan you consider. This means, don’t only look at the premium, but consider all possible costs, such as co-insurance, co-payments, deductible, or other out of pocket costs or fees.
The good thing about Medicare advantage plans is you can always switch plans at the end of the year, and switch to a plan that better covers your current medical needs, or even go back to original Medicare.