The Basics of Medicare Advantage Plans

Take a look at Medicare Advantage plans as you search for the best option for your health care needs.

There are two ways to enroll in Medicare. The first is through original Medicare, which includes Parts A and B. The second is through Medicare Advantage plans, which bundle Parts A and B in an “all-in-one” health coverage package.

Original Medicare provides good coverage for basic medical services at hospitals and physician offices, but Parts A and B only pay for around 80% of your total health care costs. The remainder comes out of your own pocket, and that could get expensive. Medicare Advantage plans can help you bridge the gap to pay some of the out-of-pocket costs original Medicare does not cover. But it’s important to shop around and know what is and is not covered before you choose a Medicare Advantage plan.

Why consider Medicare Advantage? Not only will Medicare Advantage plans bundle Parts A and B, but many will also include Part D for prescription drug coverage. With original Medicare, you have to shop for Part D coverage separately. Plus, some Medicare Advantage plans offer coverage for other health-related services that original Medicare does not pay for, including dental care, vision services and hearing aids.

Also, Medicare Advantage plans will cap how much you pay in a year for services under Parts A and B. Once you hit that annual limit, you won’t pay anything out of your own pocket. Original Medicare has no annual out-of-pocket limits, so you may be able to lower your total health care costs with a Medicare Advantage plan.

What to look out for? Most Medicare Advantage plans are either health maintenance organizations (HMOs) or preferred provider organizations (PPOs), so you’re limited to using the care providers in the plan’s network for the lowest costs. Medicare generally has no limits on what doctors or hospitals you visit, as long as they accept Medicare. You also may need a referral to see a specialist with a Medicare Advantage plan, something that’s not necessary with original Medicare.

Medicare Advantage or Medigap? Medigap plans are supplemental insurance that can help you pay for the 20% of coinsurance costs that Medicare Parts A and B do not cover. You may be able to buy Medigap coverage through a former employer’s plan or a union. But if you opt for a Medicare Advantage plan, you don’t need and can’t get Medigap coverage. Medigap won’t pay for premiums, deductibles or co-payments with a Medicare Advantage plan. It’s one or the other, so consider this as part of your overall Medicare decision.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal.

This material was prepared by LPL Financial.

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