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What is Medicare Advantage?

A guide to Medicare Part C benefits, costs, eligibility and enrollment

Louise Norris

What is Medicare Advantage?

Medicare Advantage (Medicare Part C) is a coverage alternative to Original Medicare.  Medicare Part C plans are offered by private insurers approved by Medicare. In 1997, Congress passed legislation creating the Medicare+Choice program, which was renamed Medicare Advantage under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.1

As of September 2023, there were nearly 32.5 million people covered by Medicare Advantage, accounting for almost half of the more than 66 million total Medicare beneficiaries. (The rest had Original Medicare.)2 Enrollment in these plans has grown significantly over the years. In 2007, only 19% of Medicare beneficiaries had Medicare Advantage plans.3

What does Medicare Advantage cover?

All Medicare Advantage plans are required to cover services that are covered by Medicare Part A and Medicare Part B, with the exception of hospice services. However, the out-of-pocket costs for these services vary widely between Original Medicare and Medicare Advantage. And there can be different coverage rules under Medicare Advantage plans, such as a requirement to use in-network medical providers or obtain prior authorization.

This differs from one Medicare Advantage plan to another, and also differs from Original Medicare. Original Medicare allows beneficiaries to use any provider who accepts Medicare, and prior authorization is very rarely used in Original Medicare.

Read our overview of Original Medicare.

Medicare Advantage enrollees only have one plan, rather than having to use multiple plans to get coverage for all the care they need. (For example, Medigap – also known as Medicare supplement insurance – only works in conjunction with and as an add on to Original Medicare, and cannot be used with Medicare Advantage).

Read our overview of Medicare supplement insurance (Medigap).

Since 2019, Medicare Advantage plans have been allowed to cover a broader range of extra benefits than they could in prior years4 and some Medicare Advantage plans have chosen to offer these benefits. As of 2023, 97% of Medicare Advantage plans offer some type of extra benefit not covered by Original Medicare (although, different benefits are available to different enrollees depending on availability and health status.5

A note about hospice care: In most cases, this is covered under Original Medicare, even if the person is enrolled in a Medicare Advantage plan.6 But CMS debuted a small pilot program in 2021, under which a limited number of Medicare Advantage plans are providing hospice services through the Medicare Advantage plan rather than through Original Medicare.7)

When is Medicare Advantage open enrollment?

Medicare Open Enrollment – also known as the Annual Election Period – runs from October 15 to December 7 each year. This is an opportunity for Medicare beneficiaries to switch to a different Medicare Advantage plan or enroll in one for the first time. Plan selections made during this window will take effect January 1 of the following year.

Read our Guide to Medicare Open Enrollment.

In addition, a Medicare Advantage Open Enrollment Period – from January 1 through March 31 – is an opportunity for people already enrolled in Medicare Advantage to switch to another Medicare Advantage plan or to switch to Original Medicare.

Read more about the Medicare Advantage Open Enrollment Period.

How much does Medicare Advantage cost?

The cost of a Medicare Advantage plan varies depending on the plan you select. Medicare Advantage enrollees pay the Medicare Part B premium ($174.70/month for most beneficiaries in 2024), although some Medicare Advantage plans cover a portion of this cost for their enrollees.8

Across all Medicare Advantage plans, the average premium is about $18.50/month in 2024.9 in addition to the cost of Medicare Part B. But two-thirds of 2024 Medicare Advantage plans with integrated Medicare Part D prescription drug coverage (MA-PDs) are “zero premium” plans.10 This means that they don’t charge a monthly premium and enrollees only have to pay the premium for Medicare Part B.

Average MA-PD premiums tend to be lower for HMOs versus PPOs. In 2023, KFF reported that the average HMO MA-PD had a premium of $14/month, whereas the average local PPO had a premium of $17/month and the average regional PPO had a premium of $46/month.11

The majority (56%) of 2024 Medicare Advantage plans are HMOs, although this is down from 71% in 2017. Local PPOs account for 42% of plans in 2024, up from 24% in 2017. Regional PPOs are rare, accounting for just 1% of plans in 2024.12

Who is eligible for Medicare Advantage Plans?

If you already have Medicare Part A and Medicare Part B (or are eligible to enroll in th97em), you can choose to enroll in any Medicare Advantage plan available in your area, instead of Original Medicare. You can do this when you’re first eligible for Medicare, or during Medicare Open Enrollment (the Annual Election Period).

But there are some rural areas of the country where no Medicare Advantage plans are available for purchase.5 If you’re in one of those areas, Original Medicare is your only Medicare coverage option.

An increasing number of employers are using Medicare Advantage plans to provide health coverage to their retirees: About 18% of Medicare Advantage enrollees are enrolled in employer-sponsored Medicare Advantage plans.13

If you have employer-sponsored or union-sponsored health benefits, you may be able to add a Medicare Advantage plan, but you’ll want to discuss this with your benefits administrator first, to ensure that you won’t lose your existing health benefits if you enroll in a Medicare Advantage plan.

Special Needs Plans (SNPs) are Medicare Advantage plans that are specifically designed to cater to the needs of certain populations, such as individuals with certain chronic medical conditions. Institutional Special Needs Plans (I-SNPs) are for, among other things, people who live in long-term care skilled nursing facilities. In order to join any SNP, you would have to meet the specific eligibility requirements of the plan.14

What are the different types of Medicare Advantage plans?

There are five different types of Medicare Advantage plans15 although not all of them are available in all areas:

  • HMO (health maintenance organization; some HMOs have a point-of-service option for out-of-network care, and are known as HMO-POS plans)
  • PPO (preferred provider organization)
  • PFFS (private fee-for-service)
  • MSA (medical savings account)
  • SNP (special needs plan; only available to enrollees who meet the plan’s special needs criteria)

A few points to know about the different coverage types:

  • If you enroll in an SNP or HMO (including an HMO-POS), you’ll need to select a primary care doctor. This is not required with an MSA, a PPO, or a PFFS.15
  • HMOs and SNPs may require a referral before seeing a specialist for certain services.15
  • HMOs require enrollees to receive care from medical providers in the HMO’s network. (If it’s an HMO-POS, you might be able to get some care outside the network, albeit with higher out-of-pocket costs.)15
  • About 97% of Medicare Advantage enrollees in 2023 were in plans that included Medicare Part D prescription drug coverage (MA-PDs).16 (89% of Medicare Advantage plans include Part D prescription drug coverage,12 but enrollees tend to select these plans, which is why the percentage of enrollees with MA-PDs is higher.)
  • If you need prescription drug coverage (and don’t already have it from another source, like an employer-sponsored plan) and you’re choosing an HMO or PPO Medicare Advantage plan, it’s important to select a plan that includes prescription drug coverage because you can’t purchase a stand-alone Medicare Part D prescription drug plan if you have an HMO or PPO Medicare Advantage plan.15
  • SNPs are required to cover prescriptions.17
  • PFFS plans sometimes cover prescriptions, but if you have one that doesn’t, you can supplement it with a stand-alone Medicare Part D prescription drug plan.18
  • MSAs do not include prescription coverage, but you can buy a stand-alone Medicare Part D prescription drug plan to supplement your MSA plan.19

Can a Medicare Advantage plan be zero-premium?

Yes, zero-premium Medicare Advantage plans are possible. But most enrollees do still have to pay the premium for Medicare Part B. (In 2024, the standard premium for Medicare Part B is $174.70/month.)8

As of 2023, 73% of all Medicare Advantage enrollees only had to pay the Medicare Part B premium, as their plans did not have any additional premiums.12

Some Medicare Advantage plans pay some or all of the Part B premium on behalf of their enrollees, further reducing the monthly cost of the coverage.

People who are eligible for full Medicaid coverage (in addition to Medicare) do not have to pay Part B premiums.20 And people who are eligible for a Medicare Savings Program may find that one of the programs covers the cost of Part B for them.21

What is the difference between Original Medicare and Medicare Advantage?

Original Medicare vs Medicare Advantage infographic

See transcription of this image.

Original Medicare vs. Medicare Advantage:
a comparison

Original Medicare Medicare Advantage (MA)
Also known as Traditional Medicare Medicare Part C
Enrollment through Federal government:

Centers for Medicare & Medicaid Services

Private carriers
What’s covered? Medicare Part A covers inpatient hospital stays, skilled nursing facility care, hospice care and some home health care.

Medicare Part B covers medically necessary services and preventative services, including doctors visits, outpatient hospital stays and medical equipment.

Combines Medicare Part A and Medicare Part B and usually also includes Medicare Part D prescription drug coverage plus additional benefits described below
Availability Nationwide Sold in most but not all countries.
Outpatient prescription drug coverage  Not included.

(Exception: When administered by injection/infusion in medical office.)

Included in most plans.
Dental & vision Not included. Included in most plans.
Monthly premium cost No Part A premium for most enrollees

Part B premium of $174.70/month in 2024 for most enrollees

Average premium projected to be $18.50/month in 2024. You’ll pay this in addition to your Original Medicare premium.

Note: In 2023, 73% of Medicare Advantage enrollees paid no MA premium, and only paid the Medicare Part B premium.

Cap on out-of-pocket costs No Yes: In-network out-of-pocket costs can’t exceed $8,850 in 2024 (not including prescription drug costs).
Nationwide access to physicians Yes Access varies plan to plan. Some MA plans have narrower networks – with fewer physicians in their county.
Will you need to buy additional supplemental coverage? Probably. Most people buy supplemental insurance due to the lack of prescription drug coverage, dental, vision, and cap on out-of-pocket costs. Probably not, because most Medicare Advantage plans include coverage for prescription drugs, dental, vision, and cap on out-of-pocket costs.

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.

Footnotes
  1. Health Plans – General Information” CMS.gov 
  2. Medicare Monthly Enrollment. CMS.gov, September 2023 
  3. Medicare Advantage in 2023: Enrollment Update and Key Trends” CMS.gov, April 2023 
  4. Comparing New Flexibilities in Medicare Advantage with Medicaid Long-Term Services and Supports: Final Report” aspe.hhs.gov, January 2022 
  5. Medicare Advantage 2023 Spotlight: First Look” KFF.org, Nov. 10, 2022  
  6. Medicare Hospice Benefits” page 10, Medicare.gov, March 2023  
  7. VBID Model Hospice Benefit Component Overview” CMS.gov, July 28, 2023 
  8. 2024 Medicare Parts A & B Premiums and Deductibles” CMS.gov, October 12, 2023  
  9. Medicare Advantage and Medicare Prescription Drug Programs to Remain Stable in 2024” CMS.gov, September 26, 2023 
  10. Medicare Advantage 2024 Spotlight: First Look. KFF.org, November 2023. 
  11. Medicare Advantage in 2023: Premiums, Out-of-Pocket Limits, Cost Sharing, Supplemental Benefits, Prior Authorization, and Star Ratings. KFF. August 2023. 
  12. Medicare Advantage 2024 Spotlight: First Look. KFF. November 2023.   
  13. Medicare Advantage in 2023: Enrollment Update and Key Trends” KFF.org, Aug. 9, 2023 
  14. Special Needs Plans (SNP)” Medicare.gov, Accessed August 2023 
  15. Compare types of Medicare Advantage Plans” Medicare.gov, Accessed August 2023     
  16. Medicare Advantage in 2023: Premiums, Out-of-Pocket Limits, Cost Sharing, Supplemental Benefits, Prior Authorization, and Star Ratings” KFF.org, Aug. 9, 2023 
  17. Special Needs Plans” CMS.gov, Accessed August 2023 
  18. Private Fee-for-Service (PFFS) Plans” Medicare.gov, Accessed August 2023 
  19. Medicare Medical Savings Account (MSA) Plans” CMS.gov, Accessed September 2023 
  20. Medicaid” Medicare.gov, Accessed August 2023 
  21. Medicare Savings Programs” Medicare.gov 
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