How To Compare Medicare Advantage Plans and Costs

How do they compare to Original Medicare?

Doctor and patient laugh in exam room.
•••

The Good Brigade / Getty Images

If you want more or lower-cost coverage than what’s provided by Medicare Parts A and B (also known as “Original Medicare”), you might want to shop for Medicare Advantage (MA) plans. Or perhaps you already have an MA plan and would like to see if you can improve it during open enrollment.

To get the best Medicare Advantage plan for your needs, it’s helpful to know how to compare these plans, how they work, and what you can get with one that Original Medicare doesn’t provide.

Key Takeaways

  • Medicare Part C (Medicare Advantage) provides the same benefits as Original Medicare, plus extra perks.
  • It’s important to review your plan’s Annual Notice of Change letter and compare available plans during open enrollment.
  • Part C plans can be less expensive than Original Medicare.
  • Use Medicare’s plan finder tool to search available plans that fit your needs.

What Is Medicare Part C Coverage?

Unlike Original Medicare, Medicare Advantage plans have an annual limit on your out-of-pocket expenses and might cover some (or all) of your Part B premium. Plus, they often include prescription drug coverage and benefits that Original Medicare does not.

To get a Medicare Advantage plan, you need to be enrolled in both Parts A and B.

Think of MA plans as a way to bundle your Original Medicare benefits, usually along with prescription drug benefits (which you’d otherwise get from Medicare Part D) and extra benefits (such as hearing, vision, and dental coverage). Because of the way MA plans are structured, many have no premium or even help pay your Part B premium. You can also get perks that you’d otherwise have to buy a Medigap policy for, such as paying lower deductibles and out-of-pocket expenses relative to Parts A and B alone.

Medicare Advantage Plan Types

Because Medicare Part C coverage is administered through private insurance companies, shopping for coverage means comparing a variety of plans. Medicare Part C plans are required to provide at least the benefits you’d get with Parts A and B—except for hospice care, which is still covered by Original Medicare.

Much like other types of health insurance, certain plan structures determine where and how care is provided—some are more expensive than others, offering greater flexibility and benefits, while some are more restrictive than others but are also more affordable. Before comparing specific MA plans, it can help to know how you’d like your plan to be structured.

Plan coverages and costs change annually, so even if you have a Medicare Advantage plan you’re happy with, check your plan’s Annual Notice of Change (ANOC) letter for changes to your coverage beginning next year. It’s well worth the effort to compare plans and revisit your options during open enrollment.

Health Maintenance Organizations (HMOs) 

Also known as HMOs, these are the most restrictive types of policies. Generally, you have to:

  • See doctors in the plan’s network.
  • Choose a primary care physician (PCP).
  • Get a referral from your PCP to get care from a specialist.

Additionally, out-of-network emergency care is covered under an HMO. An HMO is the most affordable plan.

If you really like your current doctors, know that an HMO may require you to switch when the plan’s coverage starts.

Preferred Provider Organizations (PPOs)

Also called PPOs, preferred provider organizations have a preferred network of physicians, but you can pick doctors outside of the network—as long as you’re willing to pay more out of pocket. You don’t need to choose a primary care physician, and you generally don’t need to get a referral to see a specialist. Because of the added flexibility, these plans tend to be among the more expensive than other options. PPOs and HMOs make up the majority of the choices you’ll have through your MA coverage.

Medical Savings Accounts (MSAs)

A medical savings account (MSA) is similar to a health savings account (HSA) in that it’s not an insurance plan on its own. Instead, it has two parts: an actual savings account and a high-deductible Medicare Advantage plan. The MSA deposits money into the savings account portion that you can use to pay for covered services, including the deductible. You aren’t generally bound by a network or to any particular provider.

MSAs don’t cover prescription drugs. You would need to purchase a separate Part D Medicare drug plan for prescription coverage.

Private Fee-for-Service (PFFS) Plans

Private fee-for-service plans are less common than PPOs and HMOs. You can generally go to any provider, and you don’t need to choose a PCP or get a referral for specialty care. Drug coverage may or may not be included. Because of their flexibility, PFFS plans may be more expensive.

How To Compare Medicare Advantage Plans

Since Medicare Advantage plans are offered by individual insurance companies, their coverage often differs, sometimes dramatically. So as you compare MA plan types, premiums, deductibles, and features, keep the following information in mind as a benchmark:

  • The average monthly premium for MA plans in 2022 will be $19 (this is $2.22 lower than the average premium 2021).
  • The out-of-pocket maximum that any MA plan can charge is $7,550 for in-network services and $11,300 for both in- and out-of-network services.

When shopping for Medicare Part C (MA) coverage, you should also have a complete list of the prescription drugs you take. Use Medicare’s Plan Finder to search for plans with a drug formulary that works with your specific needs. You can also input your preferred pharmacy.

Once you find a few plans you like, you can view the provider network for that plan to make sure it works with your doctor.

As you evaluate the options, consider which coverages you’d like as well as how they affect your premium and out-of-pocket costs. You’ll find that many plans include limited coverage for vision, hearing, and dental. Some may also provide coverage for less common benefits like in-home support.

Pay particular attention to an MA plan’s star rating. The higher the rating, the better the plan scored in a variety of metrics.

Medicare Advantage vs. Original Medicare

Switching from Original Medicare to MA may be able to reduce your costs. But if you aren’t comfortable making the switch or you’d like to compare costs, here’s a quick overview of the costs for Original Medicare in 2021 and 2022.

Medicare Part A (Hospital Stays)

Part A, known as hospital insurance, pays for hospital stays. The Part A deductible is projected to be $1,556 in 2022, up from $1,484 in 2021.

Once you’ve paid the deductible, the first 60 days of your stay are fully covered. After 60 days, the 2022 projection is that you’d pay $389 per day, up from $371 in 2021. After 90 days, it’s projected you’d pay $778 per day in 2022, up from $742 per day in 2021.

Part A only fully covers up to 20 days of skilled nursing care. You’ll then pay $185 per day for days 21-100, and you’ll be responsible for all costs from day 101 on. Most people do not pay a premium for Part A. But Part A has no maximum on your out-of-pocket expenses—Medicare Advantage plans do.

Part A plans do not cover long-term care or care related to the maintenance of daily health, such as meal delivery or home health services that aren’t part-time or intermittent. But since 2019, some Medicare Advantage plans do.

Medicare Part B (Medically Necessary Services)

Part B is the piece of Medicare that covers medically necessary services, like doctor’s visits, diagnostic services, and preventive services. Medicare Part B monthly premiums are projected to rise to $158.50 in 2022 from $148.50 in 2021. (Those with incomes above $88,000 and who file individual tax returns pay more.) And the 2022 Medicare Part B deductible is projected to rise from $203 in 2021 to $217.

After you pay the deductible, you pay 20% of the Medicare approved amount for care, but there’s no limit to what you’d pay. If your medical bills are $100,000, you would pay $20,000.

Unlike Original Medicare, Medicare Advantage plans limit your out-of-pocket expenses.

Medicare Part D (Prescription Drugs)

Part D covers prescription drugs. Once you’ve paid the deductible for your plan, you’ll pay a copay or coinsurance for covered drugs during the initial coverage phase, depending on the plan and the drug tier.

Once you have spent $4,430 (in 2022), you’ll enter a coverage gap known as the “donut hole.” During this phase, you’ll pay no more than 25% for prescription drugs. You’ll leave the coverage gap once your total out-of-pocket spending is $7,050 (in 2022) and enter the catastrophic-coverage phase. At this point, you’ll generally pay no more than 5% of the cost of covered drugs for the remainder of the year.

You can be vulnerable to expensive out-of-pocket costs during the Part D coverage gap depending, in part, on the retail cost of the drugs you take.

The Bottom Line

When it comes to Medicare coverage, there’s a lot to consider: whether you should get it at all, which plan to purchase, or whether you should stick with Original Medicare. Keep in mind that Original Medicare on its own can leave you vulnerable to large expenses as it has no limit on out-of-pocket costs. One way to mitigate this is by purchasing a Medigap plan. Another is to purchase “bundled” Medicare coverage via a MA plan.