What Are Medicare Advantage Plans and How Can You Get One?

A Shopping Guide for Medicare Advantage Plans

Medicare Advantage

Reaching retirement might mean fulfilling dreams you’ve had for decades but before you set off on your first trip around the world, there are some financial matters you need to attend to. Unfortunately, they come with a lot of complicated terms, tax implications, and rules that you have to understand. One of the most important is Medicare.

You’ve probably heard the term, “Medicare Advantage” in commercials, mailings, and online. You might have written these ads off as unimportant or kind of sleazy but understanding Medicare Advantage is essential for getting the coverage you need and guarding against medical bills that you probably can’t afford to pay.

Filling the Gaps

First, you have to understand how Medicare works and that means understanding each part. Medicare has 4 parts—Parts A, B, C, and D. What’s important to know is that Parts A and B, known as Original Medicare, only covers a portion of your medical expenses and leaves you on the hook to pay potentially large medical bills out of pocket. Let’s take a look at a few scenarios.

Think of Part A as hospital insurance. If you’re admitted to the hospital for any reason, Part A pays for your hospital stay but you have to pay the first $1,316 as of 2017 and if you go to the hospital multiple times, you may have to pay that $1,316 each time. After 60 days, you pay $329 per day and after 90, your costs rise to $658. Do the math and you see that it doesn’t take long for your out-of-pocket expenses to reach levels that the average retiree can’t afford.

How about Part B? Think of Part B as covering anything done to you—medical equipment, doctor visits, tests, ambulance services and more. You’ll probably pay around $134 per month as a monthly premium. If your income is higher, you’ll pay more but most people who get Social Security will pay less—around $109. Your deductible is super cheap at $183 but once you meet it, you have to pay 20 percent of all of the Medicare-approved costs as long as the healthcare provider accepts Medicare assignment but there’s no cap.

For the sake of simple math, if your total medical costs for the year were $100,000, you would be responsible for $20,000 plus your Part A costs if you were in the hospital. You pay 20 percent of the total cost regardless of how large.

Part D covers prescription drugs but there’s the infamous “doughnut hole.” Once you and your plan have spent $3,700 on covered drugs, you’re responsible for 40 percent of the costs for branded drugs and 51 percent of generics until you reach $4,950.

Once you spend enough to move out of the coverage gap, the term Medicare likes to use instead of “doughnut hole”, your costs are again covered. You only pay a small co-payment but while in that doughnut hole you paid potentially thousands in out-of-pocket costs along with a monthly premium of up to $76.20 in addition to your monthly plan premium.

Your Costs Rise Quickly

In a single year where you might have surgery and spend an extended amount of time in the hospital, you could amass medical costs far higher than you can afford to pay. Over the course of years or decades, these costs could lead to a catastrophic financial situation for you and your family.

These are plenty more examples but these are 2 of the largest examples of gaps in your Medicare coverage. Unless you have a sizable amount of money saved you will need additional coverage to fill these gaps. That’s where Medicare Advantage plans come in

What is Medicare Advantage?

There are 2 ways to receive your Medicare benefits. You can have Original Medicare or a Medicare Advantage Plan, also known as Part C. Remember that Original Medicare is Parts A and B and administered by the federal government. You don’t receive prescription drug benefits with Original Medicare.

Also known as Part C coverage, Medicare Advantage plans are administered by private insurance companies. The federal government pays the private companies to administer its portion of the Medicare expenses and the retiree pays the rest of the coverage in the form of a monthly premium. Under a part C plan, you receive all of the Part A and Part B coverage you are entitled to under an Original Medicare plan plus additional benefits.

Types of Medicare Advantage Plans

Medicare Advantage plans work much the same way as traditional health insurance. You can shop around for a plan that has the features you want for a price that fits your budget. There are 5 main types of plans:

Health Maintenance Plans (HMO): These are the types of plans that most people don’t like because it requires them to see doctors in the plan’s network. You may also need a referral from your primary care doctor. Exceptions are made for a medical emergency but outside of that, you won’t get to choose the healthcare providers you would like. But these plans are often the most affordable.

Preferred Provider Organization (PPO): You’ll pay less if you stay in-network but it’s not required. You’ll pay more in out-of-pocket costs if you go outside of the network.

Special Needs Plans (SNP): These plans cater to people with chronic medical conditions or other special needs.

HMO Point-of-Service Plans (HMOPOS): HMO plans that may allow you to receive care outside of your network for a higher copayment.

Medical Savings Account (MSA): Combine a high deductible health plan with a bank account for paying medical expenses. Medicare deposits money into the account for paying healthcare-related expenses.

How to Shop for a Plan

By law, all Medicare Advantage plans must provide everything that Original Medicare provides with the exception of certain hospice care, which is covered in Part A. You don’t have to worry about not receiving the basic benefits you’re entitled to.

Every Medicare Advantage plan has an annual out-of-pocket maximum. Once you reach this limit, the plan covers 100 percent of your costs for the rest of the year. Remember those potential large bills if you were to get seriously ill? This is the part that makes a Medicare Advantage plan so attractive.

Some plans offer additional features like a prescription drug plan, hearing, dental and vision, and health and wellness programs. With additional benefits comes additional costs.

If you don’t want to change doctors, make sure any plan you consider lists your current doctors as part of their network. Finally, what is the plan’s star rating? Medicare gives each plan a star rating that gauges its quality. A 5-star rating means the plan is of the highest quality. The fewer the stars, the more you should steer clear of that plan.


In 2016, the average cost of a Medicare Advantage HMO plan was $39 per month but a PPO was significantly higher at $75 per month. The other plans are less common but may fit your specific health insurance needs.

To begin shopping for plans, go to Medicare’s plan finder, enter your zip code and any other information you would like to provide. You can compare features and pricing for each plan. Some plans will list zero premium but you still have to pay any premiums you would have paid under original Medicare. Medicare is complicated and you can't afford to make a mistake with your coverage. Consider speaking to an insurance professional that specializes in Medicare.

International Coverage

If you plan to spend a lot of time out of the country keep in mind that Medicare probably won’t cover your medical care except in rare cases. You probably need travel insurance, available outside of your Medicare coverage. Talk to an insurance agent for help on exactly what you need.

Stay Safe

According to Medicare, no one should call you or come to your home unless you give them permission. No one is allowed to sell you Medicare products unannounced and you should never give personal information out over the phone unless you asked the company to call you.

They should also not ask you for financial information including bank account or credit card numbers, over the phone.


Although Original Medicare comes at a very affordable cost, you shouldn’t view it as the only healthcare you need. The gaps in coverage represent a real financial danger to your retirement savings. Enroll in a Medicare Advantage or other policy to fill the gaps in coverage.