Alyssa Lane
Medicare Advantage is a health insurance plan that provides Part A (Hospital Insurance) and Part B (Medical Insurance) benefits to people with Medicare. These plans are typically offered by private companies that contract with Medicare and often cover both Medicare and Medicaid services for enrollees who are eligible for both. Medicare Advantage plans are required to offer coverage that meets or exceeds the standards set by Medicare Parts A and B, and they feature an out-of-pocket annual spending limit of the beneficiary's choosing. In most states, Medigap insurers are required to issue policies to beneficiaries only during specific enrollment windows, and Medicare Advantage enrollees must pay their Part B premium, which was $174.70 per month in 2024.
| Characteristics | Values |
|---|---|
| Cost | Medicare Advantage plans cost the government and taxpayers more than traditional Medicare on a per-beneficiary basis. In 2019, Medicare Advantage plans cost taxpayers $9 billion more than if those enrollees were in traditional Medicare. In 2023, the additional cost was about 6%, down from a peak of 17% in 2009. |
| Coverage | Medicare Advantage plans are required to offer coverage that meets or exceeds the standards set by Medicare Parts A and B, but they don't have to cover every benefit in the same way. Operators are allowed to vary what they cover from Medicare Parts A and B as long as the result is actuarially equivalent. Some Medicare Advantage plans cover both Medicare and Medicaid services for dually eligible enrollees. |
| Enrollment | Medicare Advantage plans are offered by private companies that contract with Medicare. Health insurance companies bid annually to enroll Medicare beneficiaries in their Medicare Advantage plans. In 2022, 1,000 Medicare Advantage plans were projected to enroll 3.7 million people in a Value-Based Insurance Design (VBID) program. |
| Out-of-Pocket Costs | Medicare Advantage plans feature an out-of-pocket annual spending limit of the beneficiary's choosing, typically ranging from $1,500 to $8,000 (as of 2023). Many Medicare Advantage plans with a high limit have no premium, but the enrollee must pay a Part B premium if otherwise required. |
| Fraud | Operators of Medicare Advantage plans have been accused of manipulating diagnosis codes to increase risk ratings and their compensation. Most large operators, including UnitedHealth, Humana, Elevance, and Kaiser, have faced or are facing federal fraud charges. |
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What You'll Learn
Medicare Advantage vs. Traditional Medicare
Medicare Advantage, also known as Medicare Part C, is an alternative to Original Medicare, which is administered by the federal government. Medicare Advantage is offered by private companies or insurers.
Original Medicare is divided into Part A and Part B. Part A covers inpatient hospital care, nursing facility care, nursing home care, hospice care, and home healthcare. Part B covers certain doctors' services, outpatient care, medical supplies, and preventive services.
Medicare Advantage plans include Part A, Part B, and often Part D all in one plan. Medicare Advantage plans may also include additional coverage for dental, hearing, vision, prescription drugs, and more.
Original Medicare allows you to choose any primary care doctor or specialist who accepts Medicare, and you don't need referrals to see a provider. On the other hand, Medicare Advantage plans may restrict you to in-network providers and facilities or charge more for out-of-network care.
When deciding between Original Medicare and Medicare Advantage, it's important to consider your personal budget, coverage needs, and provider access. Original Medicare provides more options, as Medicare Advantage plans have some restrictions and limitations, such as provider networks and prior authorization. Medicare Advantage plans may have lower premiums, but other costs may differ from Original Medicare.
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Medicare Advantage eligibility
Medicare Advantage, also known as Part C, is a health insurance option for Americans that covers Part A (Hospital Insurance) and Part B (Medical Insurance) of Medicare, as well as other benefits such as dental, vision, and prescription drug coverage. To be eligible for Medicare Advantage, you must meet the following requirements:
- Be enrolled in both Medicare Part A and Part B: You can check this by referring to your red, white, and blue Medicare card.
- Live within the plan's service area: The service area is typically based on the county you reside in, not the state.
- Be 65 or older: This is the standard eligibility age for Medicare, but there are exceptions for certain individuals with disabilities, end-stage renal disease, or ALS.
- Meet income and asset requirements: If you are applying for Medicaid in addition to Medicare, you must meet the income and asset requirements, which vary by state.
It is important to note that Medicare Advantage plans are provided by private companies that contract with Medicare. These plans may vary in their specific offerings, so it is essential to review the details of each plan to ensure it meets your individual needs.
If you meet the eligibility requirements for Medicare Advantage, you can enroll during the Annual Enrollment Period (AEP) from October 15 to December 7 each year. You may also be eligible for a Special Enrollment Period (SEP) if you experience a qualifying event, such as moving outside your plan's coverage area.
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Costs and coverage
Medicare Advantage plans provide Part A (Hospital Insurance) and Part B (Medical Insurance) benefits to people with Medicare. These plans are usually offered by private companies that contract with Medicare. The costs of Medicare Advantage plans are bid on annually by health insurance companies that want to enrol Medicare beneficiaries in their Medicare Advantage plans. The bids are based on the company's assessment of the costs of providing Part A and Part B services to the average beneficiary.
Medicare Advantage plans are generally more expensive than traditional Medicare plans. This is because they offer additional benefits not covered by traditional Medicare, such as dental care or eyeglasses. In addition, enrollees must pay a premium for Medicare Part B and Part D (for those who opt for prescription coverage) on top of the premium for the Medicare Advantage plan itself.
Medigap plans can help cover some of the additional costs associated with Medicare Advantage. These plans are provided by private insurers and may include extra benefits like coverage for travel outside the country. However, Medigap insurers are prohibited from selling policies to Medicare Advantage enrollees in most states outside of certain enrollment windows.
Rebates are another way that costs can be lowered for Medicare Advantage enrollees. If a plan's bid is below the local benchmark, it keeps part of the difference as a rebate, which must be used to lower patient costs, premiums, or provide additional coverage. These rebates can also be used to pay for administrative expenses and profits associated with providing extra benefits.
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Medicare Advantage operators
Medicare Advantage plans are required to offer coverage that meets or exceeds the standards set by Medicare Parts A and B, but they are allowed to vary the specific benefits they cover as long as the overall coverage is actuarially equivalent. This means that the cost of the coverage provided must be equivalent to that of Medicare Parts A and B. Medicare Advantage plans feature an out-of-pocket annual spending limit, typically ranging from $1500 to $8000 (as of 2023). Some plans with a high limit have no premium, but enrollees must still pay the Part B premium if required.
In most states, Medigap insurers are prohibited from selling policies to Medicare Advantage enrollees. Medicare Advantage enrollees must pay their Part B premium, which was $174.70 per month in 2024 for most enrollees, with higher amounts for higher-income individuals. Some Medicare Advantage plans pay all or a portion of the Part B premium. These plans can also charge an additional monthly premium, which typically includes Part D prescription drug benefits.
The largest Medicare Advantage operator is a hybrid of AARP, an interest group, and UnitedHealth (UHC), a for-profit private insurance company. UnitedHealth also offers its own Medicare Advantage plans, separate from any AARP-affiliated plans. Other large operators include Humana, Elevance, and Kaiser. These operators have been accused of manipulating diagnosis codes to increase risk ratings and, thus, their compensation, as operators are compensated based on enrollee-specific risk scores.
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Medicare Advantage Value-Based Insurance Design (VBID)
Medicare Advantage, also known as Medicare Part C, is a health plan option provided by private insurance companies that contract with Medicare. Medicare Advantage plans cover everything that Original Medicare (Medicare Part A and Part B) covers, and some plans offer additional benefits.
The Medicare Advantage Value-Based Insurance Design (VBID) Model is a program that began in January 2017. It is designed to test whether certain flexibilities in coverage and payment for Medicare Advantage Organizations (MAOs) would reduce Medicare program expenditures, enhance the quality of care Medicare enrollees receive, and improve the coordination and efficiency of healthcare service delivery. The VBID Model contributes to the modernization of Medicare Advantage and tests whether these model components improve health outcomes and lower costs for MA enrollees.
The VBID Model allows MA plans to offer additional supplemental benefits and/or reduced cost sharing (in some cases to zero). MA plans participating in the VBID Model may also use reward and incentive programs. The VBID Hospice Benefit Component provides access to palliative/hospice services. In 2022, 1000 Medicare Advantage plans were projected to enroll 3.7 million people in a VBID program.
The VBID Model has been successful in enhancing the quality of care for Medicare enrollees, including those with low income, such as dually eligible enrollees and those qualifying for Low-Income Subsidies (LIS). However, the model has also resulted in substantial and unmitigable costs to the Medicare Trust Funds. Due to these costs, the Centers for Medicare and Medicaid Services (CMS) is terminating the VBID Model at the end of 2025.
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Frequently asked questions
Medicare Advantage plans are health plans provided by private companies that contract with Medicare to provide Part A (Hospital Insurance) and Part B (Medical Insurance) benefits.
Original Medicare is available to those who meet the eligibility criteria, whereas Medicare Advantage plans are provided by private companies that contract with Medicare.
Medicare Advantage enrollees must pay their Part B premium, which was $174.70 per month in 2024, with higher amounts for higher-income people. Some plans also charge an additional monthly premium, which may include Part D prescription drug benefits.
When deciding between Original Medicare and a Medicare Advantage Plan, you can consider factors such as the benefits provided, quality of care, patient outcomes, and costs.
In 2022, it was projected that 3.7 million people would be enrolled in Medicare Advantage plans, with 1,000 plans participating in a Value-Based Insurance Design (VBID) program.
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