Medicare beneficiaries have a choice in health plans. They may choose Medicare Part A (hospital insurance) and Part B (physician and outpatient coverage), which together are also known as traditional or original Medicare, or they may choose Part C, a Medicare Advantage plan, which replaces Parts A and B. Medicare Advantage plans also usually come with their own prescription drug plan, thereby replacing Medicare Part D as well.
Medicare Advantage plans are offered by private health insurance companies that contract with the government to provide Medicare benefits. Most of them are managed care plans similar to preferred provider organizations (PPOs) or health maintenance organizations (HMOs). Medicare Advantage plans may cost more than traditional Medicare, but they may also offer additional benefits. It is important for beneficiaries to understand the options in order to make the best choice for their circumstances. For many, traditional Medicare is the default choice, but there are reasons why beneficiaries may prefer Medicare Advantage.
Some people may prefer the way Medicare Advantage plans handle prescription drug coverage. Most of them include prescription drug coverage in the cost of the plan, so the extra cost of Medicare Part D can be avoided. However, the total that beneficiaries pay depends on what prescriptions they have. The Medicare Plan Finder at Medicare.gov can help individuals determine how much they would pay for prescription drugs under various plans.
Another reason people choose Medicare Advantage plans is the limits on out-of-pocket spending. Under traditional Medicare, there is no out-of-pocket maximum, but Medicare Advantage plans are restricted to a cap for out-of-pocket expenditures. Whether a beneficiary would meet that cap depends on individual circumstances. In addition to the cap, Medicare Advantage coinsurance payments may be structured in a more beneficial way.
Beneficiaries may also choose Medicare Advantage because they want vision or dental plans included, or they want an alternative to purchasing “Medigap” coverage to pay for costs that traditional Medicare does not cover. Individuals should examine the costs and benefits of plans carefully to determine the right choice for them.
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