The Medicare Advantage program (also called "Medicare Part C") consists of health plans offered by private insurance companies that have a contract with Medicare. If a person with Medicare chooses to enroll in a Medicare Advantage plan, their Part A (hospital) and Part B (medical) benefits are then administered by the Medicare Advantage plan they choose - instead of being administered by Medicare directly. In other words, it is simply another way for you to receive your Medicare benefits. To be eligible for enrollment in a Medicare Advantage plan you must first have both Medicare Parts A & B and live in the plan’s service area. For a complete overview of the parts of Medicare and what they cover, check out our Medicare 101 page.

What Does Medicare Advantage Cover?

Medicare Advantage plans are required to cover everything Original Medicare covers. However, the cost sharing (i.e. deductibles, co-pays and co-insurance) you are responsible for is done a little differently. For example, a doctor office visit on a Medicare Advantage plan may be a nominal co-pay - whereas on Original Medicare you would first have to meet the Part B deductible and then be responsible for 20% of charges. Many Medicare Advantage plans also cover Part D prescription drugs which eliminates the need to enroll in a standalone prescription drug plan.

How Much Does Medicare Advantage Cost?

Medicare Advantage premium amounts depend on where you live. In many instances (particularly in densely populated areas), Medicare Advantage premiums tend to be a lot lower than Medicare supplement premiums. 

Tap here for Medicare Advantage plan options and rates in your area.

Types of Medicare Advantage Plans (HMO, EPO, POS, PPO, MSA and PFFS – What does that mean?)

The health insurance industry uses a lot of acronyms like “HMO”, “PPO, “POS“, “PFFS”, etc. So it’s easy to see why many people get confused when trying to find the right Medicare plan. 

Below is an overview of Medicare Advantage plan types. 

HMO (Health Maintenance Organization):

A Health Maintenance Organization (HMO) is one of the least expensive types of health insurance. It has low premiums and deductibles as well as fixed copays for things like doctor visits. HMO’s require you to choose doctors within their network for any routine or follow-up care (NOTE: emergency care is always covered in-network regardless of where the event occurs). When you sign up for an HMO plan, you’ll select a primary care physician (PCP) whom you’ll see for regular checkups. Your PCP will need to give you a referral before you can see a specialist (for example: a dermatologist or an orthopedic doctor). Because all your health services are funneled through your PCP, it’s important to find one you trust. HMOs can be a very good value as long as the doctors and medical centers you would like to see are all in the same network.

EPO (Exclusive Provider Organization):

An Exclusive Provider Organization (EPO) is a lesser-known plan type. Like HMOs, EPOs cover only in-network care, but networks are generally larger than HMOs. They may or may not require referrals from a primary care physician. Premiums tend to be higher than HMOs, but lower than PPOs.

POS (Point of Service):

As with an HMO, a Point of Service (POS) plan requires that you get a referral from your primary care physician (PCP) before seeing a specialist. However, this plan type does allow you to see out-of-network providers, albeit at a higher cost share. This is an important difference if you are managing a condition and one or more of your doctors are not in network. 

HMO-POS

You may see a type of Medicare Advantage plan called “HMO-POS”. This type of plan is a hybrid of both plan types. It essentially operates as an HMO with some limited out of network coverage features.

PPO (Preferred Provider Organization):

Preferred Provider Organization (PPO) plans tend to have higher premiums than HMO, EPO or POS plans. The main difference, however, is that PPO plans allow you to see specialists – both in and out of network - without a referral. Copays and coinsurance for in-network services are typically higher than other plan types. Out of network coinsurance can cost up to 50% of medical expenses up until you reach the plans’ out of pocket limit (the out of pocket limit is the most you could be financially responsible for in a given year). PPO plans are a good option for those who want more flexibility with their provider choices and don’t mind paying higher premiums and cost sharing.

PFFS (Private Fee For Service):

Medicare eligible people who are enrolled in a PFFS plan are able to receive Medicare covered services from any medical provider who accepts Medicare. However, the medical provider must accept the plan’s terms and conditions for payment before providing any services (except for emergencies). So it is important that PFFS enrollees confirm whether or not their preferred providers will accept the plan before enrolling. Cost sharing on a PFFS plan may include deductibles, copays and co-insurance and no referrals are needed to see specialists.

Some PFFS plans have networks, others do not. When it comes to non-network providers, enrollees may end up paying more for services. For example, non-network providers can charge PFFS enrollees up to 15% above the Medicare allowable amount. 

PFFS plans may or may not include Part D prescription drug coverage. If a PFFS plan does not include Part D drug coverage, the enrollee would have to purchase a standalone Part D drug plan in order to receive Medicare prescription drug coverage. 

It is important to note that PFFS plans are not Medigap (Medicare supplement) plans and they are not the same as original Medicare Fee For Service.

MSA (Medical Savings Account):

Medicare MSA’s are high deductible health plans that include a medical savings account. The funds in the savings account can only be used to pay for qualified medical expenses. Medicare makes contributions to the savings account (the amount Medicare contributes varies by plan). Any money left in the account at the end of the year is rolled over to the next year. Once the deductible is met, the plan pays 100% for Medicare covered services. If an enrollee uses all the funds in the savings account before the deductible is satisfied, the enrollee then must pay 100% of charges until the deductible is met. MSA’s do not cover pharmacy drugs, so in order for an enrollee to have Part D pharmacy drug coverage they would need to enroll in a standalone drug plan as well.

NOTE: Not all plan types are available in every region. Tap here to find out which plans are available in your area.

Reasons Why Some People Prefer Medicare Advantage Plans

Medicare Advantage plans are a convenient way to receive your Part A (hospital), Part B (medical) and in most cases Part D (prescription drug) benefits. It is also a good option for people who are looking to save money but still want a health plan with robust benefits. Medicare Advantage plans may also offer extra benefits beyond what Medicare covers – which can go a long way in helping their plan members stay healthy, active and save money on other qualified products & services.

Things To Consider Regarding Medicare Advantage Plans

Because most Medicare Advantage plans are network based, it is strongly recommended that enrollees obtain services within the plan’s network. Otherwise, you could end up with much higher out of pocket expenses than you anticipated. Here are some examples of non-network cost sharing an enrollee may experience on different plan types: 

Example 1: If you are enrolled in a Medicare Advantage HMO or EPO plan, non-emergency services rendered out of network are not covered at all – even if the provider has an agreement with Medicare to receive payments.

Example 2: If you are enrolled in a Medicare Advantage PPO plan and you see a provider outside the preferred provider network, you may be responsible for up to 50% of the cost (except for emergencies). The out of pocket limit for non-network services can be as much as double the in-network out of pocket limit.

Example 3: If you are enrolled in a Medicare PFFS plan and you receive services from an out of network provider, you could be responsible for up to 15% over what Medicare typically allows (assuming the provider has accepted the plan’s terms and conditions).

Before deciding on any Medicare Advantage plan, be sure to do your due diligence and make sure the medical providers you wish to see will accept the plan(s) you are considering. This could be the difference between a health plan that meets all of your needs versus having your health care choices adversely impacted.

The Bottom Line

Medicare Advantage plans can be a great option for people who are looking to save money and understand that they will have to abide by the plan's rules — which may include receiving routine and follow-up care within a specific network. This is particularly true for those who have had an HMO or PPO in the past and perhaps their doctors are already in one network, or at least they are willing to change their doctors if necessary. Other people may see medical providers who are critical to their care that do not accept network-based plans, or they may live in an area where plan networks are few and far between. In cases like this, a Medicare supplement (also known as "Medigap") may be a better option.