11 Reasons Why Medicare Advantage Plans are Bad

by David Bynon, last updated

The biggest drawback of Medicare Advantage Plans is the potential for high out-of-pocket costs. This article will explore 11 reasons why Medicare Advantage Plans are bad for some people and work great for others.

But first, let’s discuss what Medicare Advantage is and how it compares to Original Medicare. This is why Medicare Advantage Plans are bad for some people. Even though these plans may offer more complete coverage, they have frequent expenses.

Coverage Options

If you’re 65 or turning 65 soon and are not already on Social Security, you must take the proper steps to sign up for Medicare. Enrollment for American citizens is not automatic unless you get Social Security benefits.

NOTE: If you are still working and have a health plan through your employer, you may be able to delay enrollment.

The first step is to sign up for Medicare Part A and B. Once you are enrolled and have a Medicare number, there are two ways to get Medicare coverage:

  • Original Medicare
  • Medicare Advantage

Original Medicare

Original Medicare is the federal government’s private fee-for-service (PFFS) health insurance system. It has two parts, A and B.

Part A is hospital insurance for inpatient care. Part B is medical insurance for doctor visits, other healthcare providers, medical supplies, and medical equipment.

Original Medicare covers most medically necessary healthcare services. However, it does not pay all costs.

As a general rule, Original Medicare pays about 80% of all Medicare-approved costs, whereas the Medicare enrollee pays the remaining 20% through deductibles, copayments, and coinsurance costs.

To assist with Original Medicare out-of-pocket costs and emergency healthcare when you travel abroad, you can buy Medicare Supplement Insurance. These policies, also known as Medigap plans, cover the gaps (i.e., deductibles, copays, and coinsurance). They don’t add extra benefits.

Medicare Advantage

Medicare Advantage is the private health insurance option for people enrolled in both Medicare Part A and Medicare Part B. You might also hear of these plans referred to as:

  • Medicare Part C
  • MA (Medicare Advantage)
  • MAPD (Medicare Advantage + Prescription Drugs)
  • Medicare All-in-One Plans
  • Medicare Complete Plans

For our discussion, we’ll stick with Medicare Advantage and MA plans.

MA plans are offered by private insurance companies contracted with Medicare to provide Part A and Part B services. Most plans also include Part D benefits for prescriptions.

Most MA plans also include benefits that Original Medicare doesn’t offer, such as dental, vision, and hearing.

Medicare Advantage Plans Mirror Traditional Health Insurance

Unlike Parts A and B, Medicare Advantage is not one-size-fits-all coverage. It mirrors traditional health insurance more closely, including HMO (Health Maintenance Organization) and PPO (Preferred Provider Organization) plans.

Like traditional HMO and PPO plans, MA plans have many pros and cons related to their benefits and restrictions. HMO plans, for example, provide fewer choices at a lower cost, whereas PPO plans offer more choices at a higher price.

There are other options, too, such as HMO plans with a point-of-sale option (HMO-POS), Private-Fee-for-Service (PFFS) plans, Medicare Savings Account (MSA) plans, and Special Needs Plans (SNP).

Do MA Plans Provide the Same Coverage as Original Medicare?

Although MA plans must provide the same coverage as Medicare Part A and Medicare Part B for inpatient and medical care, that is where their similarity ends. Here’s why:

  • MA plan out-of-pocket costs (i.e., deductibles, copayments, coinsurance, etc.) differ from Original Medicare. Each plan sets its prices, which means your out-of-pocket expenses could be higher or lower.
  • MA plans are allowed to restrict care to local provider networks (except in the case of emergencies). Some plans, mainly HMOs, have a limited network of providers.
  • MA plans may require members to get a referral and/or pre-approval to receive certain healthcare services. Through this process, many enrollees experience unexpected costs and denial of benefits for care that’s considered not medically necessary.
  • MA plans change their provider networks, benefits, and costs annually.
  • MA plans must set an annual maximum out-of-pocket (MOOP) limit on Part A and Part B services.

All these features, save one, are not found in Original Medicare, which may or may not have annual premium increases. But, unlike Original Medicare, which only covers medically necessary services, most MA plans offer additional benefits.

What Makes Medicare Advantage Plans Bad (for some)?

Medicare Advantage plans can be difficult to budget for individuals who frequently use healthcare services. High out-of-pocket costs are the most significant reason they do not work well for some people.

That is an important point you must fully understand before making health insurance decisions. Here’s the difference:

  • With Original Medicare and supplemental Medicare insurance, you pay most of your major medical costs upfront through monthly insurance premiums. Doing so helps you manage your budget. There are no surprises.
  • With Medicare Advantage insurance, you pay most of your healthcare costs when you use services. This makes it more difficult to budget for your healthcare because unexpected needs can create high costs.

Disadvantages of Medicare Advantage Plans

Negative questions about Medicare Advantage arise because people ask their friends, neighbors, and healthcare providers about them. That brings up many Medicare Advantage nightmares and why people dislike their current or former plan.

But is it true?

Over the years, we’ve heard from many people, particularly healthcare providers, who dislike Medicare Advantage plans, but that does not mean they are bad.

Disadvantage 1: High Maximum Out-of-Pocket Limits

This is true. And for most individuals considering an MA plan, it is the most crucial disadvantage.

Here’s why.

All Medicare Advantage plans have a Maximum Out-of-Pocket Limit (MOOP) feature. This is a built-in limit on all Medicare Part A and B services. The current maximum for in-network services is $8,550. It creeps up a few hundred dollars every year or two.

A plan’s MOOP is far more important than the monthly premium. Yet, far too many people look at the premium and need to consider how quickly copays will add up so they don’t end up with one of the worst Medicare Advantage plans.

High-deductible Medicare Supplements also have high out-of-pocket limits ($2,800 in 2024). However, no Medicare Supplements are as high as the current limit with Medicare Advantage.

Medigap plans have their disadvantages, primarily the cost. However, the cost pales compared to a Medicare Advantage plan with a high MOOP.

Disadvantage 2: Hospitalization Costs More

In many cases and with many plans, this is true.

A recent Kaiser Family Foundation study shows that half of all Medicare Advantage enrollees would incur higher costs than Medicare beneficiaries in traditional Medicare for a 5-day hospital stay.

This fact also underscores the need to scrutinize Medicare Advantage plans annually so you are not surprised by the bills. Ambulance, emergency room, diagnostic, hospitalization, and inpatient medication copays add up very fast.

Disadvantage 3: They Make You Pay Multiple Copays for The Same Issue

This is true, but it is also true with Original Medicare. However, this complaint highlights the chief difference between Medicare Advantage and Original Medicare with the addition of Medicare Supplement Insurance.

Medicare Advantage is a pay-as-you-go system. You pay your monthly Medicare Part B premium and an additional premium for the plan (if any), but most of your costs come when you use healthcare services.

For instance, you pay a copay if you see your primary care doctor for an issue. If your doctor refers you to a specialist, you pay another copay. And if your specialist orders lab or diagnostic tests, you pay a copay for each.

However, suppose you have Original Medicare and a Medigap Plan G supplement. In that case, you pay your monthly Medicare Part B and supplement premiums but pay virtually nothing when you use healthcare services.

Disadvantage 4: You Are More Likely to See a Nurse Than a Doctor

In many cases, this is true.

HMO and PPO health plans use a method called capitation to pay providers. A capitated contract pays a provider in the plan’s network a flat fee for each patient it covers. Under a capitated contract, an HMO or managed care organization pays the health care provider a fixed amount.

For this reason, many group practices use nurse practitioners and aides to reduce costs. A physician supervises these healthcare workers.

Disadvantage 5: They Only Let You See Certain Doctors

With HMO plans, this is true.

Provider networks are a feature of all HMO and PPO plans. With an HMO plan, you are restricted to the plan’s network (except in an emergency). You pay all costs if you go outside your plan’s network.

PPO plans also have networks. However, they offer the flexibility to use certain non-network providers. When you do, you pay a higher copayment.

Disadvantage 6: They Make You Get a Referral

This is true in the case of HMO plans and many PPO plans.

According to the Kaiser Family Foundation, nearly all Medicare Advantage plan enrollees are in plans that require prior authorization for some services. Prior authorization is one of the tools health plans use to control their costs.

Disadvantage 7: Plan Benefits, Costs, and Providers Change Every Year

This is true.

Under the rules set out by the Centers for Medicare and Medicaid Services (CMS), insurers may change the benefits and costs in their plans annually. They are also allowed to change their provider networks.

This is the primary reason Medicare Advantage members should compare plans every year.  Unfortunately, most enrollees don’t, which often leads to an unpleasant surprise.

Disadvantage 8: Free Plans Are Not Free

This is true.

There’s a general misunderstanding of the point of Medicare Advantage plans and how they work. How can Medicare Advantage plans be free? They aren’t.

Like Original Medicare, Medicare Advantage is a cost-sharing system. With Original Medicare, beneficiaries pay about 20 percent of the cost for all Medicare-approved services, and Medicare pays the remaining 80 percent.

You also pay about 20 percent of your costs with an MA plan. However, an annual cap limits how much you will pay in a calendar year.

This solves one of the biggest problems with Medicare Parts A and B. There’s no annual limit. However, that’s just one component of Medicare Advantage insurance costs.

Disadvantage 9: They Don’t Travel

In most cases, this is true.

Since Medicare Advantage plans have regional provider networks, their coverage is also regional. As a result, unless you need emergency care, you are restricted to providers in your local area.

That being said, some nationwide carriers, including UnitedHealthcare, allow plan members in one of their plans to receive care anywhere the plan is offered.

Disadvantage 10: Plans May Shorten Skilled Nursing Benefits

At a minimum, plans must cover the same benefits as Original Medicare, including up to 100 days of skilled nursing home care annually. However, the Kaiser Family Foundation recently reported that plans may shorten skilled nursing facility stays to less than what’s covered under Medicare Part A.

In Original Medicare, a patient’s doctor at the skilled nursing facility decides when it is safe to go home. In Medicare Advantage, the plan decides.

Disadvantage 11: Doctors Don’t Like Them

Some do. Some don’t.

Many doctors will tell you that getting paid is a hassle or they get paid less than with Original Medicare. That’s why many doctors don’t like Medicare Advantage plans.

However, the financial structure is only one issue. There are others, including:

  • Provider network restrictions; and
  • Prior authorization restrictions.

If you are considering joining a Medicare Advantage plan, it is essential to consider your physician’s concerns, particularly regarding getting you the best care. Not all doctors dislike MA plans, and many encourage a Medicare Advantage plan if they feel it is their patient’s best option.

Advantages of Medicare Advantage Plans

Compared to Original Medicare, there are advantages to a Medicare Advantage plan. Whether or not you can make use of these benefits depends on your situation.

Advantage 1: Convenient, All-in-One Coverage

Many people love the convenience of a Medicare Advantage plan that includes all their essential healthcare needs. For instance, an MA plan that includes prescription coverage, routine dental, and vision benefits is more convenient for some people than a separate Medicare Supplement, Part D plan for prescriptions, and a stand-alone dental and vision plan.

Advantage 2: Cost-Saving Additional Benefits

Most Medicare Advantage plans include prescription drug coverage. Many plans also offer routine dental, vision, and hearing benefits.

These additional benefits can add up to actual savings, but only if you use them and the overall cost of being on the plan is less than individual plans for each type of coverage.

Advantage 3: Low Monthly Premiums

Most Medicare Advantage plans have lower premiums than Medicare Supplements. Some even have no additional monthly premium because the member’s monthly Part B premium covers all costs.

Some zero-dollar premium Medicare Advantage plans rebate all or a portion of the Medicare Part B premium back to members as part of their monthly Social Security check. This is called a Part B reduction, sometimes called a give-back plan.

Advantage 4: Multiple Plan Types

Unlike Original Medicare, which is one-size-fits-all coverage, there are several types of Medicare Advantage plans, including HMO, HMO-POS, PPO, MSA, and SNP.

Advantage 5: Coordinated Medical Care

With Original Medicare, you coordinate your medical care with the help of your primary care doctor. However, some Medicare Advantage plans are designed to provide coordinated medical using a team approach. This generally results in better health outcomes because Medicare ties compensation to results.

Advantage 6: Annual Cap on Costs

With Original Medicare, beneficiaries pay approximately 20% of all approved Part A and Part B costs, and the government pays 80%. The danger is that there isn’t a cap on a beneficiary’s costs. For instance, if a beneficiary needs an outpatient surgery that costs $100,000, they must pay the $20,000 Part B coinsurance.

Advantage 7: Guaranteed Coverage

Medicare Advantage plans are health insurance, and they have all the protections enacted into law by the Affordable Care Act (aka Obamacare). So, no matter your preexisting conditions or health history, a Medicare Advantage plan is required to accept your application.

Advantage 8: Give Back Benefit

The give-back benefit (Medicare Part B premium reduction) allows some Medicare Advantage plans to offer plan members a rebate on their monthly Medicare Part B premium. Medicare beneficiaries with a give-back plan receive the benefit through Social Security.  No direct payments are allowed.

Advantage 9: Star Rating System

With so many advertisements telling Plan XYZ or ABC is the best, how do we know what’s true and what’s marketing hype? Fortunately, the Centers for Medicare & Medicaid Services has come up with a 5-star rating system to help us out. It’s the only way to know what to expect based on the experiences of other enrollees.

What Medicare Advantage Plans Cover

Medicare Advantage plans are required to cover all Medicare Part A and Part B benefits. If you join an MA plan, the plan must cover all the hospitalization and inpatient care benefits in Medicare Part A and all the medical and preventive care benefits in Medicare Part B.

Your Benefits Can’t Be Denied

Your Part A and Part B benefits cannot be denied. That said, and as previously mentioned, plans are not required to cover these benefits in the same way as Original Medicare.

What does this mean?

It means insurance plans can charge different out-of-pocket costs and restrict your access to certain care. For example, in Original Medicare you pay a 20% coinsurance for a doctor’s office visit. An MA plan may charge the same, less, or more. It all depends on the plan.

Plans May Restrict Access

Original Medicare never restricts your access to care. For example, if you want to see a cardiologist, you make an appointment.

Most MA plans require their members to see their primary care doctor first to get a referral to see a specialist. Many times, doctor visits for a referral result in an additional copayment.

Referrals are just one way MA plans restrict care. The other is prior authorization requirements.

A plan may require that your healthcare provider get prior authorization before providing a service. Services that commonly require prior authorization include:

  • Diagnostic imaging (such as MRIs, CTs, and PET scans)
  • Durable medical equipment (such as wheelchairs)
  • Rehabilitation (like physical or occupational therapy)
  • Home health services (such as nurses)
  • Non-emergency surgery (elective surgery)

Plans May Include Additional Healthcare Benefits

Most plans also include extra benefits that Part A and B don’t cover. The Medicare program allows insurance companies to offer the following extra benefits to plan members:

  • Home care services
  • Prescription drug coverage (Medicare Part D)
  • Routine dental care
  • Vision benefits
  • Hearing aids
  • Telehealth
  • Transportation to and from medical appointments
  • Over-the-counter medications
  • Nutritional assistance
  • Fitness and gym memberships

The most common additional benefit private health plans offer is a prescription drug plan. When this benefit is not included, you can buy a Part D plan.

Are Medicare Advantage Plans a Rip-off?

The only way to know for sure is to understand the biggest disadvantage of Medicare Advantage plans — out-of-pocket costs — and balance that disadvantage with your healthcare needs. When you do this, you will discover:

  1. If you are healthy – A Medicare Advantage plan is a great way to save money. If you take advantage of the preventative care benefits and additional benefits, you will get a lot for your money.
  2. If you have employer health benefits – Many employers offer workers and retirees health benefits that pay their Medicare Advantage plan premiums and other costs. If you have employer benefits, it’s a great way to save money.
  3. If you qualify for Medicare and Medicaid – Nearly 3 million people have a Medicare Advantage Special Needs Plan (SNP). Most people qualify for an SNP for financial reasons and pay minimal copays and coinsurance costs when using services.
  4. If you are a veteran and have VA health benefits – Veterans can be enrolled in both Medicare and VA Healthcare simultaneously. When they are, Medicare is the primary payor, and the VA is secondary. When receiving care at a VA facility, the veteran generally pays nothing.
  5. If you have a chronic health condition – People with chronic health issues may find Medicare Advantage plans unaffordable. Many diabetics fall into this category. Original Medicare and a Medigap plan are generally more cost-effective for these people.

Medicare Advantage vs. Medigap Plans

To understand the difference between Medicare Advantage and Medigap, you first need to understand Original Medicare’s benefits and limitations:

  1. It only covers medically necessary services (which do not include routine dental and vision care, hearing aids, and prescriptions).
  2. It only pays for about 80% of all medically necessary healthcare costs.
  3. It has a nationwide provider network without restrictions.
  4. It does not require referrals or pre-authorization.
  5. Benefits rarely change.

Medigap plans work in lock-step with Original Medicare. These plans cover some or all of the 20% share that Medicare does not cover. And, if Original Medicare does not cover it, a Medigap plan won’t cover it (except for foreign travel emergencies).

You don’t need (and can’t get) supplemental insurance with Medicare Advantage. The out-of-pocket maximum ensures that a hospital stay or serious illness won’t bankrupt you. Unfortunately, many plans have high out-of-pocket maximums.

With Original Medicare, you can get various levels of supplemental insurance to fill the out-of-pocket cost gaps. Said another way, you can buy a Medicare Supplement Plan with just the right coverage for your needs.

This is why most insurance agents feel that Original Medicare, plus a Medigap policy, offers better coverage than Medicare Advantage. In this case, better does not mean more benefits or better service; it means better financial coverage.

The most comprehensive coverage is available through Medigap Plan F, which covers all deductibles and copayments. As of January 2020, Plan F and Plan C, the two plans that covered the Part B deductible, are no longer available to new Medicare enrollees. If you qualify for Medicare on or after January 1, 2020, Medigap Plan G offers the most coverage you can buy.

Be aware that Original Medicare and Medigap plans do not cover prescription drugs. You can enroll in a Medicare Part D prescription drug plan if you need prescription drug coverage.

Medicare Advantage Enrollment

You can’t enroll in Medicare Advantage year-round. There are specific enrollment periods for enrolling in an Advantage plan. The same is true if you want to switch plans.

For most people, there are two dates to remember. The first is your Initial Enrollment Period (IEP).

Your IEP is a seven-month window that begins three months before your initial eligibility and ends three months after your initial eligibility. Initial eligibility is generally on your 65th birthday or 24 months after you qualify for Social Security Disability Income (SSDI).

The second date is the Medicare Open Enrollment Period in the fall, sometimes called the Annual Election Period (AEP).

The Medicare Open Enrollment Period is when you can change your coverage options. During this enrollment period, you can enroll in a Medicare Advantage plan, switch, add prescription drug coverage, or disenroll from a Medicare Advantage plan and return to Original Medicare.

It occurs every Fall from October 15 to December 7. You can use the plan finder tool on MedicareWire to find plans in your area or go directly to Medicare.gov.

Do You Still Have Questions?

Call 1-855-728-0510 (TTY 711) for plan assistance.

If you qualify for Medicare and don't know where to start, MedicareEnrollment.com, an independent HealthCompare insurance broker, has licensed insurance agents who can help you with your Medicare enrollment options, Mon-Fri, 8am-9pm , SAT 8am-8pm EST.

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