Why Medicare Advantage Plans Are Bad – All That You Need to Know

One of the oft-asked questions is, “Why Medicare Advantage plans are bad?” So, if you’re trying to figure out the advantages and disadvantages of Medicare Advantage plans for yourself, read on. In this article, we will explore this exceptionally important question by contrasting the private health plan option vs. Original Medicare and Medigap.

What is bad about Medicare Advantage plans? The downsides of Medicare Advantage plans include limited provider networks, potentially higher out-of-pocket expenses, and annual changes to benefits. Let’s try to understand why Medicare Advantage plans as people often sign up without thoroughly understanding them.

A review of Medicare Advantage vs. Original Medicare and Medigap

One of the most effective methods we’ve found for determining whether a Medicare Advantage plan is good for you is to compare it against Original Medicare and a Medigap plan. So, let’s start by looking at the benefits and drawbacks of Medicare Advantage plans, so we can figure out what’s true and what’s not, and help you pick the best Medicare plan for you and your circumstances.

Only then will you be able to determine whether Medicare Advantage plans are appropriate for you.

Medicare Advantage nightmares

Reason 1: Free plans are not free

This is true.

The fundamental problem here is that most consumers don’t understand how Medicare Advantage plans work. Many individuals are confused by copayments (copays) and coinsurance, which is a proportion of the total amount you must pay for a medical procedure.

So, if you’re asking how Medicare Advantage plans can be free, the answer is that they can’t. Not at all.

Medicare Advantage, like Original Medicare (Parts A and B), is a cost-sharing program. Original Medicare beneficiaries pay roughly 20% of the cost of all Medicare-approved services, with Medicare covering the remaining 80%. You pay roughly 20% of your costs with a Medicare Advantage plan, but there is a yearly maximum that limits your out-of-pocket costs, which tackles one of Medicare P’s main difficulties.

NOTE: All Medicare Advantage plans provide an annual maximum out-of-pocket (MOOP) limit, which is a significant benefit. The annual MOOP helps individuals with chronic health conditions who do not qualify for a Medicare supplement from becoming bankrupt due to exorbitant medical bills.

The monthly price for outpatient medical care, services, and supplies is known as the Medicare Part B premium. If a beneficiary’s income is above ($148.50 in 2021), an IRMAA surcharge may be applied to their premium, which will be returned to members as part of their monthly Social Security check. In other words, your Part B premium is covered by your Medicare Advantage plan.

Reason 2: Hospitalization costs more, not less

This is true in many circumstances and with many designs.

In fact, according to a recent Kaiser Family Foundation research, half of all Medicare Advantage enrollees would have higher expenses than conventional Medicare beneficiaries.

Original Medicare is a type of private fee-for-service health insurance available to persons over the age of 65. It is divided into two sections. Hospitalization is covered in Part A. Medical coverage for a 5-day hospital stay is provided by Part B. That’s surprising, yet understandable considering the escalating expense of hospitalization.

This fact also emphasizes the importance of scrutinizing Medicare Advantage plans yearly so that you are not caught off guard by the bills. Copays for ambulances, emergency rooms, diagnostic tests, hospitalization, and inpatient medicine add up quickly.

IMPORTANT: If you’re new to Medicare and have a chronic health condition that demands frequent care, pay close attention to Medicare Advantage hospitalization expenses. If you’re eligible for a Medicare supplement, do it now.

Reason 3: They make you pay multiple copays for the same issue

This is correct, but it is also correct in the case of Original Medicare. This complaint, however, emphasizes the primary distinction between Medicare Advantage and Original Medicare plus a Medicare supplement.

The Medicare Advantage program is a pay-as-you-go model. You pay your Medicare Part B premiums every month.

Part B of Medicare is medical coverage for those who have Original Medicare benefits. Doctor visits, preventative care, tests, durable medical equipment, and supplies are all covered. Part B of Medicare pays 80% of most medically essential healthcare premiums, plus a plan premium (if applicable), however, the majority of your expenditures are incurred when you use healthcare services. So, if you go to your primary care physician for a problem, you’ll have to pay a copay. You must pay an additional copay if your doctor refers you to a specialist. If your specialist orders lab tests or diagnostic tests, you’ll have to pay a copay for each one.

Reason 4: You are more likely to see a nurse practitioner than a doctor

This is true in many cases. Capitation is a payment technique used by HMO and PPO health plans (most Medicare Advantage plans are HMOs). A capitated contract pays a flat charge to each patient covered by the plan to a provider in the plan’s network. An HMO or managed care organization pays a fixed amount to the health care provider for its members under a capitated contract.

A licensed healthcare provider is a person or organization. Healthcare providers include doctors, nurses, and hospitals, to name a few.

As a result, many primary care group practices employ nurse practitioners and aides to save money and see as many patients as possible. A physician supervises this healthcare personnel.

Reason 5: They make you get a referral

This is true in the case of HMO plans and some PPO policies. Almost all Medicare Advantage plan subscribers, according to the Kaiser Family Foundation, are in plans that need prior authorization.

Prior authorization is a technique that health plans employ to keep healthcare expenses under control. Before accessing certain treatments, medical services, or prescription drugs for some services, most HMO policies and some PPO plans demand authorization.

Health plans are in the business of making money, and cost containment is one of the most important tools they have.

By the way, with Medicare supplement insurance, Congress approved a similar cost-cutting technique.

Medicare Supplements are extra insurance plans that Medicare beneficiaries can purchase to fill in the gaps in their Original Medicare health insurance coverage (Medicare Part A and Medicare Part B).

New Medicare recipients will be unable to purchase a Medigap plan that covers the Part B deductible as of January 1, 2020.

Reason 6: Plan benefits, costs, and providers change every year

This is correct. The Centers for Medicare and Medicaid Services (CMS) has established guidelines that must be followed.

The Centers for Medicare & Medicaid Services (CMS) is the federal organization in charge of administering Medicare, Medicaid, and the Children’s Health Insurance Program in the United States.

According to the Centers for Medicare and Medicaid Services (CMS), insurers may change the benefits and costs of their plans. They also have the option of switching provider networks.

Members of Medicare Advantage should compare plans at least once a year for this reason. Unfortunately, the majority of students do not.

Reason 7: High maximum out-of-pocket limits

This is correct. The average out-of-pocket limit for 2020 Medicare Advantage subscribers was $4,925 for in-network services.

In-network providers are doctors, hospitals, pharmacies, and other healthcare providers who agree to deliver services and supplies to health plan members at a defined price. Some health plans only cover your care if you acquire services. The average cost of in-network and out-of-network services for PPOs is $8,828. (PPOs). For 2021 and beyond, these figures are likely to rise. The new maximum out-of-pocket limit imposed by CMS, which climbed from $6,700 to $7,550, reflects the future rise.

NOTE: Medicare supplements with high deductibles and shared-cost plans, such as Medigap Plan K.

Plan K is one of only two Medicare supplements that provide shared-cost coverage and a yearly out-of-pocket maximum. This is a plan that can help with some of the costs associated with Original Medicare. It may also have high out-of-pocket limits.

What do Medicare Advantage plans cover?

We just looked over the top reasons why people dislike Medicare Advantage, but do the benefits and drawbacks match what private health plans are supposed to offer?

Original Medicare (Medicare Part A) and Medicare Advantage (Medicare Part B) are combined in Medicare Advantage programs.

Medicare Part A covers hospitalization for Medicare recipients. It includes hospital and skilled nursing facility inpatient treatment. It also incorporates limited home healthcare and hospice care, as well as Medicare Part B) coverage into a commercial health plan, and frequently includes additional benefits. Plans can provide the following benefits to their members under the Medicare Part C program:

  • hospitalization
  • doctor’s visits
  • preventive care
  • limited home healthcare services
  • hospice
  • Hospice is a special way of caring for people who are terminally ill. Hospice care involves a team-oriented approach that addresses the medical, physical, social, emotional, and spiritual needs of the patient.
  • care
  • prescription drug coverage
  • dental
  • vision
  • hearing
  • telehealth
  • SilverSneakers fitness memberships

There are several different types of Medicare Advantage plans to choose from:

  • Health Maintenance Organization (HMO)
  • Preferred Provider Organization (PPO)
  • Private Fee-for-Service (PFFS)
  • Special Needs Plans (SNPs)
  • Medical Savings Account (MSA)

The many varieties of all-in-one Medicare coverage cater to various demands. In some places, not all plan types are offered. PPO plans, for example, allow members to seek care outside of their provider network, but at a higher cost. Institutionalized people, have a chronic condition, or have unique financial needs can benefit from SNP plans. Original Medicare, on the other hand, is a one-size-fits-all system.

Is a Medicare Advantage plan a good choice for you?

There’s no one-size-fits-all answer. It depends on your health and budget. Here’s a breakdown:

  • Healthy individuals: If you’re healthy and use preventative care, a Medicare Advantage plan can be a great way to save money.
  • Employer benefits: If your employer health plan covers Medicare Advantage costs, it can be a good savings option.
  • Dual eligibles (Medicare & Medicaid): If you qualify for both, a Medicare Advantage Special Needs Plan (SNP) might be the most affordable choice with minimal copays and coinsurance.
  • Veterans with VA health benefits: Veterans can have both Medicare and VA coverage. Care at VA facilities is usually free, even for non-VA facilities with prior approval.
  • People with chronic conditions: If you have frequent medical needs or see specialists often, Original Medicare with a Medigap plan might be more cost-effective in the long run.

Remember, weigh the pros and cons to see if a Medicare Advantage plan fits your situation.

The real disadvantage of Medicare Advantage plans

We explain how to decide if Medicare Advantage or Original Medicare with a Medigap plan is the best option for you in Understanding Medicare in 4 Easy Steps. To paraphrase, we believe that there is a single fundamental distinction that aids the majority of people in making the best decision. This one issue overshadows the majority of the benefits and drawbacks of Medicare Advantage plans.

This is the distinction. You pay the majority of your significant medical costs upfront through monthly insurance premiums with Original Medicare and supplemental Medicare insurance. This allows you to plan for your healthcare expenses.

When you have Medicare Advantage, you are responsible for the majority of your healthcare spending. As a result, budgeting for healthcare expenses is extremely tough. The primary downside of Medicare Advantage plans is this. If you fall into one of the five categories, you’re in luck.

What about the Medicare Advantage give back benefit?

Some Medicare Advantage plans can offer plan participants a return on their monthly Medicare Part B premiums thanks to the give-back benefit. The benefit is received through Social Security for beneficiaries with a give-back plan. Direct payments are not permitted.

Medicare Part B premium reduction is the precise phrase for the benefit. The insurance company covers a portion or all of your premium when you join one of these plans. There is a section labeled “Part B Premium Buy-Down” in the evidence of coverage document that the plan is required to give. This is where you’ll find the percentage of your Part B premium that the plan paid.

Giving-back plans are getting more popular, although they are still not widely available. Aetna, Cigna, and Humana are among the largest providers of these plans. The amount of money given back ranges from $.10 to the full amount of the normal Part B premium.

Why are they pushing Medicare Advantage plans?

The Trump administration isn’t the first to use Advantage to its advantage. Gretchen Jacobson, associate director of the Kaiser Family Foundation’s Program on Medicare Policy, said, “The past several administrations have been very much in support of private coverage.” She points out that the Obama and Bush administrations, as well as Congress, promoted the expansion of the program through rulemaking and legislation that allowed Advantage plans to include features like vision care and gym memberships, as well as cap patient out-of-pocket payments. Regulators have also given Advantage plans more leeway in establishing their own rules for certain types of coverage.

However, according to Joe Baker, president of the Medicare Rights Center, the current round of government backing for Advantage plans is louder than anything seen in previous administrations. “I’ve been a part of Medicare since 1994, and I can’t recall a time when I wasn’t.”

Baker goes on to say that his group has no objections to CMS offering consumer education, but only provided it is balanced. “People have two choices, and CMS should communicate the benefits and drawbacks of each – this approach is unfair.”

According to Jacobson, the motivations are unclear. According to a recent study published in the New England Journal of Medicine, evidence is conflicting on whether Advantage saves the government money or increases government spending.

Moreover, according to Jacobson’s research, the jury is still out on the quality of care offered by Advantage plans, particularly for patients with major chronic diseases. According to multiple robust research studies, these people are disenrolling from Advantage plans at alarmingly high rates. “As Advantage membership expands, there is a serious issue,” she added.

What is Medigap?

In this essay, we’ve discussed Medigap a couple of times. Here’s a quick rundown of what the term means and how it can help you.

Supplemental Medicare insurance is referred to as Medigap by Medicare. Unlike Medicare Advantage, a Medigap plan does not require you to forgo your Original Medicare benefits.

Medigap insurance, as the name suggests, fills in the gaps in Original Medicare coverage. The Medicare beneficiary’s out-of-pocket expenses from the various Medicare Part A and Part B deductibles are referred to as this.

A deductible is the portion of a beneficiary’s healthcare costs that must be paid before the health-insurance policy kicks in as well as coinsurance A Medicare supplement plans comparison chart makes it simple to discover what these fees are and which Medigap plans cover them:

There are eleven different Medigap plans to choose from (A, B, C, D, F, G, K, L, M, and N). Benefits and coverage are the same regardless of which insurance provider you purchase a policy from. Monthly premium is the only difference.

Your fees and coverage aren’t as apparent with Medicare Advantage plans. One of the main reasons why individuals believe Medigap is preferable to Medicare Advantage is because of this.

Is it better to have Medicare Advantage or Medigap?

We’re frequently asked whether Medicare Advantage or Medigap is better. It all boils down to having a good night’s sleep. With Medicare Advantage, you don’t need extra insurance. However, you can purchase supplemental insurance to cover the holes in Original Medicare. This is the primary reason why individuals believe Original Medicare is preferable to Medicare Advantage when supplemented with a Medigap policy.

If you have supplemental coverage (e.g., from your work, Medicaid, or the VA), they may cover some or all of your out-of-pocket expenses. The remaining costs not paid by the beneficiary’s health insurance plan are known as out-of-pocket costs for Medicare. Monthly premiums, deductibles, coinsurance, and copayments can all contribute to these expenditures. Make the most of your advantages. If not, consider if you’re willing to spend up to the Medicare Advantage plan’s maximum out-of-pocket limit.

Consider this when deciding if Medigap or Medicare Advantage is the better option. If the thought of having to pay an average of $4,925 out of pocket, not including medicines or monthly premiums, makes you concerned, it’s time to examine the best Medigap plans in your area. When you do, you’ll be able to choose from a variety of coverage alternatives.

Medicare Supplement Plan N is a good option if you’re a healthy senior.

One of the ten standardized Medigap plans is Medicare Supplement Plan N. Despite being one of the newest plans on the market, Medicare Plan N is quickly becoming a favorite among Baby Boomers approaching retirement… is a terrific way to save money and gain peace of mind most of us need when it comes to our health. Even a Medigap Plan K, which some experts believe has high out-of-pocket prices, can be a better alternative if you have high out-of-pocket expenditures.

Pros and cons of Medicare Advantage plans vs. original Medicare

In addition to the fact that Medicare Advantage plan insurance carriers are generally obligated to sell you a plan, they also bundle additional benefits, such as vision, dental, hearing, and a prescription drug plan (Part D). These are valuable benefits that Original Medicare does not cover. For healthy people, these extras make a Medicare Advantage plan a very good deal.

Many of the extra benefits that some insurance plans offer look very enticing, but they often come with limits or high out-of-pocket costs. For example, a plan may have excellent healthcare benefits (i.e., low copays) and a poor Part D plan (i.e., your meds are not covered in the lower tiers).

Also, it is important to understand that the extra benefits, including Part D prescriptions, are not included in the plan’s maximum out-of-pocket (MOOP) limit. So, let’s say you use the plan’s dental coverage and pay $1,500 in copays for restoration work, that $1,500 is not included in your MOOP, nor are your Part D medications. This is why so many people feel that traditional Medicare, plus a supplement plan, dental plan, and a stand-alone Medicare Part D.

Medicare Part D plans are an option Medicare beneficiaries can use to get prescription drug coverage. Part D plans provide cost-sharing on covered medications in four different phases: deductible, initial coverage, coverage gap, and catastrophic. Each plan is the best way to go.

Worst Medicare Advantage plans

The Centers for Medicare & Medicaid Services does an excellent job of weeding out bad Medicare Advantage plans. Sub-par plans are given a year to clean up their act and CMS sanctions them.

So, what is a bad plan?

Generally, plans get sanctioned for bad customer service, poor performance managing chronic health conditions, a bad track record keeping members healthy (screenings, tests, vaccines, etc.), and a poor member experience with the drug plan (if included). All of these measures are graded by CMS annually, and more. You can check each of the ten grades a health plan receives on our plan pages.

Beyond the 5-star grades, you must look at how a plan will cover you. By this, we mean the out-of-pocket costs you will be charged by the plan when you use health care services. A 4- or 5-star plan can be fantastic for one member and the worst of the bunch for another. It all depends on your total costs.

You must do the research and run numbers based on how you expect to use a plan’s benefits. Only then will you know if the plan you are choosing is a winner or a loser.

Charles Bains

Charles Bains

Charles Bains started his insurance career as a marketing intern before pounding the pavement as a commercial lines agent in Orlando, FL. As an industry journalist, his articles have appeared in a variety of trade publications. His insurance television career, short-lived but glorious, once saw him serve as the expert adviser on an insurance-themed infomercial (yes, you read that correctly). Having recently worked for various organizations, coupled with his broader insurance knowledge, Charles is able to understand our client’s needs and guide them accordingly. He is a gem for Insurance Noon as his wide area of expertise and experience have been beneficial in conducting further researches to come up with solutions and writing them in a manner which is easy for everyone including beginners to comprehend.