If you’re one of the 64 million Americans enrolled in Medicare, you know that a deluge has begun. In your mailbox and on TV you’re being inundated with ads for Medicare Advantage plans, star-powered by the likes of William Shatner, all promising great care with low- or zero-cost premiums.
This marketing tsunami is timed to Medicare open enrollment, which runs from Oct. 15 to Dec. 7. That’s when you can switch coverage between Original Medicare and Medicare Advantage, or change your prescription drug plan.
The pitches work: In 2022 nearly half of those eligible for Medicare were enrolled in Advantage plans, up from about a third in 2016, according to the Kaiser Family Foundation. By 2032 about 60 percent of beneficiaries are expected to sign up for these plans.
It’s easy to see the appeal: Original Medicare requires piecing together care from what’s called Part A, for in-patient hospital and skilled nursing care, and Part B, for doctor services. That typically costs about $165 a month (with the cost deducted from your Social Security check). Plus, many people pay extra for Medigap, to cover copays and other out-of-pocket costs, as well as a Part D plan for drugs.
Advantage plans (also called Part C), on the other hand, provide the benefits of Parts A, B, and often D, usually for about the same amount, with lower copays, so there’s no need for Medigap. Some also offer benefits not in Original Medicare, such as fitness classes or some vision and dental care.
Sounds good—but be wary. Choosing between the two requires careful consideration of your finances and health needs. And Advantage plans can carry hidden risks, especially for people with major health issues.
“Some people in Medicare Advantage end up paying unexpectedly high costs when they become ill or find their network lacks the providers they need,” says Tricia Neuman, senior vice president at Kaiser.
When Medicare Advantage Plans Fall Short
For many seniors, Medicare Advantage plans can work well. A 2021 study in the Journal of the American Medical Association found that Advantage enrollees often receive more preventive care than those in traditional Medicare.
But if you have chronic conditions or significant health needs, you may want to think twice. For one thing, with Original Medicare you can see any provider that accepts Medicare, which is most of them.
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But Medicare Advantage plans typically require that you get care from a more limited network of providers, and you may need pre-authorization to see specialists, says Melinda Caughill, a co-founder of 65 Incorporated, a firm that provides Medicare enrollment guidance.
“It’s a riskier approach to health care,” Caughill says, which can also end up being more expensive.
For example, a recent Kaiser study found that about half of all Medicare Advantage enrollees would end up paying more than those in traditional Medicare for a seven-day hospital stay.
Medicare Advantage plans may be especially problematic for people in rural areas, says David Meyers, PhD, an sssistant professor of health services, policy, and practice at Brown University. A 2021 study he co-authored found that rural Medicare Advantage plan enrollees were nearly twice as likely to switch to Original Medicare as those in urban or suburban areas, possibly because the network of providers in rural areas is especially narrow, making it harder for people to make appointments and get care.
Original Medicare vs. Medicare Advantage
When choosing between an Advantage plan and Original Medicare plus Medigap and a stand-alone prescription drug plan, you need to take into account how much healthcare you expect you will need in the coming year in order to determine your anticipated costs.
What It Covers
Original Medicare
(Parts A & B)
Part A: In-patient hospital and skilled nursing care.
Part B: Doctor services at any provider that takes Medicare. Vision, dental, and hearing usually not covered, so paid out of pocket.
Medigap
Medigap plans cover nearly all out-of-pocket costs for parts A and B.
Prescription Drugs
(Part D)
Prescription Medications.
vs.
Medicare Advantage
(Part C)
Most medical care, usually including drugs and often vision, dental, and hearing.
What It Costs Monthly
Original Medicare
(Parts A & B)
Part A: $0 1 + Part B: $165 + copays and coinsurance
Medigap
$178 2
Prescription Drugs
(Part D)
$22 2 + copays and coinsurance
higher earners pay more
vs.
Medicare Advantage
(Part C)
$18 + $165 for Medicare Part B + copays and coinsurance higher earners pay more
Annual Average Deductible
Original Medicare
(Part A & B)
$1,600 generally covered by Medigap
$226
Medigap
$181 2
Prescription Drugs
(Part D)
$427 2
vs.
Medicare Advantage
(Part C)
$121 2
Out-of-Pocket Maximum
Original Medicare
(Part A & B)
There is no out-of-pocket maximum.
Medigap
Medigap plans cover nearly all out-of-pocket costs for parts A and B.
Prescription Drugs
(Part D)
$4,660 3
vs.
Medicare Advantage
(Part C)
$8,300 in-network care;
$12,450 in- and out-of-network care combined.
Best for
Original Medicare
(Part A & B)
Adults with known health issues who prefer not needing a doctor referral, and who want access to wide doctor and hospital networks.
Medigap
People in Original Medicare who have existing health issues or want more predictable healthcare costs.
Prescription Drugs
(Part D)
Everyone, even if you don’t presently require prescriptions.
vs.
Medicare Advantage
(Part C)
Healthy adults who prefer low premiums and are comfortable with managed care and the need for referrals.
1. Part A is free for those who paid Social Security taxes for 10 years. 2. Average for 2022 based on eHealth estimates. 3. After this you enter the “doughnut hole,” when you pay up to 25 percent of drug costs until you reach $7,400, and then generally pay 5 percent. Sources: CMS and Kaiser Family Foundation.
What to Do
Start researching your options several months before you first sign up for Medicare or before your open enrollment period, says Julie Carter at the Medicare Rights Center. Start with these steps:
Assess your current coverage. If you’re already enrolled in Medicare, you’ve probably received an “annual notice of change” letter, which details any changes in your plan’s benefits. Call your insurer or go to the plan’s website if you’ve misplaced that letter.
With Medicare Advantage plans, you could see changes in the doctors and hospitals included in their networks from year to year, so call your providers to ask whether they will remain in the network next year.
There may also be changes to the plan’s vision and dental coverage, as well as the prescription drugs it covers, says Danielle Roberts, a co-founder of Boomer Benefits, a Medicare insurance broker.
Compare all out-of-pocket costs. One portion of your expenses will be the monthly premium costs; this is when Medicare Advantage can look inexpensive. That’s why you need to dig deeper to fully understand your potential out-of-pocket costs, Caughill says. They can include copays as well as coinsurance, or a percentage of your total bill.
“If you have a chronic condition, and you have to pay 20 percent in coinsurance for each visit, you might spend thousands of dollars, which will more than offset any savings in premiums,” Caughill says.
So examine your benefits statements and medical bills for the past year, then add up what you paid in deductibles and copays to get the true costs of your plan. Then consider what you might pay the following year, if you need, say, a knee replacement or have an accident. For many people, opting for Original Medicare plus a Medigap plan offers more financial security.
Consider the consequences of switching. When you initially enroll in Medicare at age 65, you have a guaranteed right to purchase a Medigap plan. And insurers are required to renew coverage each year as long as you continue to pay your premiums. But if you try to buy a Medigap policy after that enrollment window, insurers in many states may be able to turn you down or charge you more due to a preexisting condition, Roberts says.
There are exceptions. Connecticut, New York, and a few other states provide greater protections. And if you opt for an Advantage plan when you first enroll, you generally have a 12-month trial period when you can switch to Original Medicare and have guaranteed access to a Medigap plan.
For More Information
When you’re ready to start reviewing plans, check out the Medicare plan finder tool, which will let you compare Medicare Advantage and Part D prescription drug plans available in your area. You can also get this information by calling Medicare at 800-633-4227.
If you’re looking for a Medigap plan, you can also start at medicare.gov, where you can compare the different types of coverage, as well as find the policies available in your ZIP code.
Another good resource is the State Health Insurance Assistance Program (SHIP), which provides free guidance over the phone. To find your state’s program, go to shiphelp.org or call 877-839-2675.
Low-income seniors (limits vary by state) may be able to get help with costs through Medicare Savings Programs. For eligibility information, search for “help paying costs” at medicare.gov, or call your state’s SHIP program.
When you’ve made your selection, enroll in your new plan by calling Medicare at 800-633-4227 if you’re looking to switch to Original Medicare, or by calling the insurer or an independent Medicare broker who offers products from multiple companies. (Be sure to keep detailed notes of your phone conversations with the representative in case any problems emerge later.)
Or if you determine that your current plan is still the best one, just sit tight. You’ll be re-enrolled automatically at the start of the year.
Editor’s Note: A version of this article also appeared in the December 2022 issue of Consumer Reports magazine.
Penelope Wang
I cover everything from retirement planning to taxes to college saving. My goal is to help people improve their finances, so they have less stress and more freedom. What I enjoy: walks through the city, time with family, and reading mysteries, though I rarely guess who did it.
