Navigating Medicare Options: Is Medicare Advantage a Good Fit for You?

If you’re nearing age 65, the decision between Original Medicare and Medicare Advantage may be weighing on your mind. Insurance companies are likely bombarding you with advertisements for Medicare Advantage plans; they’re not afraid to tap some of our favorite “seasoned” celebrities for these commercials, either!

Medicare Advantage (MA) has been around for some time, but it only boomed in popularity starting in 2010 when provisions in the Affordable Care Act improved coverage for MA participants. Since then, Advantage plans have grown to cover 50% of the senior health insurance market. In short, private insurance companies receive a monthly subsidy from the federal government for every participant they insure on an MA plan. This relieves the federal government of some of the burden of administering Original Medicare.

In practice, MA participants still pay for Part B premiums, but the MA provider takes care of their Parts A, B, and (usually) D coverage. I say “usually” because that will vary plan by plan. Medicare Advantage’s main attraction is the very low (or even $0) monthly premiums. This amounts to meaningful savings, as Medicare Supplement plans can cost anywhere from $100 to $250 per month (depending on a multitude of factors). They also offer benefits that Original Medicare does not, including dental and vision coverage and even gym memberships.

However, while the low monthly premiums are great, there are drawbacks. When working with MA, you have a limited network of hospitals and doctors to choose from, as opposed to Original Medicare, which has no network of providers; almost 100% of providers accept Original Medicare. Many specialized clinics, including the Mayo Clinic, do not accept MA. Broadly speaking, severe and costly diagnoses will typically lead to higher costs when compared to Original Medicare. There may be exceptions, but generally, that is true.

A less tangible drawback to MA is that it is run by a for-profit insurance company incentivized by their bottom line to reduce and manage their costs (your coverage). You can expect to spend more time on the phone fighting the insurance provider on claims and coverage. This is what I call the increased “hassle factor.”

At this point, you might be wondering if MA is a good fit for you. If you value low monthly costs, are generally in good health, are OK with working with a network of providers, and have a higher risk tolerance, then MA may be right for you. On the flip side, if you value predictable costs, have high healthcare needs, and a low risk tolerance, then you are probably better off with Original Medicare.

If you have more specific questions about Medicare Advantage versus Original Medicare, reach out to your advisor to discuss this further. There is no “one size fits all” answer when it comes to a comprehensive, tailored approach to your financial plan.

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Zac Pohlenz, CFP®

As a Wealth Advisor, Zac works every day to help clients reach their financial goals, and finds it satisfying to know that he has helped someone gain a new perspective that can help change their life.