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Here's how to snag the best Medicare Advantage Plan

Key Points
  • You can sign up or make changes to an Advantage Plan until Dec. 7.
  • Most enrollees, or 63 percent, choose HMOs; another 33 percent are in PPOs.
  • You also can skip it altogether and stick with original Medicare and a prescription drug plan.
The government is planning to fix this Medicare mistake by April 2018
The government is planning to fix this Medicare mistake by April 2018

Medicare open enrollment is underway, which means you have until Dec. 7 to sign up for an Advantage Plan or to make changes to the one you already have.

If you're uncertain whether one of these plans is right for you, it's important to first understand your options.

"It's really about how people want to manage their health care," said Josh Norris, senior health insurance agent for Comprehensive Financial Consultants in Bloomington, Indiana. "Some people want to visit whatever doctor they want, but for other people it doesn't matter as much."

Advantage Plans, also known as Medicare Part C, have grown steadily in popularity among Medicare recipients over the years. This year, 33 percent (19 million people) were enrolled, compared to 13 percent in 2004, according to the Kaiser Family Foundation. (Click on graphic below to enlarge.)

Source: Kaiser Family Foundation 2017 Enrollment Market Update

In simple terms, these plans provide coverage from an insurance company and take the place of original Medicare, comprised of Part A (in-patient coverage) and Part B (outpatient care). While regulated by the government, Advantage Plans are administered by insurers and can vary in terms of coverage and cost.

The majority of them include prescription drug coverage (Part D), which means you wouldn't need to find a separate plan to cover medicines. Many also include extras not covered by original Medicare, such as dental and vision.

Most also charge a monthly premium in addition to the Part B premium you already pay ($134 for 2017, although many people pay less). The monthly cost for an Advantage Plan ranges from zero to more than $200, with an average of $31.40, according to the National Council on Aging.

In broad terms, you must have original Medicare and live in the plan's service area to be able to join an Advantage Plan. Exception: People with permanent kidney failure generally cannot join one.

Pali Rao | Vetta | Getty Images

Most of these plans are HMOs, with 63 percent of Advantage enrollees using one, according to the Kaiser Family Foundation. Another 33 percent are in PPOs and the remaining 4 percent are in other private plans.

Generally speaking, an HMO will only provide coverage if you go to the doctors, other medical providers and hospitals that are in the plan's network. This means an HMO typically will not cover or reimburse medical costs incurred outside its network except in an urgent or emergency situation.

You also could need a referral from your primary-care doctor to see other physicians or specialists.

HMOs also tend to cost less than other Advantage options. For 2017, the average premium is about $29, according to the Kaiser Family Foundation.

However, you must be okay with receiving all your health care in the plan's network. So if you travel frequently or split your time between a summer and winter home, an HMO is likely not the best choice.

Even if you're on vacation and a trip to the emergency room is covered by an HMO, other costs might not be.

"There have been different interpretations by some insurance companies about whether some services afterwards constitute an emergency and whether it will be covered," Norris said.

Advisors also caution that a zero premium could cost you in coverage, so check carefully to make sure what you need is included.

"if you're paying no premium, you can be sure there are lower benefits in some way and you won't know it until you go to use your insurance," said Matt Chancey, a certified financial planner based in Orlando.

If you choose a PPO, you'll pay more monthly. The average premium for a local PPO, which covers a smaller geographical area, is $62. For a regional PPO, whose coverage area typically is statewide or broader, it's $35.

Additionally, although a PPO lets you go to out-of-network providers, you will typically pay more in co-pays and/or co-insurance for that flexibility.

If you're paying no premium, you can be sure there are lower benefits in some way and you won't know it until you go to use your insurance. 
Matt Chancey
Orlando-based certified financial planner

The alternative to enrolling in an Advantage Plan is to remain on original Medicare. In that case, you can visit any provider across the country that accepts Medicare.

In that case, however, you'd have to sign up for a stand alone drug plan. For people in areas with limited or no access to Advantage Plans, this is a common route.

Keep in mind that if you didn't get drug coverage when you were first eligible for Medicare and change your mind later, you'll generally pay a late enrollment penalty forever (unless you meet an exclusion). You can also sign up for this coverage or change it during this fall enrollment period.

Also, be aware that original Medicare does not cover all costs, including co-payments, co-insurance or deductibles. To mitigate those expenses, some people purchase a supplemental (Medigap) policy. Depending on the level of coverage, their premiums can run more than $200 monthly.

The enrollment rules for Medigap policies are different from those applying to Advantage Plans and prescription drug coverage: If you didn't sign up soon after you turned 65, you could be subject to medical underwriting and your acceptance isn't guaranteed as it is during your initial qualifying period.

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