Advantages and Disadvantages of Medicare Advantage for Baby Boomers

Every day, an estimated 10,000 baby boomers turn 65 and become eligible for Medicare, a federal health insurance program that provides coverage for inpatient and outpatient medical care. While many older adults select Original Medicare for their insurance needs, about 34% choose a Medicare Advantage plan.

In contrast to Original Medicare, which is provided by the federal government and offers the same benefits at the same price to all members, Medicare Advantage plans are provided by private health insurance companies that are approved by Medicare and offer varying benefits, premiums and copays. To get the best health insurance coverage, seniors should examine the benefits and drawbacks of Medicare Advantage plans and determine whether they should consider enrolling in a plan provided by a private insurer or the federal government.

This guide provides an overview of how the Medicare Advantage program works, the positive and negative aspects of these plans and the eligibility requirements. It also provides answers to some of seniors’ most frequently asked questions about Medicare Advantage.

The Basics of Medicare Advantage

In many ways, Medicare Advantage plans are similar to private or group healthcare plans that baby boomers had during their working years. They are run by private health insurance companies and provide comprehensive coverage for inpatient and outpatient medical care to protect members from burdensome medical bills.

Coverage Under Medicare Advantage

The benefits included in Original Medicare Parts A and B are determined by state and federal laws, as well as national coverage decisions regarding whether a treatment or procedure is covered. Medicare Advantage plans are required to offer at least as much coverage as Original Medicare and cover medical costs like:

• Hospital care
• Skilled nursing care
• Nursing home care
• Home health services
• Doctor’s office visits
• X-rays and laboratory tests
• Emergency medical transportation
• Durable medical equipment and mobility devices
• Preventative care
• Vaccinations
• Rehabilitative services

In addition to these standard benefits, many Medicare Advantage plans cover supplemental benefits, including:

• Prescription drugs
• Routine dental, hearing and vision care
• Expanded coverage for inpatient hospital and skilled nursing care
• Wellness benefits like gym memberships
• Adult day health care services
• In-home support services
• Home-based palliative care
• Therapeutic massage

Costs Associated with Medicare Advantage

Baby boomers who are enrolled in a Medicare Advantage plan automatically pay the standard premiums for Original Medicare Part B coverage, which are set by the federal government. In 2021, the standard Part B premium was $148.50 but may be higher or lower depending on the member’s income. In some cases, Medicare Advantage plans have a separate premium that a member pays in addition to the standard Part B premium. According to the Kaiser Family Foundation, Medicare Advantage premiums are an average of $21 per month in 2021.

In addition to the monthly premiums, Medicare Advantage plans have some out-of-pocket costs, including copayments (a fixed dollar amount) or coinsurance (a percentage) for covered services and deductibles (the amount the member pays before the plan pays out for covered services). In most cases, Medicare Advantage plans have lower out-of-pocket costs than Original Medicare, and unlike Original Medicare, Medicare Advantage plans have out-of-pocket maximum limits.

Advantages of Medicare Advantage

There are several reasons that many baby boomers prefer Medicare Advantage plans over Original Medicare.

Additional Benefits

In addition to the standard benefits provided by Original Medicare Part A and Part B, many Medicare Advantage plans have benefits that they would otherwise have to pay for out of pocket or purchase add-on coverage for, including services like adult day health care, dental and vision coverage and in some cases, house cleaning services.

Affordability

For healthy baby boomers with limited health concerns, the premiums, copays and deductibles required by Medicare Advantage plans are very affordable. While all Medicare beneficiaries have to pay the Part B premium whether they’re enrolled in Original Medicare or Medicare Advantage, many Medicare Advantage plans have no additional premium and may have lower deductibles and copays.

Maximum Out-of-Pocket Spending Limits

Like most private health insurance plans, Medicare Advantage plans generally cap their members’ out-of-pocket expenses per calendar year. Some plans may, for example, have an out-of-pocket maximum of $6,700. Once a member has reached that limit, their plan will cover 100% of eligible expenses. Original Medicare doesn’t have an out-of-pocket maximum limit.

Coordination of Benefits

Seniors who have separate health insurance plans for vision, dental, prescription, long-term care and medical care not only have multiple plans to juggle, but also have various copays, premiums and deductibles to track. Comprehensive Medicare Advantage plans provide streamlined coverage, making it simpler for members to pay monthly premiums, file claims, remember copays and deductibles and track total out-of-pocket spending.

Drawbacks of Medicare Advantage

While Medicare Advantage plans have several advantages over Original Medicare, they aren’t a good fit for all baby boomers.

Limited Service Areas

Unlike Original Medicare, Medicare Advantage plans have preferred provider networks. If a member goes to a healthcare provider outside of this network, they will likely have a much higher out-of-pocket copay or coinsurance amount. This may be a consideration for seniors who travel often.

Out-of-Pocket Costs May Increase Significantly Over Time

Because Medicare Advantage plan providers are required to accept any Medicare-eligible enrollee regardless of health status or preexisting conditions, they control costs through the way they structure their copays and deductibles. As enrollees age and their health needs change, their monthly premiums and other out-of-pocket expenses are likely to increase significantly.

Difficult to Compare Plans

Depending on where a Medicare-eligible baby boomer lives, they may have hundreds of Medicare Advantage plans available to them, each with its own unique set of coverage options, provider networks, drug formularies and costs. This can make it challenging for seniors to compare plans and ensure that they choose the most cost-effective option that fits their needs.

Most Plans Require Referrals and Plan Authorizations

To prevent misuse or overuse of healthcare, Medicare Advantage plan providers generally require prior authorization for medical equipment, hospital stays, home health care and certain medical procedures. In addition to this, they often require that a member’s primary care doctor provides referrals to see specialists before they will cover services. This may cause a delay in the member receiving necessary medical care and interventions.

Eligibility and Enrollment

To be eligible for Medicare Advantage, baby boomers must be at least 65 years old or eligible for Original Medicare due to an injury or disability. They must be a U.S. citizen or a legal resident for at least five years in a row, and they must either qualify for or be enrolled in Original Medicare. They must also live within the service area of the Medicare Advantage plan that they choose.

When a baby boomer turns 65, an initial enrollment period is opened for them. At this time, they can enroll in a Medicare Advantage plan or switch to one of these plans if they’re automatically enrolled in Original Medicare.

Outside of this initial enrollment period, there are two open enrollment periods, including one in the fall and one after the first of the year. Seniors who are losing coverage due to moving outside of their Medicare Advantage plan’s service area are eligible for a special enrollment period, at which time they can enroll in a different plan.

To enroll in a Medicare Advantage plan, baby boomers should click here, select the Medicare Advantage plan option and provide their zip code. Once available plans are listed, the applicant can view the plans one by one to find out which ones provide the coverage they need.

Frequently Asked Questions

Do Medicare Advantage Plans Provide Prescription Drug Coverage?

Many Medicare Advantage plans include additional benefits beyond what’s provided in Original Medicare Parts A and B, including prescription drug coverage. However, members whose Medicare Advantage plan does not have this coverage may add it through a stand-alone Medicare Prescription Drug plan.

Do Medicare Advantage Plans All Cost the Same and Offer the Same Benefits?

All Medicare Advantage plans must offer at least the same coverage as Original Medicare, but premiums, deductibles, copays, coinsurance, additional benefits and rules vary widely from one plan to another.

When Can I Enroll in or Leave a Medicare Advantage Plan?

Similar to private health insurance subsidized by employers or offered on the government marketplace, Medicare Advantage plans have open enrollment periods. These enrollment periods include when a senior first becomes eligible for Medicare, a Fall Open Enrollment Period that runs from October 15 to December 7 and a special Medicare Advantage Enrollment Period that goes from January 1 to March 31 every year. Outside of these windows, some members may qualify for a Special Enrollment Period if they meet certain criteria.

Do Medicare Advantage Plans Cover Hospitalization?

Because Medicare Advantage plans are required to provide the same coverage as Medicare Parts A and B, these plans cover hospitalization. However, hospitalization coverage varies depending on the plan. Some plans may have daily copays while others may have a set payment amount per hospital stay. Seniors with chronic health conditions may want to consider a plan’s hospitalization coverage before enrolling.

Do I Need Medigap Coverage with My Medicare Advantage Plan?

While Medigap policies can be used to cover copayments, deductibles and premiums associated with Original Medicare, these policies cannot be used with Medicare Advantage plans. Baby boomers who have Medigap policies when they sign up for a Medicare Advantage plan should contact their insurance company to cancel this coverage.

Can I Use My Medicare Advantage Plan When I Travel?

While most Medicare Advantage plans have specific service areas, members are generally able to use their plans while traveling. However, it’s important to note that if they have to see a healthcare provider outside of the plan’s established provider network, the member will likely pay a higher copay or coinsurance amount for healthcare services. Members who travel often may want to enroll in a Medicare Advantage HMO-POS plan or a PPO plan, which have higher premiums but more flexibility.