4 Medicare Advantage Rules to Live By

By Markets Fool.com


Image source: Getty Images

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If you want to select the best Medicare coverage for yourself, then you should seriously consider a Medicare Advantage plan. These privately run Medicare alternatives can have many advantages over original Medicare -- if you know how to choose the right one and make the most of it. With that in mind, let's go over a few rules that every potential Medicare Advantage enrollee needs to know.

But first, a little background for those who are unfamiliar with Medicare Advantage plans.

The Medicare Advantage plan, explained

Although we always discuss Medicare in the singular, it actually includes several different parts that cover different medical expenses. "Original" Medicare includes Part A (hospital coverage) and Part B (physician/medical insurance). Many enrollees also sign up for Part D (prescription drug coverage), which comes in many forms, too. And on top of that, some folks add on a private "Medigap" plan to cover expenses that Medicare won't.

If that sounds complicated, then you may be happy to hear about Part C, which is what Medicare Advantage plans are sometimes called. These plans are required to offer at least as much coverage as Part A and Part B, and they usually include more, such as prescription, vision, dental, and hearing coverage.

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Medicare Advantage plans debuted in 1995. They're administered by private insurers such as Blue Cross Blue Shield and UnitedHealth Group, but they're regulated by the U.S. government. During any Medicare enrollment period, you can choose between original Medicare (Parts A and B) and Medicare Advantage plans. And if you're not happy with your decision, you can make a different choice in the next enrollment period.

So here are some rules to keep in mind when considering Medicare Advantage plans.

Image source: Flickr user Jurgen Appelo.

Rule No. 1: Follow the stars

The Medicare system rates the Medicare Advantage plans (and Part D plans) that folks can sign up for, so it's in your best interest to favor ones with higher ratings, as they will likely serve you best. The top score is five stars.

Medicare Advantage plans earn their stars after being evaluated on measures such as how well they're keeping their members healthy (via screenings, checkups, and more), how well they're managing members' chronic conditions, and how good their customer service is. You'll can find their ratings through the Medicare Plan Finderon the Medicare website.

The highest score possible is five stars. And here's a cool thing about five-star plans: They don't limit you to the usual enrollment period. If you're switching into a five-star plan, then you can do so throughout most of the year, from Dec. 8 through Nov. 30.

Image source: Pixabay.

Rule No. 2: Learn what's covered

It's also critical to review the coverage each Medicare Advantage plan offers and make sure it meets your needs.

If you have a lot of vision issues, and one plan offers much stronger vision coverage, take note of that. If you take a lot of costly prescription drugs, then look for a plan that includes coverage for that (including the particular drugs you take), as most Medicare Advantage plans do. Many plans also include wellness benefits such as gym membership discounts, healthy lifestyle coaching, smoking cessation programs, and so on.

Original Medicare will often pay just 80% of big bills, leaving you on the hook for potentially huge expenses. Image source: Pixabay.

Rule No. 3: Run the numbers

Do the math and compare premiums, copays, deductibles, and so on to see whether a Medicare Advantage plan offers a financial advantage. While original Medicare leaves patients responsible for 20% of the cost of many services, a Medicare Advantage plan might charge you a low copay per doctor visit or service.

Medicare Advantage plans also have out-of-pocket limits, beyond which the plan will pick up all your healthcare costs for the year. The average out-of-pocket cap was recently $5,223, but many plans feature limits below $3,000, and the limit in 2016 was $6,700. While original Medicare has no out-of-pocket spending limit and can leave you facing hefty costs, a Medicare Advantage plan can ensure that your out-of-pocket expenses won't get out of hand.

On top of that, some Medicare Advantage plans don't even charge a premium -- though that perk might be offset by higher costs elsewhere. Always read the fine print and evaluate the total costs of the plan.

Make sure your doctors are in the networks you're considering if you want to stay with them. Image source: Pixabay.

Rule No. 4: Weigh any remaining pros and cons

Finally, look for other benefits and drawbacks that may be important to you. For example, Medicare Advantage plans are offered mainly in the following formats: Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), Private Fee-For-Service (PFFS) plans, and Special Needs Plans (SNPs). Make sure the plans you're considering are structured in formats you can deal with and do not, for example, limit you to a network of care providers that doesn't include your preferred doctors or hospitals.

Also remember that while original Medicare allows you to see any care provider in the country that accepts Medicare, it doesn't cover you when you're traveling abroad. Some Medicare Advantage plans do, so keep that in mind if you plan to travel the world in retirement.

Medicare Advantage plans are growing more popular by the day -- and for good reason. Look into whether one might serve you well, too.

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Longtime Fool specialistSelena Maranjian, whom you can follow on Twitter, owns no shares of any company mentioned in this article.The Motley Fool recommends UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.