The 1 Medicare Advantage Chart You Absolutely Have to See to Believe

By Sean Williams Markets Fool.com

For 57 million Americans, Medicare is just as important a social program as Social Security is for the more than 41 million retired workers currently receiving a monthly check. Though Medicare's benefits may not always be tangible, the simple fact that the federal government subsidizes a percentage of eligible healthcare costs for Medicare enrollees (5 in 6 of whom are seniors aged 65 and up) is a comforting thing to know when you do actually require medical care.

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One of the most important choices seniors will make

Next to deciding when to begin claiming Social Security benefits, the biggest decision seniors will likely make each and every year is which Medicare plan to enroll in. You see, Medicare has two paths that every Medicare-eligible individual can follow.

Image source: Getty Images.

The first option is traditional Medicare, which has been around for decades. Traditional Medicare consists of Part A (inpatient medical care and long-term skilled nursing care), Part B (outpatient services), and Part D (prescription drug plans). Enrollees in traditional Medicare also have the option of purchasing a Medigap plan, which helps cover some of the out-of-pocket costs associated with a Medicare plan.

The other, somewhat newer, option is a private plan, which is more commonly known as Medicare Advantage (or Part C, officially). Medicare Advantage plans are offered by private insurance companies. These insurers provide the same basic services guaranteed by Part A, B, and D, and they may have additional add-on services, such as vision, dental, and hearing care, which cannot be provided by traditional Medicare.

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The Medicare Advantage chart you have to see to believe

Which plan should you choose? That's an entirely personal decision that requires you to weigh your medical needs each year relative to the cost of each plan. However, if the following chart provides any indication, you're probably finding Medicare Advantage a little more appealing each and every year.

Data source: Kaiser Family Foundation. Chart by author.

As you can see from the chart above, enrollment in Medicare Advantage was fairly constant, to even declining, between 1999 and 2005. However, between 2005 and 2016, based on data from the Kaiser Family Foundation, enrollment in Medicare Advantage tripled from 5.6 million to 17.6 million. The jump that began in 2006 is likely tied to a major overhaul of Medicare in 2003 that led to the implementation of Part D in 2006.

More important, the percentage of total enrollees increased from 13% of eligible Medicare beneficiaries to 31%. In other words, nearly a third of eligible Medicare beneficiaries are choosing a private plan these days. That's pretty telling.

Why Medicare Advantage is gaining in popularity

So what is it about Medicare Advantage that's pushing beneficiaries to make the switch?

The first thing you'll probably notice when shopping for a Medicare Advantage plan as opposed to traditional Medicare is the simplicity. Traditional Medicare is set up in various parts, some or all of which you may be required to enroll in separately. Medicare Advantage plans are set up such that they're a single plan with all services under one umbrella. It can make the enrollment process considerably smoother and more understandable for senior citizens.

Second, as alluded to above, private plans can also offer services that may not be available with a traditional Medicare plan. Vison, hearing, and dental checkups are not covered by traditional Medicare, meaning beneficiaries have to seek a plan outside Medicare for these services. Medicare Advantage plans can have these add-on services rolled right in, making them exceptionally convenient.

Image source: Getty Images.

Another popular aspect of Medicare Advantage is the annual cap in out-of-pocket costs for what would normally be covered by traditional Medicare Part A and B. Traditional Medicare has no out-of-pocket annual limits, which can be scary news for beneficiaries who typically owe around 20% of eligible medical costs. Medicare Advantage plans help narrow down your expected costs by capping your annual out-of-pocket expenses for what's covered by parts A and B.

Last, and this is somewhat marginal and location-based, Medicare Advantage plans tend to be just a hair cheaper than traditional Medicare plans based on a Commonwealth Fund abstract.Considering that traditional Medicare is a one-size-fits-all plan (save for the choice you'd get with choosing a prescription drug plan), and there are numerous Medicare Advantage plan options to choose from, this added competition has helped bring costs down.

Medicare Advantage plans aren't perfect

But is Medicare Advantage perfect? Not exactly. As with any healthcare plan, there are trade-offs.

If you decide to go with a Medicare Advantage plan, you should understand that your network of physicians and hospitals is probably going to be a lot narrower than with traditional Medicare. This isn't to say you'll necessarily have trouble finding a doctor or a hospital to go to, so much as to say that your longtime physician may not be on your plan from year to year.

Image source: Getty Images.

Medicare Advantage plans can also slow down your treatment process when it requires a specialist. Private insurers aren't too thrilled with having to pay the costs of sending members to see a specialist, so they'll typically require that you get a referral first, which can slow down the treatment process. Additionally, it also makes things a bit more expensive for you, since you'll likely be charged higher out-of-pocket fees for visits en route to seeing a specialist.

Despite these shortfalls, Medicare Advantage plans are gaining steam because of the added choice and simplicity they provide. If you qualify for Medicare, you may be doing yourself a disservice by not examining whether a Medicare Advantage plan would be right for you.

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