In 2020, insurance companies will offer more Medicare Advantage plans than at any point in the history of Medicare Part C. With thirteen new insurance companies entering the Medicare Advantage competition, the choice in plans is up 15% over 2019. That’s 414 more plans, totaling 3,148 publicly available Medicare Advantage plans. However, this will mean different things for different consumers.

What is a Medicare Advantage Plan?

In Medicare Part C, insurance companies can take over a person’s original Medicare benefits, rearrange those benefits, and offer alternatives to original Medicare. Unlike Medigap policies or Medicare supplement policies (which add to Medicare benefits), Medicare Advantage plans actually take away and replace a senior’s traditional Medicare. For this reason, if a senior is considering surrendering his or her original Medicare protection, it’s important for seniors to understand how the plans will change those protections. We are currently in the middle of the open enrollment period during which seniors can switch plans. It ends December 7. After sixteen years of Medicare Advantage, only 34% of Medicare beneficiaries have elected Medicare Advantage plans over traditional Medicare.

How Much Choice is There in Medicare Advantage Plans?

Currently, over 100 insurance companies offer a record-setting 3,148 Medicare Advantage plans. Two-thirds of these are HMOs, but PPOs are also available. The average senior in America has 28 plans from which to choose.

Advantage Plan Choice Varies by Region

It’s important to note, however, that Medicare Advantage plans continue to cherry-pick the easier-to-manage major metropolitan areas while only expanding to more rural regions slowly. Currently, the average American can choose between 28 plans, which is down from 33 in 2010. Nearly one quarter of this year’s 15% growth in plans occurred in California and Florida alone. Conversely, these other areas experienced a decrease in the number of plans available: Hawaii, Indiana, Maryland, Puerto Rico, and Utah.

Puerto Rico is the only U.S. territory to receive any Advantage Plan service at all. Insurance companies have left the other 13 territories, such as the Virgin Islands, to be Medicare’s challenge.

Seventy-seven U.S. counties have no publicly available Advantage Plans at all. It was 115 in 2019, so insurance companies are now reaching out to 38 new counties. This stat deserves closer scrutiny, though. There are several counties where the Advantage Plans that are available on paper do not sell well in reality because the PPO networks exclude the local providers. It’s not uncommon for PPOs to ask their rural members to drive 50 miles or more to their in-network doctors, passing several qualified doctors along the way.

Why Would Someone Switch from Traditional Medicare to a Medicare Advantage Plan?

There are two main reasons that people switch. One is that Medicare Advantage plans often prioritize benefits toward routine expenses, lowering the monthly out-of-pocket costs for people on certain medications or who need recurring medical attention. The other reason is that Medicare Advantage plans are allowed to offer coverage that is not available in traditional Medicare. For instance, more than 90% of seniors have access to Medicare Advantage plans that offer dental, fitness, vision, and/or hearing coverage.

Where is the Trade-Off?

While some people save money on a monthly basis with their carefully selected Medicare Advantage plans, the trade-off may occur when people are really sick. An analysis published in the American Economic Journal finds that Medicare Advantage plans send 30% of revenue to internal expenses such as executive salaries and shareholder profits while spending 33% less on patient care. Patients with a Medicare Advantage plan

• Are more likely to be sent straight home from the hospital
• Are less likely to get time at rehabilitation facilities or nursing homes
• Receive fewer days in the hospital after a surgery
• Are more likely to receive their surgeries as outpatient procedures
• Have fewer choices in home health agencies and other providers
• Are less likely to see a specialist

Another important trade-off is that Advantage Plans may not have nationwide networks like traditional Medicare. Investopedia’s Tim Parker notes that Advantage plans often only operate in certain regions.¹ People who travel may find themselves paying high, out-of-network fees.  

Related Articles:

• Original Medicare Or Medicare Advantage: What Stanford Economists Say
• Does Medicare Advantage Limit My Access to Hospice?
• Does Medicare Pay for Home Care?

Reference:

1. Parker T. Medigap vs. Medicare Advantage: What’s the Difference? Investopedia. April 23, 2019.