Across the spectrum of Medicare health insurance plans available to adults age 65 and older (and some younger individuals with qualifying disabilities), there are many options from which to choose.
Two options you may be considering are Medicare Advantage plans and Medicare Cost plans. While there are similarities to these offerings, they’re different in some important ways.
Here, we’ll unpack everything you need to know about these two types of plans so you can make an informed decision about which best meets your needs, preferences and budget.
What Are Medicare Advantage Plans?
Medicare Advantage plans, also known as Medicare Part C, offer recipients an alternate way to receive Medicare Part A (hospital insurance) and Part B (medical insurance) coverage, according to Dee Chaudhary, a Minnesota-based principal with Clarivate Commercial Strategy Consulting, a life sciences and health care consulting services firm headquartered in London.
These plans are provided by private health insurance companies that have been approved by the Centers for Medicare and Medicaid Services to offer these policies, and they must adhere to rules set by Medicare.
Most Medicare Advantage plans also include Medicare Part D, which is prescription drug coverage, and many offer additional benefits that aren’t covered by original Medicare, such as:
— Dental
— Vision
— Hearing care
— Health club memberships, such as SilverSneakers
Because of these extra benefits, Medicare Advantage plans can be an attractive option for beneficiaries who want a more managed care approach and are looking for cost-effective options within a specific network.
[READ: Medicare Advantage HMOs vs. PPOs: Which Is Right for You?]
What Is a Medicare Cost Plan?
A Medicare Cost plan is a type of health insurance plan that combines aspects of original Medicare (Part A and Part B) with additional benefits from a private insurance company.
“They’re similar to Medicare Advantage plans but offer more flexibility in choosing doctors and pharmacies,” says John Mastronardi, executive director of the Nathaniel Witherell, a long-term skilled nursing care facility in Greenwich, Connecticut.
[READ: Medicare Agents and Brokers: How They Help and How to Find a Good One]
Reasons to Select a Medicare Cost Plan
There are nuances among original Medicare, Medicare Advantage and Medicare Cost plans, but two reasons you might opt for a Medicare Cost plan include flexibility and additional coverage.
Flexibility
Medicare Cost plans allow enrollees to receive care both in and out of the plan’s network.
“Unlike with Medicare Advantage plans, you’re not limited to a specific network of doctors and hospitals. You can see any provider who accepts Medicare,” Mastronardi says.
This could mean cost savings if you’re able to find affordable providers, he adds.
Additional coverage
Medicare Cost plans may offer additional benefits beyond what original Medicare offers, such as prescription drug coverage.
“You can choose a separate Part D prescription drug plan that best suits your needs,” Mastronardi adds.
Cons of Medicare Cost plans
There are, however, some potential downsides to Medicare Cost plans. For example, Medicare Cost plans are available only in certain states and require enrollees to have Medicare Part B coverage, Chaudhary notes.
“And you may still need to pay deductibles, copays and coinsurance, similar to original Medicare,” Mastronardi adds.
[Read: Medicare Enrollment Deadlines You Shouldn’t Miss.]
Who Offers These Plans?
Both Medicare Advantage and Medicare Cost plans are administered by private health insurance companies.
Medicare Advantage plan providers
The largest insurers who offer Medicare Advantage plans include:
— UnitedHealthcare, which Chaudhary says is known for its extensive provider network and nationwide coverage
— Humana, which has a wide range of offerings across all 50 states and provides almost solely Medicare plans
— Aetna, which provides strong local support and a variety of options
— Blue Cross Blue Shield, which is highly regarded for its comprehensive benefits and consumer reputation
— Cigna, which stands out for offering additional benefits and high overall SMC ratings, Chaudhary says
Medicare Cost plan providers
Medicare Cost plans are available only in a few states (and in some states are limited to certain counties). The companies you’ll most likely see offering these plans include:
— Medica
— Blue Cross Blue Shield
When Can I Enroll?
Medicare Advantage plans are available during three specific enrollment periods:
— Your initial enrollment period, when you first become eligible for Medicare
— The annual enrollment period, from October 15 to December 7 each year
— The Medicare Advantage open enrollment period, from January 1 to March 31 each year
CMS reports that generally, you can join a Medicare Cost plan whenever it’s accepting new members, even if you have only Part B. You’re also free to leave a Medicare Cost plan and return to original Medicare whenever you want.
Medicare Advantage vs. Medicare Cost Plans
If you’re comparing Medicare Advantage and Medicare Cost plans, there are key similarities and differences that may help you determine which one is right for you.
Network and out-of-pocket costs
Medicare Advantage: These plans have a maximum out-of-pocket limit that protects enrollees from high medical costs. For 2024, the out-of-pocket limit for in-network services has been capped at $8,850.
If a plan covers out-of-network services, the combined in-network and out-of-network limit can be up to $13,300. However, the average out-of-pocket maximum for in-network services is around $4,835.
“These limits help ensure that medical expenses do not exceed a certain amount within a calendar year, providing enrollees a sense of financial security,” Chaudhary explains.
Medicare Cost: Medicare Cost plans usually offer more predictable out-of-pocket costs, “especially if the individual needs out-of-network care,” Chaudhary says.
If you receive care outside the plan’s network, those services are covered under original Medicare, rather than the Medicare Cost plan itself. This can be a big benefit for people who travel frequently or live in an area with limited network providers.
Medicare Cost plans also “often have an annual out-of-pocket maximum, which can range from $3,000 to $7,500. Like a Medicare Advantage Plan, this limit helps protect individuals from excessive medical expenses by capping the annual out-of-pocket amount,” Chaudhary adds.
Premiums
Medicare Advantage: Medicare Advantage plans typically have fixed monthly premiums, which may be lower than those with original Medicare. In some cases, Medicare Advantage plans may have a $0 premium.
However, you may have higher out-of-pocket costs, such as copays and deductibles for specific services, Mastronardi says.
Medicare Cost: There’s little uniformity in the out-of-pocket and premium costs for Medicare Cost plans.
“The monthly premiums for Medicare Cost plans can range widely due to plan type and geography, but on average, they tend to be higher than those for Medicare Advantage plans,” Chaudhary says.
In fact, she notes, you can expect to pay anywhere from $50 to $200 per month, depending on the specific plan, plus you’ll need to continue to pay the Medicare Part B premium ($174.40 per month in 2024).
Some Medicare Cost plans also have annual deductibles that can range from $0 to $500 on up.
“These costs vary by plan but typically include copayments for doctor visits, hospitalization and other services, such as a $50 copayment for a specialist visit or a percentage of a hospital charge,” Chaudhary says.
Prescription drug coverage
Medicare Advantage: The list of prescription drugs available under a Medicare Advantage plan may be limited due to formulary restrictions. (A formulary is a list of prescription drugs a plan covers.)
“Each Medicare Advantage plan has its own formulary, which categorizes drugs into different tiers,” Chaudhary notes.
It typically includes both brand-name and generic drugs.
“These tiers determine the cost of the drugs, with lower-tier drugs generally costing less than higher-tier drugs,” Chaudhary adds.
Because these formularies can change from year to year, it’s important for that you review a plan’s formulary to ensure that your medications are covered and that you understand the associated out-of-pocket costs.
Medicare Cost: These plans also typically have prescription drug formularies, which include both generic and brand-name medications and are designed to cover a wide range of prescription drugs that people with Medicare commonly use.
Again, however, “each plan’s formulary can vary, so it’s important that enrollees review the specific list of covered medications,” Chaudhary says.
Which One Is Better?
Both Medicare Advantage and Medicare Cost plans have pros and cons.
“The best option for you depends on your individual needs, health and budget,” Mastronardi says.
For example, if you have chronic health conditions or require frequent medical care, a Medicare Advantage plan that has a strong network of specialists might be a better fit for your needs.
Mastronardi recommends talking with a health care professional or Medicare counselor to get personalized advice for your specific situation. You can start by reaching out to your local State Health Insurance Assistance Program for free advice and guidance about all things Medicare.
How Is the IRA Influencing These Plan Options?
As the 2024 open enrollment period approaches, Chaudhary points out there could be challenges ahead for some beneficiaries and their preferred Medicare Advantage or Medicare Cost plans.
This is related to the recent implementation of the Inflation Reduction Act (IRA), which introduced several significant changes to Medicare. These changes are “impacting consumers, pharmaceutical manufacturers and health insurers,” Chaudhary says.
Briefly, the IRA, which went into effect on January 1, 2023, made a number of changes intended to strengthen Medicare and improve access to affordable treatments. Some key provisions of the law include:
— Expanding vaccine coverage
— Lowering out-of-pocket drug costs, with a specific focus on capping the cost of insulin
— Capping out-of-pocket drug costs
— Expanding the Extra Help drug subsidy program
Chaudhary notes that caps on out-of-pocket drug costs have greatly increased payers’ financial responsibilities. These key components of the law could change what’s available in your area.
According to a Clarivate survey conducted in March and April 2024 to better understand the impact of the IRA, “nearly 1 in 5 insurers expected to withdraw some Medicare Advantage plans from the market due to the IRA,” Chaudhary says.
For you, the consumer, this could boil down to “some inconvenience in certain areas in finding new plans during the open enrollment period and potential disruptions in care,” Chaudhary notes, especially if your Medicare Advantage plan has changed its provider network or drug formulary.
So, be sure to start your research early and be aware you may need to make some changes going forward.
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Medicare Advantage vs. Medicare Cost Plans: What?s the Difference? originally appeared on usnews.com
Update 09/30/24: This story was previously published at an earlier date and has been updated with new information.
