What are Medicare Advantage Plans, and How Do they Work?
In 2025, the proportion of Medicare beneficiaries enrolled in a Medicare Advantage plan rose to 54%—over 34 million people, per data published by independent research organization KFF. While these plans offer benefits for many, they may not suit everyone especially those who value the freedom to choose a provider (since plans usually restrict you to a specific healthcare network). This post explores Medicare Advantage, explaining how these plans work and how to navigate the wide range of options (currently 36 of them!) available to beneficiaries.
What are Medicare Advantage plans?
Medicare Advantage plans, also called "Part C," are comprehensive, all-in-one alternatives to Original Medicare (Parts A and B). Most plans (~89%) also include Medicare Part D, which covers prescription drugs.
How do Medicare Advantage plans work?
Private companies approved by Medicare (e.g., UnitedHealthcare, CVS Health, and Humana) offer Medicare Advantage plans, most of which function similarly to health maintenance organizations (HMOs) or preferred provider organizations (PPOs). While HMOs typically require you to use doctors and other providers within the plan’s network and service area to keep costs lower, PPOs let you seek out-of-network care but often at a higher out-of-pocket cost.
Medicare Advantage plans are required to cover all the same services as Original Medicare (Parts A and B), but many also offer additional benefits such as dental, vision, hearing, and wellness programs (discussed shortly). Some plans even include prescription drug coverage (Part D), with no need to enroll in a separate drug plan. Since the company you buy your Medicare Advantage policy from will serve as your primary insurer, providers accepting original Medicare won’t necessarily accept your specific plan.
Benefits of a Medicare Advantage plan
Medicare Advantage plans offer several attractive features, including:
Expanded coverage for more services
One of the primary advantages of a Medicare Advantage plan is its additional coverage for services not included in Original Medicare such as vision, dental, hearing, fitness programs or gym memberships, home health aides, in-home safety device installation, prescription drug coverage, and extra perks like transportation to doctor’s visits.
Maximum out-of-pocket limits
Every Medicare Advantage plan has an annual out-of-pocket cost limit, often called the “MOOP” (maximum out-of-pocket). Two annual limits typically exist for plans covering out-of-network services: one for in-network services and another for combined in-network and out-of-network costs.
Upon reaching your MOOP—$9,250 for in-network and $13,900 for combined networks in 2026—you’ll owe nothing for covered Part A or B services for the rest of the year. Some plans also apply MOOP to supplemental benefits such as dental and vision. In contrast, Original Medicare does not set any out-of-pocket cost limits—making Medicare Advantage plans particularly helpful for budgeting health coverage, a benefit for those needing costly treatments.
Generally low premiums
Most Medicare Advantage plans have low premiums, and a few even offer premium reduction plans: rebates reducing the amount deducted from your Social Security check to cover Medicare Part B costs.
All-in-one coverage
Most Medicare Advantage plans bundle hospital (Part A), medical (Part B), and prescription drug (Part D) benefits, offering the convenience of a single plan with no need to manage separate policies and related complexities.
Disadvantages of a Medicare Advantage plan
Medicare Advantage plans also come with several shortcomings, including:
Restricted provider networks
A key drawback of many Medicare Advantage plans, particularly HMOs, is the requirement to use doctors and providers within the plan’s network and service area. While this restriction helps keep costs lower, it can limit your choice of providers and make it more difficult to receive care when traveling or taking up residence in multiple locations. Original Medicare, meanwhile, is accepted throughout the United States by any provider who accepts Medicare (the vast majority do).
Heavily subsidized premiums
Each approved company that offers a Medicare Advantage plan is awarded a set amount of federal Medicare funding for providing Part A and B coverage through its plans, with the remainder financed by monthly member premiums. Dependence on government subsidies is often tricky and could result in reduced benefits should the government scale back on these payments.
More out-of-pocket costs (potentially)
Although Medicare Advantage plans have lower premiums and maximum out-of-pocket limits, total healthcare expenses can sometimes exceed those incurred with Original Medicare combined with a comprehensive Medigap policy. This risk is greater for people who need frequent or expensive medical care as ongoing copayments, coinsurance, and services not covered by the plan can add up quickly. Medigap policies, on the other hand, typically cover most deductibles and coinsurance costs to help reduce unpredictable expenses.
Service delays or denials
Many Medicare Advantage plans employ strategies that can complicate access to care such as provider network or prior authorization requirements, with the latter often needed for higher-cost services like inpatient hospital stays, skilled nursing facility care, and chemotherapy. While Original Medicare also requires prior authorization, it applies to a much narrower range of services. Per KFF, 7.7% of prior authorization requests were denied in2024; although most appeals succeeded, the process can lead to delays, unexpected out-of-pocket costs, or (in some cases) patients forgoing necessary treatment.
How to qualify for a Medicare Advantage plan
To enroll in a Medicare Advantage plan, you must first be enrolled in both Medicare Part A and Part B (most people automatically qualify for these upon turning 65). Individuals under age 65 may also qualify after receiving disability benefits from the Railroad Retirement Board or Social Security Administration for 24 months. You must reside within the service area of the Medicare Advantage plan you wish to join, with these plans not available everywhere and each one licensed by its respective state and approved by Medicare for specific service areas/regions.
When you can enroll in a Medicare Advantage plan
Specific Medicare Advantage enrollment periods task you with enrolling as soon as you become eligible to enjoy valuable flexibility. If you sign up during your initial eligibility window, for example, you can leave your plan at any time within the first 12 months and return to Original Medicare—particularly helpful if your doctor or medication is no longer covered or you’re dissatisfied with your plan.
You can enroll in, switch, or leave a Medicare Advantage plan only during special enrollment periods thereafter, these periods falling outside your initial window and typically granted for specific life events (e.g., losing health coverage or moving) with exceptions sometimes applying for other special circumstances. Since Medicare Advantage plans frequently update benefits in response to market changes, it's important to review all available options each year during your enrollment period; comparing your choices can help you find the best fit, knowing plan details are subject to change annually.
Average monthly Medicare Advantage plan premiums
Before diving into Medicare Advantage costs, know that enrollment in a Medicare Advantage plan doesn’t eliminate your responsibility for the monthly Medicare Part B premium—which starts at $202.90 but is sometimes higher depending on income and tax-filing status (individual or joint).
Most people pay no additional premium
Medicare Advantage premiums are additional and vary by plan. According to KFF, they can range from $0 to up to several hundred dollars per month with the average around $14.00. Further analysis shows that 67% of enrollees pay no premium beyond their Part B premium, 17% pay less than $50 per month, 9% pay at least $50, and 6% pay $100 or more.
Medicare Advantage plans aren’t standardized
Premiums, copays, deductibles, and coinsurance amounts can differ significantly based on the insurance provider, specific plan, and your geographic location.
Cost shouldn’t be the only factor in your decision
As with most insurance policies, avoid making decisions based solely on cost. Medicare uses a star rating system (from one to five, with five being the best) to evaluate how well Medicare Advantage and Part D plans perform across various factors such as quality of care and customer service. Each plan receives an overall star rating summarizing its performance; you can use Medicare’s plan finder tool to review and compare these ratings.
An interesting fact to know about Medicare Advantage plans
Insurers that offer Medicare Advantage plans are required to allocate at least 85% of premiums to patient care and quality improvements rather than overhead. In fact, administrative costs cannot exceed 15% of revenue. The Centers for Medicare & Medicaid Services (CMS) won’t allow new members to enroll if a plan fails to meet these criteria for three consecutive years, terminating the plan altogether if this extends to five.
In sum: Medicare Advantage plans
As you can see, Medicare Advantage plans are fairly complicated—which is why we recommend speaking to a Medicare expert or Certified Financial Planner® (CFP®) to help navigate the complexities.
Still have questions about Medicare Advantage? Schedule a FREE discovery call with one of our CFP® professionals to get them answered.
FAQs
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Unfortunately, your Medicare Advantage plan will not travel with you—even if continue to reside in the same state—requiring you to enroll in a plan offered within your new service area.
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You can only join, change, or drop a Medicare Advantage plan during specific enrollment periods, as follows:
1. Initial Enrollment Period: This 7-month window starts 3 months before the month you turn 65 and ends 3 months after.
2. Medicare Open Enrollment Period: This occurs every year from October 15 to December 7.
3. Medicare Advantage Open Enrollment Period: From January 1 to March 31 each year, you can switch to another Medicare Advantage plan or drop your plan and return to Original Medicare.
You must typically keep your Medicare Advantage Plan for the full calendar year starting on the date your coverage begins, but some life events—such as moving or losing other insurance coverage—may qualify you for a Special Enrollment Period allowing you to join, switch, or drop your plan.
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You can enroll for Medicare Advantage online at medicare.gov or directly through the provider. Enrollment is also available by phone (1-800-MEDICARE).
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No, you cannot have both. In fact, it’s illegal for someone to sell you a Medigap policy if he or she knows you’re enrolled in a Medicare Advantage Plan—unless you switch back to Original Medicare.
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It depends on your specific plan, but in most cases, you can only visit physicians and other providers who are in the plan’s network and service area (for non-emergency care). Some plans do offer non-emergency out-of-network coverage but typically at a higher cost.
About the author
The content in this post was developed by our team of writers and reviewed by our team of CFP® professionals here at Vision Retirement.
Retirement Planning | Advice | Investment Management
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Vision Retirement is an independent registered advisor (RIA) firm headquartered in Ridgewood, New Jersey. Launched in 2006 to better help people prepare for retirement and feel more confident in their decision-making, our firm’s mission is to provide clients with clarity and guidance so they can enjoy a comfortable and stress-free retirement. Schedule a no-obligation consultation with one of our financial advisors today!
Disclosures:
This document is a summary only and is not intended to provide specific advice or recommendations for any individual or business.
