Medicare Advantage appeals to many older adults, but it’s not always all it’s cracked up to be

Medicare Advantage plans are offered by private insurers and bundle Medicare benefits in a way many people find appealing — but they also limit care to network providers, often require preapproval to see specialists and can saddle beneficiaries with high out-of-pocket costs for serious conditions.

The number of older adults in Medicare Advantage is also notable because financial experts tend to recommend Original Medicare with medigap. 

“I help my clients with Medicare choices, and what I tell them all is that if you can afford it, you should sign up for traditional Medicare with a Medicare Supplement plan,” says David Haas, a certified financial planner in Franklin Lakes, New Jersey.

So why do so many people turn to Medicare Advantage for their health care in retirement? Here are the main factors.

Medicare Advantage is often free

In 2023, 66% of Medicare Advantage plans with prescription drug coverage have no premium — versus medigap, which has a monthly premium. If you have no health issues, the choice can seem like a no-brainer.

“Medicare Advantage is extremely attractive when you’re healthy,” says Leslie T. Beck, a CFP in Rutherford, New Jersey. “But when something happens — and something always happens — and you’re in a Medicare Advantage plan, you can’t switch back. You can switch into regular Medicare, but you’ll never get a medigap policy.”

(This is because in all but four states, once you’re past your first 6-month Medigap open enrollment period, you must medically qualify for a Medigap plan. Those with serious health issues may not be able to get a plan.) 

Also see: $3,000 a week? The enormous cost of care for elderly loved ones that nobody warns you about.

Plans are bundled

With Original Medicare, people must juggle individual pieces of coverage — Part A, Part B, Part D, medigap — but Medicare Advantage offers one-and-done simplicity: There’s one premium for everything. 

Although choosing a Medicare Advantage plan feels simpler, it means you must shop again for coverage every open enrollment. “You have to include the prescription drug coverage and the doctor coverage, and you have to make this choice every year,” Haas says. 

With Original Medicare, Haas says, “You do need to choose a new Part D plan, but you don’t need to reopen your entire medical equation every year the way you do with Medicare Advantage.”

Medicare Advantage offers extras

Many Medicare Advantage plans offer additional benefits, such as money toward dental or vision care, which isn’t covered by Original Medicare. About 1 in 4 people say extra benefits pushed them to choose Medicare Advantage, according to a survey by the Commonwealth Fund, a health care think tank.

“Medicare Advantage plans are heavily marketed and tout how they include all of the other services not available with medigap — prescription drug plans, subsidized health club dues, dental and vision,” says George Gagliardi, a CFP in Lexington, Massachusetts. “So it seems to many people like too good of a deal to turn down.”

But the extra benefits offered by Medicare Advantage are generally pretty limited, and experts say choosing a health plan for the dental coverage and gym membership is missing the point of insurance.

“It’s not about paying for the little piddly expenses that you have,” Beck says. “It’s paying for the catastrophic expenses.”

Their friends chose Medicare Advantage

Many older adults choose a Medicare Advantage plan because someone they know chose one.

“We tend to get a snowball effect,” says Andrew T. Cook, a CFP in Timonium, Maryland. “One retiree made the decision, they talk to another retiree, who talks to another one, and that groupthink often leads them to conclude that if they all made the decision independently, it must have been the right decision.” But Medicare is an area in which retirees should go beyond friends for advice. If a financial planner isn’t an option, each state has a State Health Insurance Assistance Program, or SHIP, where people can get free, unbiased guidance. Visit shiphelp.org to find a program.

Also see: ‘My body was breaking down.’ This 75-year old was sick and overweight, and now she’s full of energy and a fitness influencer.

Medicare Advantage ads are everywhere

“When you talk about advice on what’s better for individuals, it’s really whose voice is the loudest and the most persistent,” Beck says. “If you’ve ever watched any late-night TV, it’s just ad after ad for Medicare Advantage.”

Read more: Confused by an avalanche of Medicare ads? Deceptive marketing has some experts calling for action.

In addition to being prolific, the ads are increasingly misleading. Growing complaints about Medicare Advantage advertising have led the Centers for Medicare & Medicaid Services to now require that insurers get approval from federal regulators before airing television ads.

“I watch those ads very carefully, and they basically conflate Medicare with Medicare Advantage,” Beck says. “It’s rare that they mention ‘Medicare Advantage.’”

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Kate Ashford, CSA® writes for NerdWallet. Email: kashford@nerdwallet.com. Twitter: @kateashford.