Millions of people enroll in Medicare Advantage plans (also known as Medicare Part C) offered by insurance companies such as Humana, AARP UnitedHealthcare, Aetna, and Blue Cross Blue Shield. These plans are popular due to their low or $0 monthly premiums and additional benefits, including dental, hearing, vision, and prescription drug coverage. Medicare Advantage plans are regulated by the federal government and are designed to provide comprehensive healthcare to Medicare beneficiaries through contracts with private insurance companies.

Profit Motive and Managed Care: It’s essential to understand that insurance companies offering Medicare Advantage plans are for-profit entities. This means that these plans operate under a managed care model, where cost control and utilization management are significant factors.

Comparison to Original Medicare: Original Medicare typically covers 80% of approved medical costs, leaving beneficiaries responsible for the remaining 20%. Critically, there is no maximum out-of-pocket limit under Original Medicare, which can lead to substantial expenses for extensive care. Medicare Supplement plans (Medigap) are available to help cover these out-of-pocket costs.

Medicare Approved Skilled Nursing Facility Care (SNF): Under Original Medicare, after a qualifying three-day inpatient hospital stay, Medicare Part A covers the full cost of an approved SNF for the first 20 days per benefit period. From days 21 to 100, a daily co-payment applies (in 2025, this is $209.50 per day). After 100 days in an SNF, beneficiaries are responsible for all costs within that benefit period. Medicare Supplement plans can cover these co-payments, but their coverage also ceases after 100 days per benefit period. Medicare, not an insurance company, makes the determination on the medical necessity and length of stay.

Medicare Advantage plans often waive the three-day inpatient hospital stay requirement for SNF coverage. However, they come with specific rules regarding network and authorization. HMO (Health Maintenance Organization) plans generally require beneficiaries to use in-network SNF providers. This can be a significant challenge in rural areas, as beneficiaries may need to travel long distances to access an in-network facility. PPO (Preferred Provider Organization) plans offer more flexibility, allowing beneficiaries to use out-of-network SNF options, though at a higher cost. Regardless of plan type (HMO or PPO), the insurance company, not your doctor, ultimately determines the length of stay in an SNF under Medicare Advantage, which may prioritize cost control through utilization review.

Maximum Out-of-Pocket (MOOP) Limit: Medicare Advantage plans have a maximum out-of-pocket limit, which for 2025, can be as high as $9,350 for in-network services (and higher for out-of-network services depending on the plan). This limit resets each calendar year.

The Financial Risks: A significant financial risk with Medicare Advantage plans is the annual reset of the maximum out-of-pocket limit. For example, a beneficiary admitted to an SNF in November could incur the full out-of-pocket maximum by December 31st and then face another full out-of-pocket maximum starting January 1st of the new year, potentially leading to substantial costs in a short period. The length of stay in an SNF under a Medicare Advantage plan is subject to continuous review and approval by the insurance company.

Solutions to Limit Financial Loss: To mitigate financial risks associated with Medicare Advantage plans, particularly concerning SNF care, several options exist. One avenue is to explore Medicaid eligibility. Medicaid provides comprehensive coverage for low-income individuals, including long-term care services such as SNF care, though eligibility requirements vary significantly by state. Another option is to purchase a Long-Term Care (LTC) insurance plan. These plans are designed to cover skilled and custodial nursing, assisted living, and nursing home care for extended periods. However, they are typically expensive, have strict medical underwriting requirements, and may have waiting periods before benefits begin. Alternatively, one might consider a Short-Term Nursing Home insurance plan, which offers more affordable coverage for a limited period, often designed to cover the gap in Medicare SNF coverage or initial costs. Finally, enrolling in a Medicare Supplement plan and a stand-alone Prescription Drug plan (Part D) during the Annual Enrollment Period (AEP) can be a strong strategy. For beneficiaries who medically qualify (medical underwriting may be required), a Medicare Supplement plan would pay all Medicare-approved co-pays and deductibles for an SNF stay (if the beneficiary is approved by Medicare) for up to 100 days, offering more predictable out-of-pocket costs compared to MA plans.

Important Considerations: Medicare Advantage HMO plans have strict network restrictions that can limit choices and access, especially in rural areas. MA plans utilize processes like prior authorization and concurrent review to manage care and costs, which can sometimes impact access to services or the approved length of stay. Medicare Advantage plans and Prescription Drug plans can change their benefits, networks, and cost-sharing annually; beneficiaries must review their Annual Notice of Change (ANOC) and re-evaluate their coverage thoroughly each year during the Annual Enrollment Period (October 15 – December 7). The need for medical underwriting for Medicare Supplement plans is a crucial factor that can prevent individuals with pre-existing conditions from enrolling outside of initial enrollment or guaranteed issue periods. It is vital for beneficiaries to carefully compare the details of each plan’s specific benefits, costs, and limitations, as they are not uniform. Lastly, Medicaid eligibility and benefits, as well as some Medicare Supplement plan rules, can vary based on state regulations.

In summary, the choice between Medicare Advantage plans and Original Medicare with a Medigap plan depends heavily on individual health needs, financial circumstances, and tolerance for managed care restrictions. Understanding the potential out-of-pocket costs associated with SNF care under each option is paramount when making this crucial healthcare decision.