How Medicare Advantage works and what to consider when choosing a plan

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During the open enrollment period, more than 60 million Medicare beneficiaries will have the chance to change their health or drug coverage for 2026.

For those enrolling in a Medicare Advantage plan, this year brings some surprising new trends. For starters, the number of Medicare Advantage plans nationwide has dipped, and a closer look reveals that many plan details have weakened, said Jae Oh, author of “Maximize Your Medicare.”

“And so it becomes more challenging to understand what to do, how to choose based on your particular situation,” Oh said on a recent episode of Decoding Retirement.

From Oct. 15 through Dec. 7, beneficiaries can join, switch, or drop a Medicare Advantage or Medicare drug plan — or return to Original Medicare. Medicare Advantage (also known as Part C) is a Medicare-approved plan offered by private insurers that provides an alternative to Original Medicare. These plans combine Part A (hospital insurance), Part B (medical insurance), and usually Part D (prescription drug coverage) into a single package.

Oh described Medicare Advantage as “managed care,” meaning “that the plan provider you become a member of is determining the entire suite — all of the details of the benefits — which must be, on average, at least as good as Original Medicare.”

Read more: How to add or adjust your Medicare coverage

While market disruption happens every year, this year it’s more noticeable, Oh said.

$0-premium plans still exist, but the era of the truly “no-cost” plan is fading. Some insurers are now adding health or drug deductibles, making it harder for beneficiaries to compare options.

Oh also explained that, each year, insurers must file and receive approval before offering plans in specific ZIP codes. Some insurers have left certain locations entirely, he said, which “is creating some turmoil for a number of Medicare Advantage members.”

“It’s an annual requirement,” Oh said. “So, it’s important to understand that with Medicare Advantage, it’s the insurance company — not Medicare itself — that decides what benefits your plan includes.”

When people use Medicare’s Plan Compare tool, they’ll see options from insurers like Humana (HUM), UnitedHealthcare (UNH), and Blue Cross (ELV). So how should they decide between an HMO (health maintenance organization) or PPO (preferred provider organization) plan — and whether to include prescription drug coverage?

Oh advised people to start with Part D prescription drug coverage.

“Anyone without it faces a Part D penalty,” he said. “Unless you have creditable coverage elsewhere, you’ll need a prescription drug plan, since it can’t generally be added later except in limited cases under certain private fee-for-service plans, a type of Medicare-managed plan.”

The Part D late enrollment penalty is a permanent surcharge added to your monthly premium if you go 63 or more days without prescription drug coverage after your initial enrollment period ends. The penalty equals 1% of the national base premium ($36.78 in 2025) for each full month you went without coverage, rounded to the nearest $0.10 — and it lasts for as long as you have drug coverage.

“When I guide our clients, I make sure that all the prescriptions that you know about are included and covered in a specific plan because that becomes such a large driver of the annual out-of-pocket cost that a Medicare Advantage member will face,” Oh said.

Extra benefits — vision, dental, hearing, or gym memberships like SilverSneakers — can also factor into the decision, but their importance varies from person to person.

“For example,” Oh said, “let’s say you’ve just turned 65, you’re in perfect health, you take no medications, and your overall medical needs are low — but you have significant dental expenses. In that case, if two plans are otherwise similar but one offers a more robust dental benefit, that could absolutely be the deciding factor.”

While some of these add-on benefits have been scaled back or “diluted,” Oh stressed that “I don’t want to say they’re without value, especially in a particular person’s case.”

Although many focus on $0-premium Medicare Advantage plans, Oh said the real priority should be total healthcare costs.

In 2025, more than three-quarters (76%) of enrollees in individual Medicare Advantage plans with drug coverage paid no premium beyond the standard Part B premium, according to KFF.

Oh said the key factor, beyond premiums, is the annual out-of-pocket maximum — the point at which the insurer covers 100% of remaining costs.

The government sets an upper limit, but insurers can offer plans with different caps. In 2025, Medicare Advantage plans couldn’t exceed $9,350 for in-network services or $14,000 for combined in- and out-of-network services. On average, enrollees faced out-of-pocket maximums of $5,320 for in-network care and $9,547 for PPO plans, KFF reported.

“When we guide clients, we look beyond premiums,” Oh said. “We check that prescriptions are covered, confirm that doctors and hospitals are in-network, and then select the plan that minimizes overall, all-in costs for the year.”

In some cases, paying a monthly premium can actually save money compared with a $0-premium plan that has higher out-of-pocket limits. “If your health isn’t strong, that ‘free’ plan could end up costing you more in the long run,” Oh said.

Beneficiaries should also pay close attention to copays, coinsurance, and annual deductibles.

“Copays are a fixed schedule, meaning that you pay a dollar price for a particular service,” he said. “When it comes to prescription drug plans, a particular tier may have a specific dollar amount.”

However, he cautioned that these rules vary from plan to plan. “Some care needs to be taken, and the reason it’s become complicated is because … these copay amounts may or may not apply to a deductible based on a service,” he said.

He also emphasized that while comparing plans can be complex, insurers cannot deny coverage based on health status.

“Individual plans cannot discriminate based on a particular health situation,” he said. “No carrier will deny entry into a Medicare Advantage plan based on your healthcare needs.”

Each year during open enrollment, scammers target older adults with misleading ads, unsolicited calls, and fake offers. Oh said new protections are in place — but vigilance still matters.

“I think that just means applying your common sense first,” Oh said. “You should not be receiving an incoming phone call unless you have specifically requested that. I don’t call random person number 3,000 just because I feel like it, because I’ve seen their number and they’re Medicare eligible. That is not allowed.”

If you receive a call about a Medicare plan, Oh said the first step is verifying the caller’s credentials.

“If someone calls you and you are asking whether or not that is a legitimate producer, the simple question can be: What is your NPN? That is the National Producer Number,” he said. “It is a unique number. I have one, as well as all licensed people involved in insurance — whether that insurance is auto insurance or health insurance.”

“If a person’s not willing to share that with you, that could be a red flag for me,” Oh said. “If I’m a legitimate producer, I’m absolutely willing to share that. So if someone is unwilling to share that with you, that should probably tell you something.”

Consumers can verify the number through their state insurance commissioner’s office. “They could go to their state insurance commissioner’s website, use that NPN, and be able to verify the fact that [the caller has] a valid license in that location,” he said.

Ultimately, when deciding whether to enroll in or switch Medicare Advantage plans, you have to put in the effort to make the best choice for yourself.

If the process feels overwhelming, it’s smart to reach out for help — a counselor from your local State Health Insurance Assistance Program or another qualified professional who can walk you through your options.

“This is especially true today, as inflation and higher living costs stretch retirees’ budgets,” Oh said. “Every dollar counts. I’m someone who’s been called a cheapskate myself, so I try to help people economize as much as they possibly can.”

Got questions about retirement? Email Robert Powell at yfpodcast@yahooinc.com, and we’ll do our best to answer it in a future episode of Decoding Retirement.

Each Tuesday, retirement expert and financial educator Robert Powell gives you the tools to plan for your future on Decoding Retirement. You can find more episodes on our video hub or watch on your preferred streaming service.

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