Traditional Medicare or Medicare Advantage? Some retirees aren’t allowed to choose

Usually, after age 65, you have two Medicare options: traditional Medicare (Parts A, B, and D, and often a Medigap plan) or a private health insurer’s Medicare Advantage plan, also called Part C. But increasingly, people with retiree health benefits from their former employers aren’t given that choice.

Instead, they’re told they can enroll only in a Medicare Advantage plan, with its limited network of doctors and hospitals, even if they would prefer going with the less restrictive traditional Medicare.

Reject the Medicare Advantage plan, they’re told, and they’ll lose their retiree health benefits, sometimes in perpetuity.

“It’s a lot to ask someone potentially to consider giving up their retiree benefits,” says Meredith Freed, a senior policy manager with the Program on Medicare Policy at KFF, a nonpartisan health care policy research, polling, and journalism group.

The shift to Medicare Advantage only

A new KFF report found that 12 states now offer only Medicare Advantage to their Medicare-eligible retirees, a 50% rise from 2016. The 12 states: Alabama, Arizona, Colorado, Connecticut, Georgia, Illinois, Kentucky, Maine, Missouri, New Hampshire, Pennsylvania, and West Virginia.

While only 21% of big employers offer health benefits to retirees (down from 66% in 1988), roughly two-thirds of large companies that offered retirees Medicare Advantage in 2023 didn’t permit them to enroll in traditional Medicare, according to KFF. In 2022, just 44% of those firms allowed Medicare Advantage only.

These shifts to Medicare Advantage can save money for the companies and state and local government employers. The Office of the Mayor of New York City estimated that switching 250,000 city employee retirees would save $600 million annually.

Medicare Advantage comes with tradeoffs

On the plus side, a Medicare Advantage plan usually has benefits not available through traditional Medicare: dental, vision, and hearing, for example.

A Medicare Advantage plan also often means lower out-of-pocket costs than the combination of traditional Medicare and Medigap (a Medicare supplemental plan to help cover what Parts A and B don’t).

But here’s the surprise the KFF researchers found on that score: Although many Medicare Advantage plans available to anyone 65-plus have $0 premiums, this isn’t the case for most of the 12 states offering retirees only the Medicare Advantage option. Just three of them have $0 premium plans for retirees initially.

Potential downsides of Medicare Advantage

You may encounter delays and possible treatment denials due to prior authorization—a cost-control technique requiring beneficiaries to get preapproval in order for the insurer to cover medical costs. Original Medicare rarely requires prior authorization.

Second, Medicare Advantage can mean not being allowed to go to your preferred physicians, hospitals, or specialty centers or paying extra because they’re out of network.

“Hospitals are becoming increasingly frustrated about prior authorization and claim denials, saying they won’t contract with a Medicare Advantage plan,” says Paul Ginsburg, a USC professor of health policy.

In some rural areas, few or zero doctors and hospitals participate in Medicare Advantage plans the companies and government employers offer retirees.

Some former state workers permitted to enroll only in Medicare Advantage plans can go to out-of-network health providers for the same cost as in-network, Freed says. But those doctors can choose not to accept the coverage.

Or they can require retirees to pay upfront and try to get reimbursed later by the plan. “That’s kind of administratively complex for people and can potentially be a lot of money upfront to have to pay out-of-pocket,” Freed says.

Another con: If you later decide you want to replace Medicare Advantage with traditional Medicare—forgoing your retiree health benefit subsidies—you might be unable to get a Medigap plan.

That’s because in 46 states, Medigap approval generally isn’t guaranteed after six months of enrolling in Medicare Part B; the exceptions are Connecticut, Massachusetts, Maine, and New York.

In the 46 states without a guarantee, apply for Medigap more than six months after turning 65, and you could be denied the policy due to a preexisting condition, your age, or where you live.

“When a [Medigap] insurer asks for medical information, if it looks like the person is likely to use a lot of medical care, it may just not make a policy available,” says Ginsburg.

Alternatively, he adds, “you might be offered a policy at a much higher premium than people who already have the coverage.”

Fighting back against not having a choice

Public sector retirees have been suing to prevent Delaware and New York City from requiring they enroll in Medicare Advantage plans.

Marianne Pizzitola, president of the NYC Organization of Public Service Retirees, says her group understands that the city government wants to save money by moving retirees into Medicare Advantage. “But the savings was coming at the expense of a promise made to us about our health care and our lives,” she adds.

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