Considering Medicare Advantage
A Medicare beneficiary may choose a “Medigap” (or Medicare Supplement) policy to accompany Original Medicare. These plans cover all or most of the “gaps” in Original Medicare: the hospital deductible, the 20% Part B co-insurance for Medicare Part B (doctors and outpatient medical) approved charges, and the skilled nursing facility co-pay. And some plans pay the Part B Excess charges. These policies cost $100.00 to 150.00 per month for a person in their late 60’s. Another cost in Original Medicare is Part D, prescription drug coverage, which runs about $30.00 per month on average. (You can employ strategies in choosing a Part D plan – see Using Part D Strategies.)
Or one may choose Medicare Advantage (MA), an alternative to Original Medicare, which is written by private insurance companies, under extensive supervision by Medicare. These plans usually cover Part D prescriptions as well, usually for no additional cost. They are called “MA-PD’s.” They are required to cover all of the Part A (hospital) and Part B services in Original Medicare, and they are allowed to cover additional health care and medical services. More on this later.
A very simplified way of understanding the difference between Medigap and Medicare Advantage (Medicare Part C) is this: With Medigap, you pay in advance; whereas with Medicare Advantage it’s a kind of pay-as-you-go.
Medicare Advantage (MA) plans have CO-PAYS – a fixed amount for each service. Examples are $5.00 to 10.00 for a primary care physician visit, $40 to $50 for a specialist, and about $275.00 for outpatient surgery. Hospital and skilled nursing facility co-pays are higher. All of these plans have a Maximum Out of Pocket Limit – about $4500.00, on average, per year in network. Please note that the above Maximum Out of Pocket Limit does not include prescription drugs – this part of Medicare has its own separate limits (See Medicare 2020 – What’s New?). It should be pointed out that all beneficiaries, whether in Medicare with Medigap or in Medicare Advantage, pay a premium – $135.50 per month (usually deducted from Social Security checks) for Medicare Part B. Higher income beneficiaries may have to pay more.
At this point, one may ask whether it is really necessary to pay so much on top of the 135.50 monthly cost of Medicare Part B. The answer is an unqualified yes (unless you qualify for Medicaid). The main reason is that there is no upper limit on the 20% co-insurance on the approved charges for medical services – no maximum out-of pocket. That’s very risky, so you should get something.
Here’s another difference: For a person just getting Medicare, there is a six month open enrollment period for Medigap, in which you can get any policy you want from any company you want. After those six months, starting from the first day of month they turn 65, the policies are rather heavily medically underwritten. A person with many chronic conditions (or one serious one) would probably not be able to change, or to get one after the open enrollment period has passed. With an MA-PD, however, there is no medical underwriting, and no health questions at all. The only people who cannot get an MA-PD are those who have end-stage renal disease, because they have a separate Medicare program. Medigap enrollment is open all year; whereas MA-PD’s have an enrollment period – October 15 to December 7. Past that 12/7 deadline one would need a special reason, such as moving or losing employer group insurance.
And here is yet another difference. If you have Medigap, you can see any doctor in the country who takes Medicare. On the other hand, MA-PD’s have networks, and if you go out of network, you will have to pay more. In order to better understand networks, let’s compare the two main types of MA-PD’s, HMO’s and PPO’s. HMO’s, or Health Maintenance Organizations, have a more limited network; and, most importantly, if you go out of network, you will usually have to pay the entire cost, except for emergencies. PPO’s, or Preferred Provider Organizations, have wider networks; and if you go out of network, you pay a higher cost, typically 50% of the in-network rate. HMO’s cost less, often with zero premium. PPO’s typically cost $15.00 to $40.00 per month, although some zero premium PPO’s are now appearing. So which is better? If you don’t travel much, and you let your primary care physician pick your specialists for you, you can probably do fine with an HMO. People who want to pick their own specialists, or people who just prefer greater flexibility in doctor and hospital choice, should go with a PPO. Everyone is different, there is no one size fits all. If you are considering an MA-PD, there are many companies out there. Make sure that your personal physician and your specialists are in the network of the company you choose, and that your prescriptions are well covered.
While a Medicare beneficiary can enroll at any time of the year, MA-PD’s have limited enrollment periods. Someone who wants to switch from Original Medicare to a MA-PD can generally do so only during the Annual Enrollment Period, October 15 to December 7, with an effective date of January 1 of the following year. There are two “escape clauses” for those who sign up for an MA-PD and then change their minds. They can use the Open Enrollment Period, which runs from January 1 to March 31, which allows a person to return to Original Medicare and pick a separate Prescription Drug Plan. Also, anyone who has enrolled in MA-PD for the first time has what is called a “Trial Right” – they can enroll in or return to Original Medicare at any time within the first 12 months of their MA-PD effective date.
One of the most important reasons for choosing an MA-PD are the extra benefits, those that are not covered by Medicare. MA-PD’s are given the task of trying to keep you healthy (what a novel idea!), and the extra benefits seem to keep multiplying every year. Here are some of the most important:
Free fitness club memberships
Free personal emergency response system
Free in-home visits from a Nurse Practitioner, LPN, or PA
Free exams – dental, vision, and hearing (one per year)
Free dental cleanings (usually two per year)
Discounts on prescription eyewear and contacts
Discounts on hearing aids
Comprehensive dental benefits – free or discounted (a dollar maximum applies)
Free 24/7 Registered Nurse Line
Free virtual medical visits
$40-$80 credit per quarter on drugstore-type items (usually generic)
Rewards for completing preventive health activities & screenings
Zero co-pay diabetes monitoring supplies (companies are limited)
Zero co-pay opioid treatment services
Free meals delivered after a hospital stay (about 10 days)
Free transportation to doctor visits
No MA-PD company has all of these; one company has most of these. But, with all of these no cost services, membership in MA-PD’s is growing. And consider this: Medical costs are rising, Original Medicare deductibles are rising, Medigap premiums are rising; and yet, premiums for MA-PD’s are either going down or staying the same and adding benefits, and sometimes even both. The MA-PD companies must be doing something right.
So which is better, Medigap or Medicare Advantage? (You can’t have both together.) I wish I could answer that here, but I cannot. If low cost is important to you, MA-PD’s could be the best choice; but the networks and the prescription coverage are very important. If you just don’t want to deal with networks and co-pays, then Medigap might be your choice, despite the higher cost. I can’t tell you which is better for you without knowing what your personal feelings are. And, even then, it is still a highly personal choice. To repeat myself, everyone is different; there is no one size fits all.