If you are healthy, choosing a Medicare plan at age 65 is relatively straightforward. But what if you have chronic health issues?
Most Medicare experts agree that Original Medicare plus a Medicare Supplement is the best health insurance coverage you can get. However, most Medicare Advantage plansMedicare Advantage (MA), also known as Medicare Part C, are health plans from private insurance companies that are available to people eligible for Original Medicare (Medicare Part A and Medicare Part B). offer more health benefits, such as prescription drug coverage. But, which option is best for you?
In this fourth installment of our Medicare Mistakes Series, we’ll address this very important issue to help you decide which Medicare coverage is best for you.
Medicare Mistake #4: Getting a Medicare Advantage Plan If You Have Chronic Health Conditions
- Original Medicare does not cover prescription drugs or routine care for dental, vision, or hearing, but many Medicare Advantage plans do. This often makes Medicare Advantage plans look like a better deal.
- Original Medicare has a 20% coinsuranceCoinsurance is a percentage of the total you are required to pay for a medical service. for all doctor and specialist visits and a [medicare_cost value=”parta-deductible”] hospitalization deductibleA deductible is an amount a beneficiary must pay for their health care expenses before the health insurance policy begins to pay its share..
- Medicare Advantage plans have low monthly premiumsA premium is an amount that an insurance policyholder must pay for coverage. Premiums are typically paid on a monthly basis. In the federal Medicare program, there are four different types of premiums. and an annual out-of-pocket maximum.
- Original Medicare does not have an annual out-of-pocket limit and most Medicare Supplement policies are higher than Medicare Advantage plans.
- Nearly all Medicare Advantage plans require their members to see their primary care physician to get referrals and require pre-approvalPrior authorization is a process used by health plans to control healthcare costs. Most HMO plans and some PPO plans require authorization before receiving certain treatments, medical services, or prescription drugs. for many healthcare services.
- Original Medicare and Medicare Supplements do not use provider networks and do not require referrals or pre-approvals. You can see any provider that accepts medicare.
If you are a healthy individual aging into Medicare, choosing the best Medicare plan is a matter of weighing your health vs. financial needs. If you can afford the very best, most insurance experts agree that keeping Original Medicare and adding a Medicare Supplement policy is the way to go.
However, if your budget can’t handle the supplemental Medicare insurance, or if you have retiree benefits that assist with your healthcare costs, Medicare Advantage offers excellent pay-as-you-go coverage.
When you have a chronic health condition the decision isn’t as easy.
Many people make the mistake of looking at the extra benefits Medicare Advantage plans offer and their low monthly premiums. What they fail to consider is the cost of using healthcare services.
For example, what will it cost to have a week-long stay in the hospital with ambulance transportation? Does the same service cost more or less with Original Medicare?1Medicare.gov, “Understanding Medicare Advantage Plans”, Accessed January 12, 2022
Pay Me Now, Or Pay Me Later
Do you remember the Fram oil filter TV commercials back in the 70s?
The crusty old mechanic would say something like, “You can pay me now, or pay me later.” The basic inference was that it’s cheaper to make small payments upfront.
That’s a good way to look at Medicare Advantage vs. Original Medicare and supplemental insurance.
If you asked your insurance agent, “How much does Medicare supplemental insurance cost?”, and you had sudden sticker shock, it’s because you pay upfront so you know you’re covered.
Medicare Advantage Plans Keep Healthy People Healthy
Most Medicare Advantage HMO and PPO plans are designed to keep their members healthy. This is why they have low monthly premiums.
But how much do you pay when you use healthcare services?
With Original Medicare, it’s easy to understand how much it costs to see your doctor, get a test, or consult with a specialist. You pay 20% of the Medicare-approved amountA Medicare-approved amount is what Medicare will pay for a covered service. Healthcare providers that agree to Medicare assignment accept the approved amount without excess charges. What Does Medicare-Approved Amount Mean? A Medicare-approved amount is... for Medicare Part BMedicare Part B is medical coverage for people with Original Medicare benefits. It covers doctor visits, preventative care, tests, durable medical equipment, and supplies. Medicare Part B pays 80 percent of most medically necessary healthcare services. (medical insurance) services.
With a Medicare Advantage plan, it’s not as straightforward. Each service has a different cost and each plan is allowed to charge different copaymentsA copayment, also known as a copay, is a set dollar amount you are required to pay for a medical service. or coinsurance. Plans must cover all Medicare benefits, but the federal government allows them to set their own costs and rules.
Medicare Advantage Plans Have An Out-of-Pocket Limit
There is a safeguard built into Medicare Advantage plans that help people when they do get seriously ill or have a bad accident. It’s the maximum out-of-pocket (MOOP) limit. Original Medicare does not have this safeguard.1Medicare.gov, “Understanding Medicare Advantage Plans”, Accessed January 12, 2022
The majority of healthy people in a Medicare Advantage plan never get anywhere near the annual MOOP on their out-of-pocket expenses. And that’s a good thing because as of 2023, the in-networkDoctors, hospitals, pharmacies, and other healthcare providers that agree to health plan members' services and supplies at a set price are in-network providers. With some health plans, your care is only covered if you get... MOOP can be as high as $7,550 per year.
That’s a lot of money to pull out of your pocket for healthcare, and it does not include the cost of your monthly premiums, medications, or services not covered under Medicare Parts A and B.1Medicare.gov, “Understanding Medicare Advantage Plans”, Accessed January 12, 2022
If you aren’t a healthy individual, your out-of-pocket costsOut-of-Pocket Costs for Medicare are the remaining costs that are not covered by the beneficiary's health insurance plan. These costs can come from the beneficiary's monthly premiums, deductibles, coinsurance, and copayments. in a Medicare Advantage plan can quickly make it a very expensive way to pay for your health care. The reason for this comes down to the copayment structure.
Medicare Advantage Inpatient Costs Are Too High
In most cases the copayment you make to see your doctor or a specialist is manageable. But what about inpatient careInpatient care refers to care provided in a hospital or other inpatient facility. Inpatients are admitted and stay at least one night depending on their condition. costs?1Medicare.gov, “Understanding Medicare Advantage Plans”, Accessed January 12, 2022
According to a Kaiser Family Foundation report, “half of all Medicare Advantage enrollees would incur higher costs than beneficiaries in traditional MedicareOriginal Medicare is private fee-for-service health insurance for people on Medicare. It has two parts. Part A is hospital coverage. Part B is medical coverage. for a 5-day hospital stay.”
That should be a serious concern if you have a chronic health condition that requires you to use inpatient care to maintain your health.2KFF.org, “A Dozen Facts About Medicare Advantage in 2020”, Accessed January 12, 2022
Comparing Medicare Advantage vs. Original Medicare & Medigap Costs
Many Medicare Advantage plans have a zero-dollar monthly premium. This does not mean the plans are free. It means that your monthly Medicare Part B premiumThe Medicare Part B premium is the monthly charge paid by beneficiaries for their outpatient medical care, services, and supplies. A beneficiary's premium may be uplifted by an IRMAA surcharge if their income is above..., and what Medicare pays the plan to take over your healthcare costs, are enough to cover the plan’s benefits.
If you join a Medicare Advantage plan, you must continue to pay your Medicare Part B premium. So, we can take this cost off the table when comparing Medicare Advantage and Original Medicare.1Medicare.gov, “Understanding Medicare Advantage Plans”, Accessed January 12, 2022
The real costs to compare are Medigap premiums vs. Medicare Advantage out-of-pocket costs.
Unless you live in one of the high-cost areas, like Florida, New York, Connecticut, Washington State, etc. you can get into a Medigap Plan G policy at age 65 for less than $150 per month. Annualized, that’s less than $1,800 per year.
With Original Medicare and a Medigap Plan G policy, your only out-of-pocket cost for Medicare-approved healthcare services is your annual Part B deductible ([medicare_cost value=”partb-deductible”]. Once you’ve paid this amount, you are done paying out-of-pocket for the year.3Medicare.gov, “How to compare Medigap policies”, Accessed January 12, 2022
Outpatient careOutpatient Care is medical care that does not require an overnight stay at the hospital. Medicare Part B provides coverage for Outpatient Care. costs are minor compared to inpatient and emergency care. And this is where you see the big difference between a Medigap policy and Medicare Advantage.
A growing number of Medicare Advantage plans charge coinsurance for hospital inpatient coverageMedicare Part A is hospital coverage for Medicare beneficiaries. It covers inpatient care in hospitals and skilled nursing facilities. It also covers limited home healthcare services and hospice care. ranging from 25% to 40%. This can lead to coinsurance costs in excess of $1,000 per day.2KFF.org, “A Dozen Facts About Medicare Advantage in 2020”, Accessed January 12, 2022.
You also pay for your doctor(s), tests, diagnostics, medical supplies, and any medications they dispense, just as you would as an outpatient. And if you needed an ambulance to get to the hospital, you can tack on an average of $250 for the ride.
It isn’t hard to see how a single inpatient stay can cost more with Medicare Advantage than an entire year of premiums for a Medigap policy. Even though you have to pay the Medigap premium every month, you always know you’re covered. No surprises.3Medicare.gov, “How to compare Medigap policies”, Accessed January 12, 2022
What If You Can’t Afford Medicare Supplement Plan G?
Medicare Supplement Plan GIf you're turning age 65 this year, Medicare Supplement Plan G is the most comprehensive Medicare supplement you can buy. It's also the most popular. You might be thinking that Medicare Supplement Plan F is... is the best of the best if you are turning age 65 this year. The following chart shows why:
Plan G covers all gaps in Original Medicare, except the Part B deductible. Only Plan F covers more costs, but it’s no longer available to new Medicare beneficiaries.
But, what if you don’t need all of Plan G’s coverage benefits? Are there plans that can save you money?3Medicare.gov, “How to compare Medigap policies”, Accessed January 12, 2022
One of the money-saving plans to explore is Medicare Supplement Plan NMedicare Supplemental Plan N is one of the ten standardized Medigap plans. Although it is one of the newest plans available, Medicare Plan N is quickly becoming a favorite with Baby Boomers aging into their.... It typically costs 20% (or more) less than Plan G.
With Plan N you pay a $20 copayment to see your doctor and $50 to use the emergency room. And, Plan N does not pay Part B Excess ChargesA Medicare Part B excess charge is the difference between a health care provider’s actual charge and Medicare’s approved amount for payment..3Medicare.gov, “How to compare Medigap policies”, Accessed January 12, 2022
If you need to reduce your monthly costs, Plan N is a good way to do it. Just make sure that your doctor and specialists won’t surprise you with Excess Charges.
If you’re on the fence between a Medigap plan and Medicare Advantage because your budget is super tight, look at Plan K. It covers 50% of the big costs until your annual spending reaches the plan’s annual out-of-pocket limit. Another low-cost option is High Deductible Plan GThe high deductible version of Medicare Supplement Plan G has the same coverage benefits as the regular Medigap Plan G, but you pay all costs until your Medicare-approved costs reach the annual deductible. High Deductible.... After you pay [medicare_cost value=”medigap-high-deductible”], the plan pays the rest.3Medicare.gov, “How to compare Medigap policies”, Accessed January 12, 2022
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It Does Not Pay to Delay
One of the tragic mistakes we see people make is not buying a Medigap policy during their 6-month Medigap Open Enrollment PeriodUpon initial enrollment in Medicare Part A and Part B, beneficiaries have a one-time, six-month period to buy a Medicare supplement policy with guaranteed issue rights. This is the Medigap Open Enrollment Period..4Medicare.gov, “When can I buy Medigap?”, Accessed January 12, 2022
At age 65 we have Medigap protections, better known as a guaranteed issue right. Medicare Supplement insuranceMedicare Supplements are additional insurance policies that Medicare beneficiaries can purchase to cover the gaps in their Original Medicare (Medicare Part A and Medicare Part B) health insurance coverage. companies are required to issue a policy. They can’t turn you down, charge you more, or make you wait for coverage due to a chronic health issue. When your right expires, they can.4Medicare.gov, “When can I buy Medigap?”, Accessed January 12, 2022
Medigap Open Enrollment Period
Your Medigap Open Enrollment PeriodDuring the Medicare Open Enrollment Period, Medicare Advantage and Part D plan members can change, switch, or drop a plan they chose during the Annual Election Period. OEP starts on January 1 and ends on March 31. begins the month you enroll in Medicare Part B. It ends six calendar months later. 4Medicare.gov, “When can I buy Medigap?”, Accessed January 12, 2022
In most cases, you will only get a single Medigap Open EnrollmentIn health insurance, open enrollment is a period during which a person may enroll in or change their selection of health plan benefits. Health plan enrollment is ordinarily subject to restrictions. Period. However, if you canceled a Medigap policy to join a Medicare Advantage plan for the first time, and you want to switch back, you have a trial right to do so.5Medicare.gov, “Guaranteed issue rights”, Accessed January 12, 2022
Using your trial right is one way to see if a Medicare Advantage plan will work for you. If you join a Medicare Advantage plan as soon as you are eligible for Medicare and then decide you don’t like it, you can switch back to Original Medicare and purchase a Medigap policy with your guaranteed issue rightsGuaranteed-issue is a right granted to Medicare beneficiaries and applies to Medicare Supplement insurance (aka, Medigap plans). All states and the federal government enforce this essential right, which protects Medicare beneficiaries from medical underwriting.. You have the right to buy any Medigap policy that’s sold by any insurance company in your state, but you must apply for your Medigap policy:5Medicare.gov, “Guaranteed issue rights”, Accessed January 12, 2022
- As early as 60 calendar days before the date your Medicare Advantage coverage will end, and
- No later than 63 calendar days after your coverage ends.
If I Qualify for Medicaid Can I Still Get Medigap Coverage?
Medicare supplement insurance companies cannot sell you a Medigap policy if they know you have MedicaidMedicaid is a public health insurance program that provides health care coverage to low-income families and individuals in the United States., except in certain situations. And in most cases, you shouldn’t need a Medigap policy if you are dual-eligibleDual-eligible beneficiaries are those who receive both Medicare and Medicaid benefits. It includes beneficiaries enrolled in Medicare Part A and/or Part B while receiving full Medicaid and/or financial assistance through a Medicare Savings Program.....6Medicare.gov, “Illegal Medigap practices”, Accessed January 12, 2022
In part 10 of our Medicare Mistakes Series, we’ll cover how to leverage various government assistance programs. One of these programs allows dual-eligible people to join a Special Needs Plan (SNP) available in their area. These plans cover nearly all costs for their members.
Need Help Deciding?
Don’t struggle with the decision. Our Medicare insurance experts are here to help. Give us a call at 1-855-728-0510 (TTY 711) and one of our licensed agents will be glad to answer all of your questions. with no obligation.
- 1Medicare.gov, “Understanding Medicare Advantage Plans”, Accessed January 12, 2022
- 2KFF.org, “A Dozen Facts About Medicare Advantage in 2020”, Accessed January 12, 2022
- 3Medicare.gov, “How to compare Medigap policies”, Accessed January 12, 2022
- 4Medicare.gov, “When can I buy Medigap?”, Accessed January 12, 2022
- 5Medicare.gov, “Guaranteed issue rights”, Accessed January 12, 2022
- 6Medicare.gov, “Illegal Medigap practices”, Accessed January 12, 2022