If you are a healthy senior, choosing a Medicare plan at age 65 is relatively straightforward. But what if you have chronic health issues? In the fourth article of our Medicare Mistakes Series, we’ll address this very important issue.
Key Takeaways
- Original Medicare does not cover routine care for dental, vision, or hearing, but many 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). do. This often makes Medicare Advantage plans look like a better deal.
- Original Medicare has a scary-looking 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 frightening $1,500+ 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 protect their members with an annual out-of-pocket maximum, but that does not mean they cost less.
- Most Medicare Advantage plans are PPO or HMO plans that use provider networks. If you go outside of the network for your care you will pay higher costs (PPO) or all of the costs (HMO).
- Nearly all HMO and PPO plans require their members to see their primary care physician to get referrals for tests or to see a specialist.
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If you are a healthy individual going into your retirement years, 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 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 way to go. However, if your budget can’t handle the supplemental insurance, or if you have retiree benefits that assist with a health plan, Medicare Advantage offers excellent pay-as-you-go coverage.
When you have chronic health issues the decision isn’t as easy.
Many people make the mistake of looking at the extra benefits Medicare Advantage plans offer and the low monthly premium without stopping to consider the cost of using health services. For example, what will it cost to have a week-long stay in the hospital with ambulance transportation?1Medicare.gov, “Understanding Medicare Advantage Plans”, Accessed January 12, 2022
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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. 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..
Most Medicare Advantage HMO and PPO plans are designed to keep their members healthy. This is why they have a low upfront cost (the monthly premium) and reasonable pay-as-you-go costs (copaymentsA copayment, also known as a copay, is a set dollar amount you are required to pay for a medical service.). The failsafe for people when they do get seriously ill or have a bad accident is the maximum out-of-pocket (MOOP) limit.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. And that’s a good thing because as of 2022, 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. 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
Most 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. Because you must continue to pay your 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. premium if you join a private plan, 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.
Even in most high health care cost areas, a Plan G policy will cost less than $3,000 per year. Add to this the average cost of a Medicare prescription drug plan ($32/month) and basic dental and vision insurance ($40/month) and we get to an annual cost of between $2,660 and $3,860 per year for additional insurance.
We also need to consider the annual Medicare Part B deductible, because this cost is not covered by Medigap Plan G. But it’s the only Part A and Part B out-of-pocket cost that isn’t covered.3Medicare.gov, “How to compare Medigap policies”, Accessed January 12, 2022
With Original Medicare and a Medigap Plan G policy, your only out-of-pocket cost for Medicare-approved health care services is your annual Part B 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
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Let’s say you see a specialist every month and the coinsurance would normally cost you $50 per visit. On the 5th visit, you’re finished paying out-of-pocket and the Plan G policy takes over. If you have lab tests or need medical equipment or supplies, your Part B deductible applies to these Medicare-approved costs, too.
Obviously, 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.
Most Medicare Advantage plans have average copayments of $200 to $400 per day for the first 5-7 days of a hospital stay and emergency room copayments that average $90 to $120 per visit. In some high cost of living areas, these costs can be much higher. That means a simple five-day stay in the hospital will cost you between $1,000 and $2,000 out of pocket, and that’s just the hospital charge2KFF.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 every year will cost way more with Medicare Advantage than an entire year’s premiums for a Medigap Plan G policy. In the case above, a Plan G policy pays all of the hospital, doctor, diagnostic, medical supply, medication, and ambulance costs, so long as they are approved by Medicare.3Medicare.gov, “How to compare Medigap policies”, Accessed January 12, 2022
Here’s another benefit to think about. With Original Medicare and a Medigap plan, you can easily budget your healthcare costs. With a Medicare Advantage plan, you can’t. We simply never know when we will need emergency or inpatient care. As a result, if you have chronic health issues, Medigap offer peace of mind.
What If You Can’t Afford Plan G?
Medicare Supplement Plan G 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
Potentially, yes.
One of the money-saving plans to explore is Plan N. It’s one of the newest of the 10 standardized plans and it often cost 20% (or more) less than Plan G. There are two reasons it costs less.
First, with Plan N you pay up to a $20 copayment to see your doctor and up to $50 to use the emergency room. Second, Plan N does not cover 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.. Other than that, Medigap 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... offers the same coverage as Plan G.3Medicare.gov, “How to compare Medigap policies”, Accessed January 12, 2022
If you need to reduce your monthly costs and still have premium coverage for hospital and emergency care, 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. In this way it’s a lot like the Medicare Advantage MOOP, only you don’t have to get a referral to see a specialist and you can use the doctor of your choice (no provider networks).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. and then later discovering they can’t get a policy due to their health.4Medicare.gov, “When can I buy Medigap?”, Accessed January 12, 2022
At age 65 Medicare grants us a Medigap protections privilege, better known as a guaranteed issue right. This right is a law that requires Medicare supplement insurance companies to accept the application of anyone applying for 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
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 begin receiving your Medicare Part AMedicare 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. and Medicare Part B benefits. It ends six calendar months later. During this period you can buy any Medigap policy you qualify for from any insurance company you choose. They cannot make you take a physical to qualify or ask you probing medical questions.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 dropped a Medigap policy to join a Medicare Advantage plan for the first time and you want to switch back, you have what’s known as a Trial Right. This right is granted if you had the Medicare Advantage plan for less than a year. It gives you the right to buy the Medigap policy you had before you joined the Medicare Advantage plan. If your former Medigap policy isn’t available, you can buy a Medigap Plan AMedicare Supplement Plan A is often confused with Medicare Part A, which is the Medicare coverage that pays for your inpatient hospital care. Medicare Supplement Plan A, which is also known as Medigap Plan A,..., B, C, D, F, G, K, or L that’s sold by any insurance company in your state.5Medicare.gov, “Guaranteed issue rights”, Accessed January 12, 2022
Using your Trial Right at age 65 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.
Citations
- 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