Before you decide on “options”, you need to understand why people feel the need to add something to Original Medicare. In other words, why isn’t Original Medicare enough?
Original Medicare (Parts A&B) – Deductibles, Co-insurance, and no stop loss! The GAPS!
On it’s own, Original Medicare (Parts A and B) is pretty good (especially in light of most non-Medicare plans). You have the freedom to go to any doctor or hospital that accepts Medicare and referrals are not required! In fact, if your care usually consists of a couple of doctor visits a year and/or accessing preventive care such as a mammogram or a prostate screening the costs are pretty manageable. However….
The issue with this approach can arise when you start needing care in a hospital setting and/or develop serious conditions. In cases like this, the deductibles and the co-insurance associated with Original Medicare can become costly.
For example, the deductible for an inpatient hospital stay is $1408 (2020). This is true even if it’s only for 1 day! Additionally, most don’t realize realize that this deductible is per benefit period which means it can come up more than once per year.
On the Part B side, after a $198 deductible (2020), the patient responsibility is usually 20% (Medicare usually pays 80%) on most doctor and medical services. While 20% does not seem too bad, if you are diagnosed with something more serious (such as cancer or a major heart procedure), then that 20% could be large as well…and there is no limit to high the charges can go! These are known as the GAPS in Medicare.
These GAPS are why most people choose to supplement Original Medicare. Supplementing Medicare effectively puts a ceiling (or “stop loss” or “maximum out of pocket”) on the potential costs that could be billed to you in the event of a major illness or accident. This gives peace of mind.
Now, assuming you decide to supplement Original Medicare, you generally have two options:
1. Medicare Supplements
Medicare supplements are health insurance policies sold by private insurers that work in conjunction with and help cover the GAPS in Original Medicare. They are also sometimes called “Medigap Plans” or “secondary plans”. You must be entitled to Part A and enrolled in Part B (Click here if you need help signing up for Part B) to qualify for a Medicare Supplement plan. These policies have a premium that must be paid in addition to the Part B premium.
NOTE: Medicare supplements do not cover prescription drugs so, unless you have creditable coverage through the VA (or similar) or as part of a retirement package, you will need to add a Part D Prescription drug plan.
Why Do People Choose Medicare Supplements?
• You get to choose your doctors and hospitals. There are no networks.
• Referrals are not necessary. Want to see a specialist? Call and make an appointment!
• Your policy is guaranteed renewable. You cannot be dropped because you are sick.
• You can predict your costs. Once you pay the premium, it is easy to determine your liability.
How Do They Work?
When a Medicare supplement owner receives a medically- approved service or treatment, a claim is filed with Medicare. Medicare will then process the claim and, if approved, pays its share (usually 80%). Once Medicare has paid, the supplement generally pays the remaining costs that would normally be paid by the patient. The amount that is paid depends on which Medicare Supplement plan they own.
What do Medicare supplements NOT cover?
• Long Term Care
• Routine hearing
• Routine vision
• Prescription drugs (You must add a Part D plan for this!)
How Many Plans Are There?
*Medicare and You, 2020, Page 70
There are 10 Standard Medicare Supplement plans to choose from. These plans were standardized by Medicare in 1990. The plans are identical from carrier to carrier BUT differ in cost from carrier to carrier so it is important to shop the plans to find the best premium.
The best time to get a Medicare Supplement is when someone is brand new to Medicare and enrolling in Medicare Part B for the first time. This most commonly occurs when someone turns 65. However, in recent years, people are deferring Part B because they are working longer. So, delayed-Part B enrollments are becoming more common!
NOTE: If you are planning to work past age 65, you may still want to look at your Medicare options even if your group plan is still available! You may be pleasantly surprised at what your Medicare Rights qualify you for! (Call us. 800-719-3751)
When enrolling in Part B, you are in your Open Enrollment Period and can choose any Medicare Supplement with no underwriting or health questions. After this time has elapsed, medical underwriting is usually required and can affect one’s ability to qualify for a Medicare supplement plan. Once a plan is issued, it is guaranteed renewable and cannot be cancelled for claims history or poor health.
As of this writing, the most popular plans are Plan G and Plan N. Plan F, a long-time favorite, and Plan C are no longer available to those who are new to Medicare after 1/1/2020. They will remain available to those who were eligible previous to 1/1/2020. Both plans (F&C) will eventually be phased out.
2. Medicare Advantage (Part C)
Medicare Advantage is a type of health policy approved by Medicare that is administered by private companies. Medicare Advantage plans combine Medicare Parts A, B, and D into one plan and usually use a network of providers and hospitals. These plans are most commonly offered as HMOs and PPOs. Though they are provided by private insurers, Medicare Advantage plans are tightly regulated and funded by CMS. The private insurers are accepting all the risk for your care. You must continue paying your Part B premium.
Many describe Medicare Advantage plans as feeling a bit like Group insurance you may have had while working. If you choose an HMO, you usually must choose a primary care physician (PCP) who manages your care and provides referrals to specialists. For those who want a bit more flexibility in choosing doctors or the ability to go out-of-network, a PPO structure might fit the bill. When accessing care, there may be deductibles and co-insurance up to a maximum out-of-pocket amount. Once this maximum is reached, the private insurer is responsible for all hospital and medical costs for the remainder of the year. IN addition, Medicare Advantage often offers benefits above and beyond Original Medicare such as dental, routine vision, and routine hearing (among others).
Medicare Advantage is very popular with consumers and enrollment is growing rapidly. These are often the plans seen on television and radio commercials offering premium “as low as $0”. The key to customer satisfaction is talking with your agent to make sure that your needs are understood and that your doctors, hospitals, and pharmacies are part of the plan’s network. Enrollment into Medicare Advantage Plans is tightly regulated. The most common time to make changes is in the fall each year during the Annual Election Period (AEP) which occurs from October 15- December 7th. For special circumstances, changes can be made at other times as well. (Not sure if you can make a change? Call 800-719-3751)
Which is best…Medicare supplements or Medicare Advantage?
The answer to this varies from person to person. Satisfaction depends largely on a customer’s expectations, budget and style of care they prefer (or have become accustomed to).
We find that people who don’t mind paying a premium and who want maximum doctor choice are often good fits for supplements. Also, people who travel frequently or who want to minimize co-pays and co-insurance often prefer this type of coverage as well.
For Medicare Advantage plans, the lower premium options are a very popular feature. For those willing to utilize doctor networks, get referrals, and pay co-pays and co-insurance when they access care, Advantage plans are a nice option. The extra benefits (such as routine dental, vision, and hearing) not covered by Medicare are also very enticing and popular.