Friday, October 29, 2021

Medicare Supplements vs. Medicare Advantage Plans - What are the differences?

While chatting with a friend of mine recently, a woman who has been retired for over 15 years, she referred to her Medicare Advantage plan as a Medicare Supplement. She did not know the difference.  This might not have been a serious problem, except she told me that she was giving retirement advice to one of her daughters who plans to retire in a few years, and much of what she was telling her daughter about Medicare was incorrect.  

Signing up for Medicare is more complex than many people expect it to be.  We have so many decisions to make, and they have to be done at exactly the right time, or we can end up paying higher premiums for the rest of our lives!  Often, our personal physicians cannot answer our questions, because they do not do the Medicare billing themselves.  They hire a company to do it for them.  It is important for retirees to do their own research.  While this post cannot answer all your questions, it will clarify some basic information and help you get started on making the best decisions for yourself.

What Medicare Choices Will You Have?

You have more choices in Medicare than you realize, whether you are purchasing it on the open market, or your former employer or union will help pay for your retirement coverage. You may get a good deal through the plans they offer, or you may find just as good a deal on your own, unconnected to your former employer.  You need to evaluate as many different choices as possible, to make sure you get the best plan to meet your healthcare needs.

The age you start Medicare is NOT connected to the age you retire.  They are completely separate. You can retire anytime you are financially able and can afford to retire.  You can start receiving Social Security Retirement Benefits anytime from age 62 or older.  You can retire from some government jobs at an even younger age.  

Regardless of when you retire, you are not eligible for Medicare until you are at least age 65, unless you became eligible for Medicare Disability at a younger age.  In some cases, you can sign up for Medicare if you are older than 65, particularly if you are still working and covered by an employer plan when you turn 65. If you are not working, and you wait longer than three months after you turn 65 before you sign up, you may pay a Medicare penalty for the rest of your life.  The best time to sign up for Medicare is during a time window which consists of the month you turn 65, or the three months before, or or the three months afterwards.  This could change in the future, but currently, the eligibility age is still 65.  It is important that all retirees pay attention to any changes which may be made to Medicare coverage.

If you want to make sure you do things correctly when you sign up for Medicare, and at the lowest possible cost, you will want to read the book "10 Costly Medicare Mistakes You Can't Afford to Make." (Ad)  It is well worth the $10 it will cost you.  

TWO Separate Options for Your Medicare Benefits

There are two different systems for obtaining your Medicare benefits.  There are advantages and disadvantages to both, but research has shown that medical outcomes are the same, no matter which system you choose. 

Whether you choose Original Medicare or a Medicare Advantage Plan, you will still pay your basic Medicare premium.  The amount of the premium changes annually, and is higher for retirees with a higher income.  In 2021, the premium was $148.50 for most people, but the premium rose to $207.90 for people with an individual income of $88,000 or more, and is as much as $504.90 for retirees with an individual income of more than $500,000.  Each year, the basic Medicare premium usually rises a small amount. If you are already receiving Social Security benefits, your premium will be deducted from those benefits.  If you are not receiving Social Security, you will be billed separately.  

These premiums pay for what is known as Medicare Part B.  In return, Original Medicare will pay for 80% of what is they consider normal medical expenses.  If you want coverage for the remaining 20%, which nearly everyone does, you need to decide if you want to keep your Original Medicare and add a Medigap plan and a Part D drug plan OR select a Medicare Advantage Plan which is a single payer system where you deal only with one company, similar to what you are used to doing when you had regular health insurance before you were old enough for Medicare.

What should you know about the two different options, so you can decide which one would be best for you?

Original Medicare plus a Medigap (Medicare Supplement) and a Part D Drug Plan  

What most retirees expect to do when they reach age 65 is sign up for Original Medicare, pay their monthly premium for it, and then purchase an additional Medicare supplement (Medigap) policy, plus a Part D drug plan.  There are many Medigap plans and Drug Plans to choose from, and they all have different premiums and co-pays, in addition to the monthly premium you are charged by Medicare. 

The top Medigap plans (such as Plan G or F) can cost several hundred dollars a month, and this is above and beyond your basic Medicare premium. In addition, you will usually have to sign up for a separate drug plan and, in most cases, a separate plan for certain types of specialty medical care such as dental and vision.  Altogether, depending on your plans, you can end up paying an extra $300 to $500 in monthly premiums, in addition to what you pay for your Original Medicare premiums. 

Medigap plans are available as both HMOs and PPOs.  The premiums are higher for PPOs, but you can choose your own doctor (as long as they accept Medicare).  In addition to the premiums, in most cases you will also have some co-pays and deductibles.  The more you pay in premiums, the greater your choice of doctors, and the less you will pay in co-pays and deductibles, which makes this option attractive to some people.  

Medigap billing can be complicated, because everything has to be billed first to Medicare and then to your Medigap supplement. You are sent copies of all the bills, which can be overwhelming if you are receiving frequent treatments by a number of different doctors, and this is common as you get older. It can also be confusing, if you are uncertain what part of the bill you owe, and what portion of the bill is still being reviewed by Medicare or your Medigap plan. 

This double billing after each medical appointment is different from how things were handled before you were on Medicare, when everything was just billed to your insurance carrier, and then you were billed for any co-pays and deductibles you might have.  Basically, with Original Medicare plus a Medigap plan, you are covered under TWO separate insurance plans ... Medicare and your supplement.  In addition, you may have to deal with one or two other insurance carriers for your prescription drugs and dental coverage, which means you may receive a lot of different bills.  Some people become so confused that they hire people to review their medical bills for them, to make sure they are being billed correctly.

Option 2 is an All-in-One Medicare Advantage Plan 

Approximately 42% of Medicare beneficiaries turn to Medicare Advantage plans, which are generally less expensive and less complicated to use than Original Medicare, plus a Medigap plan, plus a drug plan.  The way Medicare Advantage plans work is similar to the system you were used to when you had medical insurance before you were on Medicare.  You only deal with one company for most things. 

The main difference is that Medicare pays a premium on your behalf to your insurance carrier each month, so that one company can handle all or most of your medical needs.  The Medicare Advantage companies are required to offer you everything that Original Medicare does, but most of them offer much more.  For example, they may offer gym memberships, vision, hearing and dental coverage, and other special services.  You only deal with your insurance carrier, not with Medicare directly.  Billing is much less complicated.  

Medicare Advantage plans are available to ANY retiree. Your choice depends on the state where you live.  For example, Kaiser Permanente Senior Advantage (the plan I use) is available in California, Colorado, Georgia, Hawaii, Maryland, Oregon, Virginia and Washington.  Other states have different Medicare Advantage plans available, such as Scan, United Healthcare, Humana, Blue Cross, or CVS Health.  You will have to research which plans are available in your state.  In particular, you will want to make sure that your local doctors are part of the Medicare Advantage network you want to use, since these plans require that you only use their network doctors and medical facilities in most cases. 

Of course, anyone on any plan can always choose to pay full price and see an out-of-network doctor, anytime they want.  Seeing an out-of-network doctor will cost you substantially more, however, unless it is an emergency.  It is always best to use in-network doctors, whenever possible. 

Do you worry about what will happen if you become sick or get injured when you have a Medicare Advantage plan and are away from your network? Most Medicare Advantage plans, such as Kaiser, will also cover the cost of an out-of-network doctor if you are traveling in another state or if, in an emergency, you have been taken to an out-of-network hospital in your area.  

Just in our family alone, we have had two examples of family members who were treated well, despite using an out-of-network doctor in an emergency:  

When our daughter had a medical emergency, Kaiser covered the cost of the first hospital she was taken to, until she regained consciousness and was transferred to the ICU at a Kaiser hospital.  In fact, because she had a brain aneurysm which needed to be treated quickly, she was flown by helicopter to the nearest Kaiser facility that had an available surgical team and an ICU unit.

When my husband developed bronchitis while visiting a different daughter in Delaware, we were not forced to drive to a Kaiser facility in Maryland for him to get medical care.  We were able to get him treated at an Urgent Care in Delaware, and we were charged the same as we would have been if we had gone to a Kaiser facility at home.  If you are getting a Medicare Advantage plan, make sure you understand what medical care will be available to you when you are away from home.   If you like to travel overseas, find out what care your insurance company will provide, and whether or not you need to purchase a short-term travel medical emergency policy.  Original Medicare does not cover you when you are out of the country.

Most Medicare Advantage plans, like Kaiser, usually have no additional premiums, other than your regular Basic Part B Medicare premium.  In some cases, you may have a very small premium, such as $20 to $40 a month. You may also have some low co-pays and deductibles.  In most cases, using a Medicare Advantage plan is much less expensive than using Original Medicare, plus a Medigap plan, plus a Part D drug plan.  However, some people are willing to pay extra to use Original Medicare plus a Medigap plan and drug plan, because they have a wider choice in doctors.  The decision is entirely up to you.

Billing is simpler with Medicare Advantage plans, because the Advantage plan handles everything.  Doctors do not bill Medicare first, and then your private insurance.  You are only dealing with your private insurance company. Medicare Advantage plans are generally less complicated than using Original Medicare, plus a Medigap and drug plan.  Most people are satisfied with Medicare Advantage plans, as long as they are happy using the doctors in their network. In addition, many Medicare Advantage plans include their own drug plan and dental plan.  

Research has shown that the medical outcomes are virtually identical, regardless of which type of Medicare plan you use. 

Is It Hard to Find a Good Medicare Plan?

When you turn 65, you choose whether you want Original Medicare plus separate Medigap and drug plans, OR if you want to use a Medicare Advantage plan.  All Medicare plans, including Medigap and Advantage plans, HAVE to accept all new retirees regardless of the patient's preexisting conditions.  If you change your mind later, however, Original Medicare still has to accept you, but the Medigap plans can reject you or charge you more for some health conditions.  Once you are on a Medicare Advantage plan, do not cancel it and go to Original Medicare until you are sure a Medigap plan has accepted you at a price you are willing to pay.  

Remember that the above information just covers the basics. You will still want to make sure you do things correctly, and are getting the most for your money, by reading the book "10 Costly Medicare Mistakes You Can't Afford to Make." (Ad)  It was written by a Medicare insurance broker who has seen many people make the same mistakes over and over again, and the book could save you a lot of problems later in life. 

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1 comment:

  1. You are so right that there is a lot to consider when signing up for Medicare. And the timing is important. My husband is paying for not signing in the allotted time. It isn't a a big sum of money but it could have been avoided. Great information here!

    ReplyDelete

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