What you need to know about this popular alternative to Original Medicare.
What you need to know about this popular alternative to Original Medicare.
For many Americans over the age of 65, Medicare covers a major portion of their healthcare expenses. However, even if you have Medicare, you may still be required to pay deductibles, co-pays, and other out-of-pocket costs. If you have an accident or major illness, you may find yourself dipping into your savings or retirement funds to fill in the “gap.”
That’s why, of the 44 million Americans enrolled in Medicare, 9 in 10 have additional coverage through a supplemental insurance program, such as Medigap or Medicare Advantage. These plans offer options to extend your coverage and reduce your out-of-pocket costs.
Medicare Advantage plans are managed healthcare plans offered by private companies that offer, at a minimum, the same benefits as your Medicare plan. But rather than charge high fees for individual services, they charge a single monthly fee and have an out-of-pocket maximum of no more than $7,550 for in-network costs.
Most Medicare Advantage plans are Health Maintenance Organizations (HMOs) or Preferred Provider Organizations (PPOs). Since you may be required to see in-network providers (or face a higher co-pay), Medicare Advantage plans may not be great for frequent travelers or people who split their residency between multiple states. But they’re ideal for people who want to consolidate their healthcare costs and pay for everything all in one place.
Choosing a Medicare Advantage plan is a lot like purchasing private health insurance. Each plan offers different levels of coverage, so you’ll have to choose the one that’s best suited to your healthcare needs and financial situation.
Medicare Advantage plans are legally required to cover all of the services covered by Original Medicare, and generally, cover additional services as well. For example, Original Medicare does not cover most prescription drug costs (except when you are a hospital in-patient), but you can choose a Medicare Advantage plan that does.
Original Medicare includes Part A, which covers hospital care and nursing services, and Part B, which covers doctors’ visits and other medical expenses. If you’ve worked and paid taxes for 10 years (40 quarters), then you won’t pay a monthly premium for Medicare Part A. If you or your spouse worked less than 40 quarter, your premium could be as much as $499 per month. Either way, you’ll be responsible for a $1,556 deductible per year.
Medicare Part B has a monthly premium of $170.10 (more for high earners) and covers:
Under Original Medicare, you’ll be required to pay 20% of costs for these services. That is where Medicare Advantage often shines because the same services in some cases may be covered with no out-of-pocket costs by your Medicare Advantage plan. Regardless of what you choose, you’ll still have to pay the monthly premium for Part B. Other services that are not covered by Medicare that may be covered by a Medicare Advantage plan include:
You may also find Medicare Advantage Plans that include acupuncture and chiropractic care. So depending on which plan you choose, you may be able to get more coverage for less money on a Medicare Advantage plan than with Original Medicare.
Patients with Original Medicare can visit any doctor or hospital that accepts Medicare, but patients with a Medicare Advantage plan may only be covered at in-network providers, or have to pay more for out-of-network services except in an emergency. Emergency services are covered nationwide by Medicare Advantage plans.
The cost of a Medicare Advantage plan can vary widely – anywhere from $0 to over $100 per month. Remember, the standard cost for Medicare Part B is $170.10 per month, so you’ll still have to pay that premium, unless your Medicare Advantage plan covers it.
Can you really get a Medicare Advantage plan with a $0 premium? Yes, but depending on the plans available in your area, it could have higher co-pays and deductibles than a more expensive plan. If you don’t take prescription drugs or require frequent medical visits, it may be worth considering. You’ll still be protected by the out-of-pocket maximum, which by law can be no more than $7,550 per year and is often substantially less (the average was $5,187 in 2018).
As with private health insurance, Medicare Advantage premiums vary from state to state. The National Council on Aging reports that the average cost in 2017 was $29 for an HMO plan and $62 for a local PPO, which has more geographical restrictions.
Your plan may also have different costs depending on which prescription drugs you take and what kind of drug coverage is included. We help you find the right plan for you by offering unbiased medicare guidance.
While most Americans over age 65 will qualify for a Medicare Advantage plan, there are some restrictions on when you can enroll or switch your plan, so that’s why it’s best to plan ahead. As of 2019, there are three different periods during which you can enroll or change your plan:
Between those periods, you can only enroll or switch plans during Special Enrollment Periods, for example, if you lose prescription drug coverage or leave an employer-sponsored plan.
You can’t simply switch plans if you develop a health condition and find out that it will be cheaper to be covered under a different Medicare Advantage plan or by Original Medicare. You’ll have to wait until the next enrollment period to apply for a different plan.
If you qualify for Original Medicare, then Medicare Advantage plans can’t deny you enrollment due to pre-existing conditions.
There are two ways to get prescription drug coverage with Medicare. One option is to enroll in a Medicare Advantage plan that includes it, and the other is to keep Original Medicare and add a stand-alone Prescription Drug Plan. You can’t be enrolled in a Medicare Advantage plan that includes drug coverage and a separate prescription drug plan concurrently.
Your drug costs will vary depending on your plan’s co-pays and deductibles, as well as whether you go to an in- or out-of-network pharmacy. Before you apply, find out whether the drugs you need are included on your plan’s formulary, which is the list of drugs that are covered. Most plans have multiple tiers, with higher copayments for more expensive drugs.
According to Medicare, plans must cover “at least 2 drugs in the most commonly prescribed categories and classes,” and may include brand-name and generic options. They must also notify you of any changes to the list that affect a drug you’re currently being prescribed.
Medigap or Medicare supplement plans and Medicare Advantage plans are mutually exclusive: you can’t enroll in both at once. So when it comes time to enroll in or change your Medicare coverage, you’ll have to choose one or the other. What’s the difference between the two?
As we’ve seen above, Medicare Advantage is designed to supersede and replace your Original Medicare. Medigap, on the other hand, is designed to supplement it. So with Medigap, you can go to any doctor you would be able to see with Medicare, and won’t be restricted to an HMO or PPO network. Medigap will kick in to cover some of your out-of-pocket costs.
Most states have 10 different Medigap plans available that offer standardized benefits. Unlike Medicare Advantage plans, these don’t cover prescription drugs, dental and vision care, and other additional coverage, so you may still have to purchase a prescription drug plan.
Since Medigap allows you to visit any doctor who accepts Medicare – and may even include overseas emergency coverage – Medigap may be a better option for seniors who like to travel or split their time between two states. But because it doesn’t offer the same benefits as a Medicare Advantage plan, your total healthcare expenses may be higher.
Medicare Advantage plans are available to most Americans who qualify for Medicare Part A and B. That includes seniors who have turned 65, as well as people under 65 who qualify for Medicare by receiving disability payments through Social Security.
You’ll become eligible to enroll during your Initial Coverage Election Period (ICEP), which lasts for seven months: it includes the month you turn 65, as well as three months before and three months after. For those under 65 who receive disability payments, you’ll become eligible two years after you begin receiving payments.
Since plans are location-specific, you’ll also have to live in the service area of the plan you’re applying for, and you must be a U.S. citizen or a permanent resident.
You can’t be denied for pre-existing conditions (except for ESRD), but it’s important to make sure that the plan you’re applying for covers the medications you need. If you want to keep seeing your current doctor, check to see if they are part of your plan’s provider network. Learn more about who is eligible for Medicare.
Medicare Advantage plans aren’t right for every health scenario, but there are several reasons why one of these plans might be a better choice for you than Original Medicare.
First, they offer more benefits. If you have conditions that aren’t covered by Medicare, such as dental, hearing, and eyeglasses, then choosing a plan that covers these services or other treatments will likely save you money in the long run.
Second, you may have lower co-pays and out-of-pocket costs. You won’t have to pay the 20% coinsurance required by Original Medicare, and you’ll have an upper limit on your out-of-pocket expenses each year. Original Medicare doesn’t have an out-of-pocket cap, so if you have an accident or major illness, it could cost you tens of thousands of dollars.
Third, you can consolidate all of your healthcare coverage in one place. If your plan includes vision, dental, and prescription drug coverage, then you won’t have to pay premiums to multiple insurance companies, and you’ll be able to show the same card to each provider, rather than carrying a different card for each type of coverage. If you’re on an HMO plan, you can pick a Primary Care Physician who can refer you to specialists and oversee your care.
Remember, there are a few reasons why a Medicare Advantage plan may not be right for you. If you travel frequently or spend time in more than one state, you may find yourself paying more to see out-of-network providers. Medicare Advantage HMO plans offer emergency coverage when you are traveling, but they usually work best for people who can see all of their healthcare providers locally, while frequent travelers may be better off with a Medicare Advantage PPO or a Medigap plan.
Since Medicare Advantage plans can change frequently, it’s important to check your coverage regularly and make sure that your current plan is still a good fit for you. Typically, changes come into effect on January 1st..
Medicare Advantage plans are now allowed to provide more supplemental coverage. This can include services like home health aides, adult day care, meal delivery, rideshares to healthcare appointments, and telehealth (online) services. Not every plan will include these options, but if they would benefit you, it may be worthwhile to look for a plan that includes them.
The hope is that by expanding access to preventive services, these plans will reduce the risk of injuries and chronic disease, as well as the need for more invasive and expensive treatments.
The healthcare system can be tricky to navigate, but don’t worry: there are plenty of Medicare Advantage plans out there to choose from, and with a little research, you can find the one that’s right for you. Hopefully, you’ll be able to save money and increase your benefits.
Every person and situation is different. What’s best for your friends, neighbors, and even your spouse may not be what is best for you.