When you turn 65, you have a few Medicare choices. Every person has a unique situation, so we must find out what’s best for the client. I personally feel if you can afford a supplement, it’s definitely the best route. Everyone is different and working together, we can determine the best plan. I’m going to give you examples of the most common situations for Medicare Advantage (MA) and Supplement plans. Of course, there’s always exceptions to what I write below.
Medicare contracts with an insurance company and allots them a certain dollar amount to manage your care. The insurance company manages your care by defining a network (majority of plans are HMO’s). The majority of MA plans require you to use a network of doctors and hospitals. They provide no coverage outside of the network, unless an emergency. You must choose a primary care doctor and get a referral in order to see a specialist. I hav found this to be an inconvenience for many of my clients. In addition, each year they have to check their plan to make sure their doctors remain in network or they must switch plans again.
The main attraction MA Plans offer is $0 premium and prescription coverage included, similar to a stand alone prescription plan you need with a supplement. Again, not all plans are $0 premium, nor do they include prescription coverage, it’s usually a unique situation if they don’t.
MA plans have a copay or coinsurance for visits to your doctor, hospital or pharmacy (separate guidelines from the health portion of the plan that I mention below). Coinsurance is a percentage of the cost for a particular procedure. An MRI may be 20% of the negotiated cost. So an MRI that is negotiated at $1000, would cost the Medicare client $200. In addition, MA plans have a max out of pocket exposure for the calendar year (typically $3200-$6700). A copay might be $15 for your primary doctor, $45 for a specialist, $150 for an MRI or $225 a day for hospitalization (capped anywhere from 4-7 days typically).
There is basically a copay or coinsurance for any type of health exposure you may have in a calendar year. You will be required to use in-network services in order to be covered. If all your copay’s and coinsurance reach the max out of pocket, you will be covered at 100% for the remainder of the calendar year. Again, the included prescription coverage does not fall into the max out of pocket exposure. Prescription coverage is a separate conversation.
If you’re really healthy, on a limited income, do not travel much, don’t mind using networks and the copay is something you can handle, then a Medicare Advantage could be the best fit. MA plans allow you to change plans once a year during the Annual Election period that runs from 10/15-12/7. Once you choose a plan, you are locked in with that plan for a year with a few exceptions to get out or switch.
I am a big fan of the Medicare Supplement, Plan F or G in particular. With a supplement, you need to purchase an additional prescription drug plan called Part D (separate discussion). I mentioned above how Medicare Advantage plans contract with an insurance company to manage your care. You will put away your medicare card and only use the insurance carrier card provided after signing up. With supplements, you use your original Medicare card and the card provided by the insurance carrier. Medicare pays first and the supplement picks up the remaining cost per the plan design.
Medicare supplements are different in the following manner. Anything that Medicare does not pay, your supplement picks up the remaining portion (depending on the plan). The most comprehensive plan is F. So if you go to a doctor or hospital, medicare pays first and the supplement picks up all of the remaining covered cost. With Plans G that I mentioned above, you do have cost sharing. You are responsible for the Part B deductible which is $147.50 in 2016. Part B typically is doctor visits and some prescription coverage. The only difference between Plan F & G is $147.50 in annual cost sharing, however with Plan G you might save 30-40% in premium which offsets that $147.50 in your favor and why it’s my favorite plan.
Besides the information I just provided, I like supplements because you know exactly what your expenses will cost. If you have Plan F or G, you will pay the premium each month and typically have very little cost after that. Again, with Plan G it will be $147.50 annually in 2016. Insurance carriers have additional plans that require more cost sharing and lower premiums.
In addition, you can go to any doctor or hospital that accepts Medicare. You don’t have to worry about networks or referrals. If you need a second opinion in another state, you can almost always get it. With Medicare Advantage, your coverage is typically limited to the county you reside. After the guaranteed enrollment period with Medicare Supplements, you will have to go through underwriting in order to get coverage with another carrier. If you can no longer afford the premium, you can join an Advantage Plan during the annual election period without underwriting. As long as your premium is paid, your supplement will remain in effect.
Let’s give an example of a 10 day stay in a hospital for a 65 year old non smoking male. Also, lets assume your Medicare Advantage Plan is $0 premium with a $225 per day hospitalization copay for a maximum of 7 days. With the Medicare Advantage Plan you would be responsible for $225 x 7=$1575.00 for the 7 day stay. That original $0 premium seemed really attractive at the time, but you’re now out $1575 in copay’s.
Medicare Supplement Plan F for that same 65 year old male will cost on average about $160 a month. His total premium for 12 months is $1920. Plan G is typically 30-40% cheaper. The same hospital stay of 10 days would cost this person $160, his monthly premium. This person might be in the Mayo Clinic or another hospital of his choice as well, not the network defined hospital with your MA plan. Medicare Advantage is not accepted at any Mayo Clinic. Using the above scenario, if this is the only medical occurrence all year, the Medicare Advantage plan might be the more attractive choice still. However, one more long visit in the hospital or expensive surgery could result in the Advantage Plan, not really being an advantage at all. This doesn’t include the inconveniences of networks and referrals. Again, if you have an MA plan and a emergency occurs, go to the nearest hospital. Emergencies are covered anywhere in the world.
There are pro’s and con’s to both plans. Whichever plan you might choose, you will be responsible for the Part B premium to social security each month. If you have a supplement or $0 premium MA plan, you still have the Part B premium due each month to social security. The majority of America pays $104.90 monthly in 2016, which is determined by income. Again, I like Plan G for the cost saving on premium and the simplicity of using any doctor or hospital that accepts Medicare and knowing exactly what I’ll be paying for my health on an annual basis.
I am an independent agent representing multiple carriers in Arizona and Ohio. I am happy do discuss these plans in further detail. We will determine the right plan for you. Please feel free to call me or fill out the form on my Medicare page.
Best – Chris