Welcome back to our two-part series about the costs and benefits of Original Medicare and Medicare Advantage. In our last post, we talked about how Original Medicare can leave you on the hook for thousands of dollars a year. One way to reduce that financial burden is to join a Medigap plan for as little as $60 a month. Today let’s discuss the other option: Medicare Advantage plans.
Sometimes called Medicare Part C, Medicare Advantage (MA) plans must cover all services Original Medicare does, except hospice care. (When a patient gets admitted to hospice, their coverage automatically reverts to Original Medicare.) MA providers can also offer other benefits—such as prescription drug coverage, dental care, and vision plans—in order to stay competitive.
As we explained last time, Medicare contracts with private insurance companies to offer Medicare Advantage plans. Medicare pays the private insurer a set amount per beneficiary per month, and they use the funds to cover your medical costs. Beneficiaries who choose MA plans are still part of Medicare, and still pay their Medicare Part B premiums. Some MA plans don’t charge above your Medicare premium, while other plans can cost as much as an extra $200 a month. The three most common types of plans are:
- Health Maintenance Organization (HMO)
- Preferred Provider Organization (PPO)
- Private Fee-for-Service (PFFS)
Each type of plan has different rules, restrictions, and networks. Approximately 21 percent of New Jersey seniors enrolled in an Advantage plan in 2017. Let’s explore the pros and cons of Medicare Advantage:
The Plus Side of MA: Extra Coverage
The main draw of MA plans is that they usually provide benefits for some of Medicare’s non-covered services. Prescription drug coverage continues to be a problem for seniors under Medicare. Part D, Medicare’s optional prescription drug plan, has serious gaps in coverage that can cost thousands of dollars a year. By contrast, many MA plans offer broad drug coverage with much smaller co-payments. Plus, they often offer dental and vision coverage, unlike Original Medicare.
When it comes to care in a skilled nursing facility, some MA plans don’t require the 3-day qualifying inpatient stay Original Medicare demands.
Another benefit is that while the co-payments are often higher than Original Medicare’s, most MA plans have an out-of-pocket maximum. That means once you’ve paid a certain amount of co-payments, your insurer will pay your out-of-pocket expenses for the rest of the year. If you need a surgery, for example, you’ll probably reach your out-of-pocket maximum fairly quickly—leaving you with no out-of-pocket costs for the rest of year. In Original Medicare, you always have to pay the 20% copay, regardless of how much you’ve already paid.
The Downside of MA: Less Standardization
Since private insurers administer the MA plans, they can apply their own rules to the Medicare plan. While the basic coverage is the same, the plans have much more flexibility in how to apply your coverage. Here are some of the things you can expect from a private insurer:
- Higher premiums, deductibles, and co-payment amounts. These plan details can change from year to year.
- Stricter rules for coverage of certain services and products. You may be required to get a referral from your primary doctor in order to see a specialist. You may also be required to stick to doctors or hospitals in the plan’s network. Tip: HMO plans are generally cheaper than PPO, but restrict you to a smaller network of medical providers.
- No guaranteed plan renewal. Advantage plans have annual contracts with Medicare, so if your provider chooses not to renew their contract, you’ll have to find a new insurer.
- No out-of-state coverage. Original Medicare offers you a nation-wide coverage. It’s the same in every state, so if you travel often, you can use your Medicare coverage anywhere you go. Medicare Advantage often only covers you regionally.
Which Plan is Right for Me?
Now that you know more about Original Medicare and Medicare Advantage, you are more equipped to make the decision based on your personal circumstances. If you have high prescription medication costs, you might prefer an Advantage plan, while if you split your time between two states, Original Medicare is probably the way to go. Because MA plans are not standardized, make sure to check the benefits of each one before you choose a plan. A licensed insurance agent can help you find the plan to best suit your needs.