About 6 to 12 months before most Americans turn 65, they are bombarded with junk mail offers for different Medicare-related insurance products such as Medicare supplements, Part D prescription drug plans, Medicare Advantage plans, annuities, and life insurance policies. It is no wonder that most consumers that are Medicare eligible are confused about the choices. It almost seems like some companies want you to feel that way.
In this article, we will explain in layman’s terms exactly what a Medicare Advantage plan is, how it works, what they usually cost, and then, you can decide for yourself if they are right for you.
What is the difference between a Medicare Supplement and Medicare Advantage Plan?
• A Medicare supplemental insurance policy is a standalone health insurance policy that is purchased by seniors to cover some of the costs not picked up by traditional Medicare, the most significant cost being the 20% of Part B expenses not covered by Medicare. Also referred to as a Medigap policy, one of the most popular benefits is that you can use this kind of policy with any Medicare provider. You do not have to worry about networks or unexpected out-of-pocket costs. If you need prescription drug coverage, you would need to pick up a separate Part D drug plan, since Medigap policies do not cover outpatient prescription drugs.
• A Medicare advantage plan also referred to as Part C, is a health plan that includes outpatient prescription drug coverage, also called Part D. Advantage plans have special times during the year when you can sign up called “Enrollment Periods.” If you fail to sign up during these time periods, you will have to wait until the next year to pick a plan, although there are some exceptions to the rule. Many times, Medicare advantage policies are characterized by low premiums due to the fact that they are subsidized by the federal government. Another factor to keep in mind is that all of Medicare advantage plans have provider networks, which you must adhere to or face higher out-of-pocket cost on your end. Also, all of these kinds of Medicare insurance plans have co-pays and coinsurance which is your share of cost any time you need medical care.
Why should I sign up for a Medicare Advantage Plan?
No one can make a blanket recommendation as to what type of Medicare insurance policy would be best for all seniors, without speaking to you individually to ascertain your needs and wants.
With that being said, we can say this. Due to the fact that Medicare advantage plans have numerous restrictions such as annual enrollment periods, provider networks, co-pays and coinsurance, most insurance professionals to whom we have spoken only recommend a Medicare advantage plan when a Medicare supplemental policy is not an option for a senior.
The reason for this statement is that if a senior can afford a Medicare supplemental policy in combination with the Part D prescription drug plan, it’s really the best choice overall for most seniors over 65 years of age and on Medicare. You don’t have to worry about unexpected co-pays, whether you’re for favorite physician is in the network, or if your plan will change next year.
However, one of the reasons that Medicare advantage plans are so popular with seniors is the low cost. We have to keep in mind that seniors are responsible for their Part B premiums of around $100 a month, so a lot of folks don’t want to spend another hundred dollars a month or more money on Medicare supplemental premium, when they can get an advantage plan for a $0 monthly premium. The trade-off really is on the backend. Instead of paying upfront for the healthcare in the case of the premium for a Medigap policy, seniors are paying via hospital co-pays, coinsurance, etc etc.
An interesting fact is that in many metro areas, there are more seniors on Medicare advantage plans than on Medigap policies. So it makes the Medigap plans even more expensive, turning more seniors off, since the low upfront cost of Medicare advantage becomes even more attractive.
If you are considering a Medicare advantage program, you really should speak with a SHIP Adviser they specialize in Medicare insurance products to compare and contrast your options. It does not cost seniors anything to work with SHIP Advisor. It’s really a win-win for all seniors, all around.