Maura Carley, MPH, CIC, CEO of Healthcare Navigation, LLC, a patient advocacy and consulting company, Darien, Connecticut.
October is the start of the open-enrollment season for Medicare. You’re probably already feeling overwhelmed by all the TV ads for Medicare supplement and Advantage plans. Bottom Line Personal asked Maura Carley, Medicare expert and CEO of Healthcare Navigation, LLC, what you need to know to choose between Original Medicare and Medicare Advantage to get the coverage that best fits your needs…
The basics. Medicare is, of course, the federal government’s health insurance program for adults age 65 and over. Original Medicare consists of Medicare Part A and Part B. Part A covers hospital and skilled nursing facility services…and Part B covers medical services. Two other Medicare programs were subsequently added—Part C, more commonly referred to as Advantage Plans, and Part D for outpatient prescription drugs. Complicating matters further, most people on Original Medicare also purchase a Medicare supplement, sometimes called a Medigap policy, which is private insurance to help cover your out-of-pocket costs. (For more on Medigap, see page five.)
You can piece together your coverage in different ways depending on your preferences and what insurance you may have from a former employer. But the basic question facing most enrollees is whether to stick with Original Medicare (Parts A, B) and Part D plus a supplement…or buy a Medicare Advantage plan, a private offering that is an alternative to Original Medicare. You cannot have both Original Medicare and a Medicare Advantage plan, although you must be enrolled in Medicare Parts A and B to elect an Advantage plan.
The annual Medicare enrollment period begins October 15 and ends December 7 for coverage that begins January 1, 2024. If you are already enrolled, you may switch between Original Medicare and an Advantage plan, or vice versa, and change your drug (Part D) plan during the enrollment period.
Another open-enrollment period that is strictly for people on Advantage plans runs from January 1 to January 31. During this time, you may change Advantage plans or return to Original Medicare from an Advantage Plan.
Important: Although you can always change from Medicare Advantage back to Original Medicare during these enrollment periods, you can’t always count on being able to purchase a Medicare supplement. The guaranteed issue period for purchasing supplements ends six months after your Part B effective date. As a result, after that deadline, purchasing a supplement in most states can be subject to medical underwriting—the insurer will ask questions about your health and can reject your supplement application based on your answers. Some states—including New York, Connecticut and Massachusetts—don’t allow medical underwriting. The supplement is an important protection for those on Original Medicare because it essentially provides an out-of-pocket maximum for medical expenses and catastrophic hospitalization coverage. As a result of this guaranteed issue window, it is important to make a decision for the long term between Original Medicare and an Advantage Plan when you first transition to Medicare.
About Medicare Advantage. The original rationale for Medicare Advantage was the notion that private companies could manage Medicare costs better than the federal government. When an individual joins an Advantage Plan, the federal government pays the private company an amount for that enrollee. If the insurer can provide care for less than the government payment, it can pocket the difference as profit. Spurred by that incentive, companies selling Medicare Advantage Plans compete for patients by offering perks including gym memberships, dental cleanings, and post-hospitalization transportation and meals, among other things. These insurers also spend millions on advertising and pay fees to brokers who bring in clients.
An Advantage Plan covers Medicare Parts A and B services. Most Advantage plans also provide a drug benefit…but not all do, so some people on Medicare Advantage still enroll in a Part D plan.
Comparing Advantage and Original. What’s the difference between buying a Medicare Advantage Plan versus opting into Original Medicare? They differ in three main ways…
Out-of-pocket costs: Generally speaking, you’ll have considerably more out-of-pocket risk on an Advantage Plan but will pay lower premiums versus taking a Medigap supplement. For 2023…
Advantage Plans’ out-of-pocket maximum can be as high as $8,300. It is common to see plans with $4,000-to-$6,000 out-of-pocket maximums. Again, some of these plans have small monthly premiums or even no monthly premiums. The lower the premium, the more out-of-pocket risk.
Original Medicare has no out-of-pocket maximum, but you essentially obtain one for hospital and medical services when you purchase a Medigap supplement. Example: People enrolled in Original Medicare who want a “high-deductible” plan with low premiums often will opt for a High-Deductible Plan G supplement, which has premiums of $40 to $70 per month, depending on where you live, with a maximum out-of-pocket cost of $2,700. Anything above that figure is paid in full by the supplement.
When comparing Original Medicare with Advantage Plan options, it can help to compare the Plan G’s supplement premium of $40 to $70 per month plus a $2,700 deductible (which is also the out-of-pocket maximum for hospital and medical expenses) with whatever the premiums, deductible and out-of-pocket maximums are for the Medicare Advantage options.
Original Medicare is almost universally accepted by hospitals and clinics around the US, and 97% of doctors have a relationship with Original Medicare. While every treatment must meet criteria for medical necessity, access to services is relatively hassle-free.
With a Medicare Advantage Plan, you are enrolling in a managed-care product with a provider network. You typically are either joining an HMO (health maintenance organization) or a PPO (preferred provider organization). With an HMO, your choice of doctors and facilities will be restricted to those in the HMO’s network. With a PPO, you have coverage for out-of-network providers. With any Advantage Plan, you are more likely to encounter aggressive care management when it comes to reviews of expensive procedures, admissions and continuing stays in hospitals or skilled nursing facilities. Some individuals who had been pleased with their Advantage Plans for years when using only routine outpatient services such as physician visits and lab tests often feel that it is challenging to get the expensive care they need once they are sick.
Extras: As mentioned above, Medicare Advantage plans sweeten the pot by offering benefits that are not included under Original Medicare, such as hearing aid credits, vision benefits, dental services and more.
Approach the choice of Original Medicare versus Medicare Advantage with an open mind. Ask yourself the following three questions…
How important is my freedom of choice? Are you the kind of person who wants to be seen by any doctor at any facility in the country? Or is that not important to you? Imagine a scenario in which you were diagnosed with a difficult-to-treat illness. Would you want the option of flying to the other side of the country to see a world-renowned specialist? If so, Original Medicare might be the better choice.
Or are you a very settled person and know your doctors are in-network with a given Advantage Plan? Then the Advantage Plan might be very attractive. Perhaps you are a resident of a long-term-care facility where the doctors are in-network with a given Advantage Plan. Then an Advantage Plan might be fine, but you should always compare costs among options.
Reminder: Even if you choose a PPO Advantage plan, you still might have to fight to get certain services covered. Are you up for that…or is the relative simplicity of Original Medicare claims more your speed?
What’s my threshold for out-of-pocket expenses? Look very carefully at the premiums and out-of-pocket maximums of the plans you’re considering. Remember that keeping premiums down can come at a real cost once those out-of-pocket charges start adding up. It’s not true across the board, but Medicare Advantage Plans often cost considerably more out-of-pocket once you have a serious illness.
How valuable are Advantage’s perks? Take a look at what’s being offered beyond face value. Example: Find out what a “dental benefit” is—it may be just two cleanings a year, worth only a few hundred bucks. Don’t let such a perk sway you into buying a plan that comes with high out-of-pocket risk. But don’t dismiss all extras as trivial—some Advantage Plans offer hearing-aid perks worth thousands of dollars, and that could certainly tip the scales away from Original Medicare.
Add up the value of all the perks, and compare the overall package, including premiums and out-of-pocket exposure, of the Advantage Plan and Original Medicare. As a benchmark, use Original Medicare’s High-Deductible G supplement, figuring on monthly premiums of between $40 and $70, depending on where you live, and a $2,700 deductible.
Everybody needs drug coverage, and your prescription needs will evolve and change over time. When on Original Medicare, you should always have Part D coverage. You can and should reassess your plan during the open-enrollment period if your drugs are not on the plan’s formulary or if you are unhappy with the plan for any reason. If, during the course of the year, you’ve been prescribed a new drug that’s not on your plan’s formulary, request a formulary exception for temporary coverage, but at open-enrollment time, switch plans to one that covers the medication if possible. Make sure, too, that your pharmacy is one of the plan’s preferred pharmacies.
Medicare Advantage plans have been in the headlines lately for allegedly engaging in unscrupulous behavior. Federal authorities have been bombarded with complaints about the companies’ marketing practices, and numerous lawsuits allege that the insurers have exaggerated the poor health of their customers to charge the government more money for their care. The federal government has begun to respond with lawsuits and closer scrutiny. It’s impossible to know what the upshot will be for customers, but it’s easy to imagine a scenario in which the companies are forced to reduce benefits as a result. That’s not to say that you shouldn’t enroll in an Advantage Plan if it truly feels like the right choice, but it’s something to bear in mind if you’re still on the fence.