Is A Medicare Advantage Plan Right For You?

Original Medicare won’t cover all of your medical expenses. AARP estimates that nearly 90% of beneficiaries enroll in some type of supplemental coverage to round out their health plan and keep expenses at bay.

There are two options for additional coverage:

  • Medicare Advantage Plan (Part C)
  • Medigap Plan (Supplement Plan)

Today, we are going to dive into the ins and outs of each type of policy to help you determine which route is best for your health needs. 

All about Part C

Medicare Advantage plans have gained popularity over the last couple of decades. The Kaiser Family Foundation found that about one-third of all Medicare beneficiaries (36% or 24.1 million people) were enrolled in an Advantage Plan in 2020. 

Why are these plans so popular?

Medicare Advantage plans are like an all-in-one solution. A private insurance company is contracted by Medicare and that company must at least provide the same coverage as Original Medicare, but often these plans come with much more. 

With an Advantage plan, beneficiaries have all the benefits of Original Medicare and some plans even have built-in Part D (prescription drug) coverage. Many Advantage plans also come with additional benefits like vision, hearing aid, dental, gym memberships, coordinated care, worldwide emergency coverage, and more. 

Even with all of these benefits, the hallmark feature of most Medicare Advantage Plans is their economical premiums. Most Part C plans have minimal to even no monthly premiums. But that small sticker price can be misleading in terms of the true cost of these plans. 

Premiums may be low, but the cost-sharing responsibility for Advantage plans are high. This refers to the co-pays, co-insurance, deductibles, and general out-of-pocket maximums. 

Advantage plans are required to set out-of-pocket maximums, but these numbers can be quite high. In 2020, the maximum is $6,700 for in-network coverage and even more costly for out of network service. Keep in mind that different plans can set lower limits lower, but you could be on the hook for some substantial expenses should something happen.

There are other critical elements you should know about Advantage Plans:

  • Part C is area-specific, sometimes even down to the zip code. This restriction limits where you can receive treatment and can especially impact retirees who split their time between states. 
  • Most plans require prior authorization, meaning the insurance company must approve procedures, specialist visits, etc. before you can make an appointment. This can add time and stress to your health plan.
  • You must stay in-network for all your medical treatment, going outside could mean that treatment isn’t covered.
  • If you want to make any changes to your Advantage Plan, the only time you are able is during open enrollment (October 15 to December 7). Should you discover that your plan doesn’t work for you in April, you have to wait until October to make any adjustments. 

Advantage Plans are popular for a reason: most offer strong coverage and provide an all-encompassing solution for retirees. While these plans could make sense for you, it’s critical to understand their limitations. 

You want to choose your health coverage with both eyes open to help you make the right elections for you. Let’s take a closer look at another option for coverage, Medigap plans.

What are Medigap Plans?

Medigap plans, also known as Supplement Plans, are additional insurance plans designed to cover the gaps in Original Medicare. These plans come in letters A-N and offer different levels of coverage and costs. Keep in mind that for new 2020 beneficiaries, Plan C and Plan F are unavailable. If you were enrolled in Medicare before 2020, you can still enroll in these plans. 

A great feature of Supplement plans is that each lettered plan is the same no matter which company you purchase a policy from. Plan G, for example, is Plan G no matter where you buy it. This adds a layer of consistency and lets you shop around for plans with the best rates.

Supplement plans also offer more flexibility as they aren’t tied to one area. Those with a Medigap plan can receive treatment from any facility that accepts Medicare. For retirees who travel often or split their time, this added layer of flexibility could be a crucial component of their lifestyle. 

Medigap plans aren’t tied to open enrollment, meaning you can make adjustments to your plan at any point throughout the year. While frequent plan hopping isn’t advised, it’s good to know that you can switch plans if it no longer serves you or if your coverage needs change. 

While these plans do offer comprehensive coverage, there are some features you need to know about. 

  • Most Supplement Plans have higher monthly premiums. 
    • These premiums are paired with lower cost-sharing and out-of-pocket maximums than Advantage plans. From a budgeting standpoint, Supplement plans give you a clearer picture of your medical costs each year, whereas Advantage plans could fluctuate dramatically depending on your health needs at the time.
  • Medigap Plans don’t include Part D
    • You have to purchase your own prescription drug plan. Most Part D plans have a premium of about $30 a month. It’s important to enroll in Part D during your initial enrollment period, because if you wait to enroll until you need it, Medicare issues a permanent penalty on your monthly premium. The penalty is 1% of the national average premium times the number of uncovered months. While not significant in the short term, it could add a lot to your monthly costs in the long-term. 

Which type of plan is right for you?

Both Medicare Advantage and Supplement plans offer comprehensive coverage to beneficiaries, but they do it in different ways. To find the right plan for you, think about the following:

  • Your desired lifestyle
    • Are you a frequent flyer who spends half of your time in another state? How likely is it that you will want or need out of network coverage? Do you need more options when it comes to finding and receiving treatment?
  • Your retirement budget and income plan
    • How have you been saving for medical costs in retirement? Are you prepared to cover added out-of-pocket medical expenses should they arise?
  • Your location
    • Are you in an area with excellent health care? Would you have to travel far to receive care from the doctors and specialists you are comfortable with?
  • Your health needs
    • Do you have a pre-existing condition? What is your family’s health history? Which plan will not only serve you best now but what about 5, 10, even 20 years from now?

Selecting the right coverage for you might seem daunting. But by taking the time to evaluate your needs, you will be able to find a plan that best suits you. Our team is passionate about helping clients curate a plan that works for their health and their finances. 

If you would like additional guidance on your Medicare options, set up a time to talk with us today. We look forward to serving you.

Healthcare, Medicare, Retirement Planning
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