Original Medicare verse Medicare Advantage that is the question!
In retirement, when we turn at least 65 years of age or older and no longer have health insurance through employer we have to make a decision between Original Medicare verse Medicare Advantage Plan (MA Plan)….seriously we have no choice, federal law states that we have to have health coverage.
Now, this is not an easy decision when choosing “Medicare verse Medicare Advantage” as each have their own pros and cons and this article is going to hopefully shine a little light on your own answer.
Please note that we do NOT SELL ANY MEDICARE PRODUCTS NOR DO YOU PROVIDE ADVICE FOR A FEE.
We are in the business of educating financial professionals on the subjects of IRMAA, Medicare and their impact on your Social Security benefit.
This is where we are suppose to urge you to not take our impartial advice and go get advice from someone who makes a living off of selling you the highest producing product that have access too.
Here is a breakdown of the differences when it comes to Medicare verse Medicare Advantage:
**Note: you cannot own both types of coverage at the same time**
A. Original Medicare:
Is the “alphabet of health coverage” and consists of:
- Part A – covers all hospital costs if you are an inpatient for a medically necessary procedure.
- Part B – covers all physician visits (as long as they take Medicare)
- Part D – Prescription Drug coverage.
- Supplemental Coverage (Medigap Plan) – this covers the co-pays, deductibles and excess charges that come with Parts A & B. These Plans may also extend coverage for certain things like hospital stays & blood. ***This is the big difference between Medicare vs Medicare Advantage***
Keep in mind that with Original Medicare you will have separate premiums, co-pays, deductibles and excess charges for each type of coverage.
What is great about this coverage:
1) As long as the physician, the facility or the care provider (things like ambulance provider) accept Medicare and you have a “medically necessary” reason to use Medicare you are covered.
This means NO Networks.
This also may mean that a physician who doesn’t accept Medicare may not see you.
2) If you are “fully covered”, meaning you have a Medigap Plan, the opportunity to stay in a hospital indefinitely is available.
If you happen to chronic ailments and believe they may worsen later in life, it is not up for debate you have to go with Original Medicare verse Medicare Advantage.
3) Your ability to receive care/coverage anywhere in the United States, again, as long as the provider accepts Medicare (this is great if you plan on traveling).
If you happen to have a second residence outside of your primary state of residency then there is no debate, you have to go with Original Medicare verse Medicare Advantage.
4) The overall cost, when doing apples to apples comparison verse Medicare Advantage plans is usually cheaper under “normal circumstances”.
With Original Medicare having certain Medigap Plans, besides premiums and the one annual Part D Deductible there are no other costs if you need care.
If you enter a hospital with this coverage under proper requirements, regardless of what services you receive all costs are covered…all of them.
What is not that great about this coverage:
1) Obviously the payment structure
As you age there is about a 50% chance of a you having some form of memory loss past the age of 80 years old, with the payment structure being broken up into parts there may be the off chance that a bill is not paid.
2) Lack of Coverage since Medicare does NOT cover:
- Most routine physicals or exams unless they are part of a “medically necessary” procedure.
3) If you select a Medigap Plan the premiums may increase higher than you expect annually.
Please see – http://www.medicare.gov/find-a-plan/staticpages/learn/rights-and-protections.aspx
B. Medicare Advantage Plans (MA Plans)
MA Plans are health insurance plans that private health insurers offer as a competition to Original Medicare.
These types of Plans, by law, must provide at least the exact same coverage that Original Medicare (Parts A & B) provides and can also offer a wide variety of other types of coverage as well.
Where as Original Medicare does NOT offer coverage for dental, vision hearing etc… MA Plans may provide coverage for those services.
Please note about MA Plans:
- Each health insurer that offers MA Plans is subject to oversight by the Centers of Medicare/Medicaid Services (CMS) and must adhere to its rules and regulations.
- Regardless of choosing an MA Plan or not you are still responsible for paying the Part B premium on a monthly basis.
- In order to purchase an MA Plan you must first enroll into Original Medicare Part A & B and then select coverage to an MA Plan during your Initial Enrollment Period.
What is great about this coverage:
- Possible better coverage, as there a multitude types of plans to choose from depending on your residency and budget that can also provide for things not covered by Original Medicare, like Vision, Hearing, etc…
- There is the possibility of “free” coverage as most carriers receive subsidies for selling plans, which they, sometimes, pass on to you, the insured (with recent legislation being passed the subsidy may be lessened over time though.)
- Possible limits on how much out pocket costs you may face in retirement.
- One bill and the ability to include your drug coverage too.
- In network coverage which may be a double edge sword as you may not get to see the specialist you want, but those care providers who are in the network do really want to see you.
What is not great about this coverage:
- In terms of a possible extended hospital stays, it may depend on how you are progressing or not as the MA Plan provider may not cover a stay where you have stabilized for an extended period of time.
- Possible cuts, due to the Affordable Care Act, may place pressure on those private health insurers to raise either cut coverage, raise rates or change terms.
- Other terms in the Affordable Care Act provide possible better benefits for Original Medicare beneficiaries (another discussion point).
- There may be larger co-pays, deductibles and extra fees depending on the type of plan or even the private health insurer who is administering the plan.
- There can be the opportunity to be denied care as either you are not in the network or the private health insurance provider just denies the claim.
- This breakdown is not to persuade in either direction, but is meant only to provide some very basic information on the differences between these the two types of coverage. For those that need more information, please, and I urge this, ask a health insurance professional for help as well contacting CMS too.
So which one when comparing Medicare verse Medicare Advantage?
When making a decision on either Medicare verse Medicare Advantage please just say the 2 sentences below out loud…really, say them out loud.
1) “With Original Medicare and a Medigap Plan the decision regarding the healthcare I receive will be a decision from ME and MY DOCTOR, but I will have higher monthly premiums”.
2) “With a Medicare Advantage Plan the decision regarding the healthcare I receive will be a decision from MY INSURANCE COMPANY AND MY DOCTOR’S ADMINISTRATOR, but I will have lower monthly premiums.
The issue with the choices of health coverage in retirement is that with either selection of coverage not all of your needs may be covered, but with proper investigation and help from professionals the possibility of having a retirement as stress free of health coverage as possible can be met.