Ready to enroll in Medicare Advantage? Before you do, make sure you are choosing the right Medicare plan for your needs. No matter what your situation, it all starts with deciding between two main options
- Original Medicare (potentially combined with Part D and/or Medigap) or
- Medicare Advantage (MA)
Understanding the difference between Original Medicare and Medicare Advantage
Original Medicare (i.e. Medicare Part A plus Medicare Part B) covers basics like hospital services (Part A) and doctor’s visits (Part B). It is called Original Medicare because it was the first type of Medicare program created by the federal government in 1965. Part D plan can be added as an optional component to Original Medicare for prescription drug coverage. A Medigap plan (aka supplemental coverage) can also be added to cover the cost gaps in Original Medicare. If selecting Original Medicare, it is strongly recommended to add both Part D (to get prescription drug coverage) and Medigap (to help pay the costs of Original Medicare). Without these two additions, it can be very difficult to afford prescriptions and other medical expenses.
Option two is the Medicare Advantage plan. This is a privately managed alternative to Original Medicare (managed by the federal government). This plan covers all of the services of Original Medicare and usually includes Part D (drug coverage). This plan may even offer additional services that Original Medicare does not cover, such as dental, hearing and/or vision coverage.
There are five key advantages of choosing a Medicare Advantage plan (versus Original Medicare)
1. Lower Costs
Although Part B premium is paid with both options, additional premiums with a Medicare Advantage plan are less expensive (sometimes $0) versus premiums for a Medigap policy combined with Original Medicare. The Medicare Advantage plan has a Maximum Out-of-Pocket Expense, which sets a limit (or cap) on the maximum amount paid out-of-pocket. These caps vary from plan to plan but the max is $6,700. Once the maximum amount is spent, no additional payments are required for covered services for the remainder of the year. Original Medicare does not offer an out-of-pocket max, so expenses are limitless (and could, therefore, be much higher).
2. Similar to employer health insurance
If leaving a job where health insurance was offered, a Medicare Advantage plan will look similar. Deductibles, co-insurance, drug coverage, physician networks are all part of the package.
3. One system versus several
A Medicare Advantage plan can be more cohesive. Often there is only one card (the Medicare Advantage card) to keep track of, not three. Some beneficiaries prefer to deal with one system versus the separation of Original Medicare, Part D and Medigap.
4. (Potentially) more coordinated care
HMO Medicare Advantage plans require a Primary Care Physician (PCP). She or he is the gatekeeper for all care and is responsible for making sure that the patient’s healthcare team collaborating with other medical professionals on treatment. For beneficiaries with complicated, multi-specialist health problems, this can be valuable.
5. Additional benefits (not covered by Original Medicare
Medicare Advantage plans often include prescription drug coverage, plus vision, hearing and dental benefits — all of which are not part of Original Medicare. Sometimes additional premium may be required, but that is not true for all plans.
There are four key disadvantages of choosing a Medicare Advantage plan (versus Original Medicare)
1. Getting coverage for procedures can be more complicated
Medicare Advantage plans are not for everyone. Because managed care plans aim to keep healthcare costs within budget, they try to prevent overuse through various means — such as “prior authorization” for surgery, home health care, hospital stays and medical equipment. Doctors will need to provide additional proof of services required before the plan will pay.
2. Billed before you receive treatment
With Medicare Advantage, copays are paid prior to treatment. For multiple physician visits, there may be several copays upfront before seeing the doctor or receiving care (versus owing a 20% coinsurance that would be paid by a Medigap policy with Medicare-plus-Medigap).
3. Less freedom in choosing healthcare providers
With Original Medicare, there is an open choice to see any physician who accepts Medicare, providing full access to major medical centers nationwide. Conversely, Medicare Advantage plans are more restricted in terms of provider networks. A network is a list of doctors, hospitals or pharmacies that negotiate prices with insurance companies. In some locations, it can be difficult to find a local doctor or hospital that works with Medicare Advantage. To see a doctor or visit a hospital that isn’t “in-network” with this plan, there will be higher medical fees.
4. Less compatible with other forms of retiree coverage
There are also some limitations in how Medicare Advantage works with other types of retiree coverage. For example, beneficiaries with Tricare for Life need to enroll in Original Medicare (versus Medicare Advantage) in order to keep the Tricare coverage. Prior to enrolling in a Medicare Advantage plan, review how it will work with other types of retiree coverage.
Switching from Medicare Advantage to Original Medicare
Switching between a Medicare Advantage plan and Original Medicare is allowed once a year – during the annual 7-week Medicare Open Enrollment period from October 15 through December 7. During this time, anyone with Medicare Advantage can switch to Original Medicare.
In most states, anyone enrolled in a Medicare Advantage plan for more than one year, is not likely to be able to enroll in a Medigap policy – which helps many people fill the cost gaps in Original Medicare. If enrollment is possible, there may be additional “underwriting,” which is evaluates the plan holder’s risk as a beneficiary. Staying on a Medicare Advantage plan for more than one year and then trying to switch to Original Medicare may result in limited or nonexistent Medigap choices. Take time to read and discuss these options with a licensed Medicare benefits adviser.