Medicare, Medigap, and Medicare Advantage
For many, the month of November is the time of year that signifies the end of the year is close, the holidays are coming, and it’s time to get our shopping and household decorating in order. For anyone over the age of 65, however, November also signifies another very important season; Medicare Advantage Open Enrollment Season.
Starting in October and ending in the first week of December each year, Medicare Advantage Open Enrollment gives those over 65 the ability to opt into or change their Medicare Advantage plan.
One thing I’ve learned over the years is how unclear many people are about Medicare, Medigap, Medicare Advantage, and what they all mean. Let’s take a step back and look at the main components of Medicare.
Throughout this article, it’s important to note and remember the difference between “Parts” and “Plans.” Medicare starts by differentiating coverage by Parts A, B, C, and D. Part A covers hospital care and is free to those that are eligible for Medicare. Part B covers physician services and requires has a premium that is usually deducted from a retiree’s Social Security check. Unfortunately, for those on Medicare, the Part B premium will increase 6.7% in 2020 to $144.60, up from $135.50 in 2019.
Medicare Parts A and B cover approximately 80% of health insurance costs, leaving 20% uncovered. To fill in that gap, individuals over 65 can select a Medicare supplement (Medigap) plan or they may choose a Medicare Advantage Plan (also known as Part C of Medicare). Prescription coverage is identified as Part D of Medicare. For those with traditional Medigap plans (Medicare supplements), prescription coverage is only accessible with an additional Part D plan. For those with Medicare Advantage plans, prescription coverage is bundled with Parts A and B, and no Part D plan is needed.
Medicare Supplements and Plans
While Medicare is divided into “Parts,” Medicare supplements are referred to as “Plans.” In 2020, there will be approximately 10 plans ranging from Plan A to Plan N. It’s important to note that Plans C and F will be discontinued in 2020, as no new plans can cover Medicare Part B deductibles. For those individuals that have Plan C or Plan F, you will be allowed to keep those plans, but may want to consider switching for a few reasons.
One reason, for example, is those that choose to stay on Plan F will continue to age and could likely file increased claims as they age. Because there won’t be any younger, healthier participants joining the plan, some believe this could lead to higher premium increases for those still on Plan F (in order to cover the costs of more claims).
One of the primary things to know about these supplemental or Medigap plans is that they are standardized across every insurance provider that offers them. In other words, Plan G coverage is identical at every provider, regardless of who the provider is. If you have been considering a different insurance provider but haven’t in fear that your coverage may not be as good, hopefully this helps eliminate that concern.
Also, you can switch Medigap plans at any time throughout the year, meaning you do not have to enroll in a Medigap plan during the Medicare Advantage Open Enrollment period. It’s important to note that the application process for a Medigap plan does include medical underwriting, so you must be somewhat healthy to be approved. Insurance carriers differ in their underwriting standards, but once you are approved, these plans will automatically renew each year.
While Medigap plans only provide Part A and Part B supplemental coverage, Medicare Advantage plans also offer prescription coverage, and possibly even dental/vision as well. However, Advantage plans differ from Medigap plans in that they are not standardized, so it takes more effort on the part of the insured to make sure you fully understand what the Advantage plan covers. If you are shopping for Advantage plans, there a few things you want to be sure and know.
First, you need to understand that Medicare Advantage are offered as HMO or PPO plans, meaning that there is a restricted network that you must use to be covered. You’ll want to make sure your current doctors are “in-network” before selecting any Advantage plan. Also, if you are a frequent traveler, you’ll want to understand what the network coverage looks like in the areas that you travel to.
Next, you should know what your plan would pay and what you would pay on things like doctor’s visits, urgent care, emergency room visits, overnight hospital stays, etc. While it may be difficult to estimate what your costs on those items would be, the Advantage plan should have a maximum out-of-pocket limit, which would give you a worst-case scenario.
Lastly, you’ll want to get an estimate of how much your current prescriptions would cost on the Advantage plan. Again, Advantage plans are all unique, so prescription coverage, while included, is not always created equal.
While Medigap plans require multiple health questions, Medicare Advantage only has one health condition that would prevent coverage; end-stage renal disease.
Other Benefits to Advantage Plans
To help you evaluate if an Advantage Plan might be right for you, it’s also important to know what additional benefits they may provide. It’s not uncommon for Advantage plans to offer “some” dental and vision benefits, credits toward over-the-counter items, and discounts or free access to senior citizen workout programs like Silver Sneakers, which encourages those insured by these plans to stay healthy by staying active.
By understanding how Medicare, Medigap, and Medicare Advantage works, hopefully you can make a more informed decision about your health coverage. Changing coverage is easy and might offer lower premiums or more benefits than you have today. Before you switch, we recommend you speak with a qualified Medicare specialist to help you evaluate your options. If you think an Advantage plan might be a good option for you, be sure to act before the Open Enrollment Deadline of December 7th, 2019.
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