In Part 1 of How To Choose A Medicare Plan we explored the pros and cons of Original Medicare and Medicare Supplement plans. In Part 2 we explore the other path, Medicare Advantage plans. If you are new to Medicare, you must choose one of these two paths. With these two articles, our intent is to give you enough information to decide for yourself which path is right for you.
Medicare Advantage Plans
Medicare Advantage plans are health insurance plans that replace your Medicare Part A and Medicare Part B with a private insurance policy from a private, for-profit insurer. They come in many different forms but are usually either HMO’s or PPO’s. They often include a Medicare Part D prescription drug plan as part of the Medicare Advantage package. Medicare Advantage Plans are also referred to as Medicare Part C.
If you choose a Medicare Advantage plan you must still pay your Medicare Part B premium that is automatically deducted from your Social Security check. However, instead of those funds going to Medicare, they are redirected to your Medicare Advantage insurer.
Medicare Advantage plans are required to be actuarially equivalent to Medicare Part A plus Medicare Part B. What that means is that over large groups of people the medical expenses of the population in total should be approximately equivalent to the medical expenses of those people with Original Medicare Part A & B. Simply put, “actuarially equivalent” means very little to the individual as individual experiences will vary greatly depending on the plan and their medical needs. In addition, Medicare Advantage is not equivalent to Original Medicare plus a Medigap plan. Original Medicare plus a supplement (any supplement) offers more coverage and freedom of choice but comes with a higher premium.
The attraction of a Medicare Advantage plan is mostly because a Medicare Advantage plan has a very low or zero premium except for the Medicare Part B monthly premium already deducted from Social Security income. However, when comparing choices you should consider that Original Medicare without a Medicare Supplement plan also comes with no monthly premium other than the Medicare Part B premium deducted from your social Security income.
Medicare Advantage HMO’s and PPO’s
Medicare Advantage plans are much more complicated than either Original Medicare or Medigap Plans. They are not standardised, so no plan is the same. They differ from one insurer to the next and from one county to the next. In addition, the plans change every year. Any feature of a plan can change in any year. They can change deductibles, co-pays, premiums, the doctors they work with, the hospitals…anything. If you have a Medicare Advantage plan it is your responsibility to keep up with the changes each year.
Because they can and do change plan features and benefits every year and they are not standardised, they have a star rating system to give potential buyers an idea of how well they perform relative to other Medicare Advantage plans. The star rating system goes from one star (poor) to five stars (good).
In early October of each year, the insurance company sends you, the policy-holder, a statement of the changes in the plan, and changes to the Part D drug section of the plan. You must also check to see if your doctors that have been removed from the plan. Your obligation to yourself is to evaluate those changes and decide if you want to keep that plan or try a new one. You can change plans during Annual Enrollment which is between October 15 and December 07 of each year. Any changes made take effect as of January 01. You may not make any changes outside of this time period unless you move or have some other life event that creates a Special Enrollment period.
To understand what you get with a Medicare Advantage plan, it may be best to start with a brief description of HMO’s and PPO’s.
HMO stands for Health Maintenance Organization. With an HMO you must select a Primary Care Physician
(PCP) who will direct your care. If you wish or need to see another doctor, you will need a referral from your Primary Care Physician. Your insurance will only cover you if you have a referral.
The HMO will have a limited local network of hospitals and doctors from which you must choose. Only doctors that have contracted with your HMO will be in your network. Geographically, you are typically limited to your county or local area. If you only see doctors in your network, your annual out-of-pocket costs will be limited. Your maximum annual out-of-pocket expense defines how much you may experience in out-of-pocket costs due to deductibles and co-pays. A typical maximum annual out-of-pocket limit (MOOP) would be $6,700 per year. In other words, you HMO may have no monthly premiums, but when you need service there will be co-pays and deductibles that can add up to as much as $6,700 per year. If you seek medical service outside your local network (except for emergency) you will bear the cost yourself. You have no insurance coverage for non-emergency services outside your local network.
PPO stand for Preferred Provider Organization. Like the HMO above, the PPO will have a local network of doctors and hospitals from which you can choose your service. This is referred to as in-network. The PPO geographic network can be just your county, or could be your state in the case of Regional PPO’s.
You do not need to have a Primary Care Physician and can thus direct your own care. As long as you see doctors in your network your annual costs will be limited. Typically, an in-network maximum annual out-of-pocket expense (MOOP) is $6,700. Most PPO’s also allow you to see doctors outside your network, but at additional costs. They may have a deductible to see out-of-network medical professionals. They will also have higher co-pays. In addition, your maximum annual out-of-pocket expense will be higher than the in-network MOOP of $6,700. Often it is $10,000 for out-of-network services.
With many PPO’s, if you see an out-of-network doctor you will likely have to pay the doctor bill out of pocket and then seek reimbursement.
In Florida, there are two insurance companies that offer Regional PPO’s with a special feature that allows you to see doctors in another state at in-network prices. If you are a Florida snowbirds, or travel around the country to any meaningful extent, then these are the only Medicare Advantage plans you should consider, although Original Medicare plus a supplement would still offer the greatest coverage.
To Summarise HMOs & PPOs:
Medicare Advantage HMOs and PPOs both have low or no monthly premium. You must choose from in-network doctors within your local area. With HMOs you will require a PCP to direct and coordinate your medical care. You must get permission to see a specialist. A PPO offers more flexibility, but higher costs for going outside your network.
With either plan, you will have a MOOP typically between $6,700 and $10,000. Some plans in some locals offer lower MOOPs.
The Most Important Difference Between Medicare Advantage & Original Medicare
With the above out-of-the-way, we can now look at the most important difference between Medicare Advantage plans and Original Medicare. If you recall, when we were discussing Original Medicare in Part 1 of this article, we asked you to pull up an online copy of the Medicare & You guidebook and use the CNTRL <F> feature to search for the term “Medically Necessary”? Do you recall how those words were placed to make it clear that only if the medical service or procedure was medically necessary would it be covered?
Now here is the point that I want to drive home: with Original Medicare your doctor makes the determination as to what is medically necessary. With a Medicare Advantage Plan the private for-profit insurer makes that determination. Get it?
You can no longer appeal to Medicare. You gave up that right. You can only appeal to the insurance company that manages your Medicare Advantage plan for a profit.
If you need more time to let that sink in. Watch this video (the second video on this page) while you’re pondering the ramifications of what it means when a for-profit insurance company is your sole arbiter of “medically necessary”.
The national average shows that 30% of people on Medicare choose a Medicare Advantage plan. 70% prefer to stay on Original Medicare. However, the national average may be a bit misleading in that there are many states where only one in ten people on Medicare choose Medicare Advantage.
What About Pre-existing Conditions?
When you first get your Medicare Part B you have an initial enrollment period that allows you to choose any Medicare plan available, at the best price available, without any consideration for pre-existing conditions. However, that changes as time passes.
With Medicare Advantage plans, you can enrol during the Annual Election Period (AEP) (October 15th – December 07) or during any Special Enrollment period regardless of your health. You can change plans every year during AEP and no company can rate you or deny coverage due to health.
That is somewhat different with Medicare Supplement plans. Unlike Medicare Advantage plans, you can change Medicare Supplement plans and insurance companies any time of year. You can change plans as often as you like. As long as you are changing from one Medicare Supplement plan to another and do not have a meaningful period in-between without coverage, the insurance company cannot deny coverage due to pre-existing conditions.
However….and this is an important However, in order to change from one Medicare Supplement insurer to another you will have to go through Medical Underwriting. Medical Underwriting consists of a series of questions about your medical history and usually a check of your prescription history. If your medical history consists of recent cases of cancer, heart attack, stroke, COPD, inserted medical devices or other serious medical conditions the insurance company can deny you coverage.
What does this mean? First keep in mind that your current Medicare Supplement, if you have one, is guaranteed renewable. As long as you pay your premiums, the insurance company cannot cancel your policy. You are also guaranteed that your rates cannot change due to your medical history. If an insurance company is going to change your rate, they must do the same for all people in your category (i.e. all people in your state). However, if you wish to shop for a new plan or different coverage, the new insurance company that you wish to change to have the right to put you through Medical Underwriting and deny you coverage or rate you due to your health history.
What This Means for you….
If you have a Medicare Supplement plan, you can keep your plan and cannot be cancelled. At some point in the future, if you decide to shop for a lower price or different plan, you can. You will simply need to qualify via medical underwriting. Each insurance company has a different set of questions and underwriting procedure, which means we can often find a company with a more favourable view of your medical history.
If you decide to purchase a Medicare Advantage plan, you can change your mind and go to Original Medicare and a Medicare Supplement. If you are still within your first twelve months of owning a Medicare Advantage plan, you can get any Medicare supplement without medical underwriting. After your first year,you can only make changes during the Annual enrollment period, or if you move out of the service area. You will also need to go through medical underwriting to get a Medicare supplement policy.
How To Choose A Medicare Plan
So, there you have it. Between the information in Part 1 on Medicare Supplements and Part 2 on Medicare Advantage plans this article has covered all you need to know to determine if you would be more comfortable having Original Medicare with a Medicare Supplement policy or choosing Medicare Advantage.
From here, you should explore the details and prices of the plans that interest you most. Because we are 100% independent and offer ALL Medicare Supplement plans along with some of the largest Medicare Advantage plans, we can show you the prices and details of the plans available to you.
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Matthew Claassen, CMT - Independent Insurance Broker
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Medigap Seminars Insurance Agency
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