Medicare Advantage vs Medicare Supplement

There is a wealth of information available on TV and the internet regarding Medicare Advantage and Medicare Supplement plans. However, with this abundance of information often comes a fair share of misinformation. As someone who closely follows news sources on Medicare and reads daily articles on the web, I encountered two articles while researching for this piece that contained glaring mistakes about the functionalities of these two plans. Such inaccuracies can pose a challenge when it comes to making an informed decision between Medicare Advantage and Medicare Supplement.

I will address those mistakes later. However, it is crucial for you to familiarize yourself with the programs and determine what suits you best. Ultimately, you are the one who should make the optimal decision for your specific circumstances. My objective is to provide educational assistance, even though this article may be slightly lengthy.

Medicare Has Many Gaps in Coverage

Both Medicare Advantage plans and Medicare supplements, also known as Medigap plans, can help reduce your out-of-pocket healthcare costs. Opting for Medicare alone without additional coverage will reveal the gaps in coverage that Medicare does not address. For instance, you will be responsible for the Part A deductible, which is currently $1,632 in 2024, for up to 60 days of hospital care. If you stay in the hospital for 4 days and then return three months later, you will have to pay the Part A deductible again. This is because the Part A deductible only covers you for a 60-day benefit period. If your hospital stay exceeds 60 days consecutively, you will also start incurring a daily co-pay.

Paying 20% of outpatient surgeries, doctor visits, or chemotherapy treatments under Medicare Part B doesn’t sound like much fun, either. That’s why it’s important to have coverage to fill the gaps in Medicare Part A and Part B.

There are two types of private plans available to fill the gaps in Medicare: Medicare supplements (Medigap) and Medicare Advantage. It’s crucial to comprehend the distinctions between these two plans. Your choice could potentially save or cost you thousands of dollars over your lifetime on Medicare, depending on your long-term health. Understanding these differences will ensure that you make an informed choice.

Check out this video:

Medicare Advantage vs Medicare Supplement – How Medicare Advantage Plans Are Structured

Medicare entails various co-payments and deductibles, making it potentially costly for those without insurance coverage to bridge the gaps, be it through Medigap or Medicare Advantage. The Medicare program is comprised of four parts: A, B, C, and D.

Part A generally covers most inpatient care. This includes hospital stays, home health care, hospice, and skilled nursing facilities. Part B, on the other hand, typically covers services provided by physicians and other healthcare providers, as well as certain preventive care. While each part encompasses additional coverage items, this simplified breakdown encapsulates the essence of Medicare. Lastly, Part D offers prescription drug coverage.

medicare supplement vs medicare advantageMedicare Advantage replaces your Medicare Part A and Part B services, and often your Part D coverage as well, by consolidating them into a single policy offered by a private insurance company. This consolidated policy is known as Part C of Medicare. With a Medicare Advantage plan, there’s no need to carry around your Medicare card anymore. You only need the card provided by your insurance company. It’s important to note that you still need to pay the Part B premium, just as you would with Medigap plans.

By enrolling in a Medicare Advantage plan, you relinquish your rights as a Medicare beneficiary. You transfer your right to healthcare fully to an insurance company. Under this arrangement, your benefits are provided solely through the plan, rather than directly from Medicare. With a Medicare Advantage plan, you are subject to prior authorizations for any services provided, which are often denied. There is no prior authorization needed under a Medigap plan.

How Medigap Plans Are Structured

Medigap plans are designed to complement your existing Medicare coverage. These plans fill in the gaps of Part A and Part B that would normally require out-of-pocket expenses. Rather than replacing Medicare, these supplemental plans work alongside it. Think of them as a safety net, ensuring you have comprehensive coverage. You can find detailed cost information and deductibles on the Medicare.gov website by clicking here.

With a Medicare supplement plan, Medicare initially covers its share of the bill. The remaining balance is sent to your supplement company for payment. This seamless process, known as the crossover system, ensures that providers are paid directly, often resulting in no out-of-pocket expenses for you. Rest assured that Medicare and your supplement work together to take care of your medical bills.

Medicare Advantage PROS

Cost

Medicare Advantage plans typically offer lower premiums compared to Medicare supplements. In fact, there are numerous regions where Medicare Advantage plans require no monthly premiums, only co-pays and deductibles. This is a key factor contributing to the widespread popularity of MA plans.

Part D Inclusion

Around 80% of Medicare Advantage plans include Part D coverage at no extra cost, providing an additional option for coverage. By combining your Part D coverage with Medicare Advantage (MAPD), you can lower your monthly premium and carry just one insurance card for both Medicare and prescription drugs. However, it is important to note that drug co-pays and out-of-pocket costs under Medicare Advantage plans can sometimes be higher compared to standalone Part D drug plans with a Medigap plan. It is advisable to compare drug costs in both scenarios. That way you ensure that you are truly saving money on your drug coverage under a Medicare Advantage plan. Visit PartD.info for more information.

All Coverage From One Source

As mentioned earlier, MAPD plans provide the convenience of having all your insurance coverage under one insurance company. This streamlined approach offers simplicity and ease.

Extra Services

Most MAPD plans offer additional services like dental, vision, and gym memberships without any extra cost. Although these services may have limitations, they are included even in many of the available no-premium plans today.

Medicare Advantage CONS

Network Limitations

Medicare Advantage plans establish contracts with networks of doctors, hospitals, and healthcare providers to ensure cost-effectiveness. Adherence to these networks is crucial to avoid significantly higher out-of-pocket expenses. HMO plans require full payment for out-of-network services, while PPO plans involve increased cost-sharing. Unfortunately, situations have arisen where patients faced unexpected bills from non-network providers, such as anesthesiologists during surgery or physicians in emergency rooms. This has been an issue in some instances where patients went in for surgery thinking everything was fine with their network coverage only to receive a huge bill from an anesthesiologist who was actually not in the network, or a patient who receives care in an emergency room from a physician not in their network.

Furthermore, network coverage is often limited to specific geographic regions. This limitation presents challenges for individuals seeking care while traveling or visiting family. It is important to note that Medicare Advantage plans do not provide coverage for international travel. In some cases, networks can be as small as 250 doctors, severely limiting options. Therefore, it is crucial to thoroughly research and evaluate the network before pursuing this option.

Your Co-Pays, Deductibles, Physicians, Networks, and Plan Can Change From Year To Year

Medicare Advantage plans are not guaranteed to be renewable. This means that your deductibles and co-pays are not fixed. Your plan coverage has the potential to change from year to year and can even disappear altogether. Additionally, your physicians may no longer be in-network from one year to the next. It could leave you in a scramble to find a new insurance plan, as we have seen with AARP plans in Florida.

What’s worse, your physicians may even leave the network in the middle of the year. This can be especially problematic if you’re in the midst of treating a condition. As anticipated cuts to the government payments to insurance companies for Medicare Advantage patients loom, insurance companies are responding by indicating that they may need to further reduce the size of their networks.

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Fluctuating Annual Costs

Maintaining good health can significantly reduce your costs due to the low premiums of MAPD plans. If you don’t visit the doctor frequently, your out-of-pocket expenses can remain minimal. However, a major health issue or accident could have a devastating emotional and financial impact, potentially reaching up to $7,550, which is the out-of-pocket maximum for 2024. With an HMO plan, going out of network could leave you responsible for the entire bill. The uncertainty of healthcare expenses from year to year makes budgeting for these costs challenging.

Chemotherapy treatments are typically considered outpatient procedures unless administered in a hospital. This means that with most plans, you would face a 20% co-payment for chemotherapy and radiation. From personal experience, as our son battled cancer at the age of 11, we know these drugs can be exorbitantly expensive. One particular drug cost over $10,000 per dose.

It’s evident that with 20% co-payments, you could quickly reach the $7,550 annual co-payment limit. Dealing with cancer is already an immense challenge. However, being burdened with substantial out-of-pocket costs can exacerbate the emotional toll. Moreover, if the treatments extend into a new year, you would have to pay the $7,550 maximum out-of-pocket amount again. This could leave you responsible for paying up to $15,100 within a matter of weeks. During a cancer diagnosis, your primary focus should be on recovery, not worrying about how to cover the expenses.

Enrollment/Disenrollment Issues

When you enroll in a Medicare Advantage plan, you are locked into that plan until December 31st. There is only one opportunity each year, from October 15th to December 7th, to enroll in Medicare Advantage plans and Part D prescription drug plans. During this time, you can switch plans or transition from MAPD to original Medicare with a Medicare Supplement plan, or vice versa. However, there are limited Special Enrollment periods, such as when you move out of your network coverage area. Additionally, you have an Initial Enrollment Period three months before and three months after enrolling in Part B of Medicare. Apart from these exceptions, you are unable to change plans or revert to original Medicare.

This can pose a problem if your provider leaves the network midyear, which occurs more frequently than most people realize. If this happens, you are left with two choices:

  1. Find a new provider within your network, which can be challenging if you are in the midst of extended treatments like chemotherapy and radiation.
  2. Pay for all costs out of pocket when visiting that provider.

Neither option is ideal, and you cannot switch to a new plan until January of the following year unless you qualify for a Special Enrollment Period.

Medicare Supplement (Medigap) PROS

No Networks

With a Medigap plan, you have the freedom to visit any doctor, specialist, or hospital in the United States, as long as they accept Medicare. As of the end of 2020, less than 1% of doctors had formally opted out of the Medicare program. Out of those who did, 42% were psychiatrists. This means that over 99% of physicians in the US still accept Medicare payments for their services. The best part is that there are no networks to navigate. This flexibility is a key advantage to consider when comparing Medicare Advantage and Medicare Supplement plans.

Additionally, most Medigap plans (C, D, F, G, M, and N) provide coverage for foreign travel emergencies up to $50,000 for trips outside of the United States. On the other hand, very few Medicare Advantage plans offer coverage outside of the US.

Guaranteed Renewability

When you choose a Medigap plan to supplement Medicare, your coverage remains unchanged by the insurance company. They cannot cancel your coverage unless you fail to pay the premium. Even if Medicare discontinues your plan, your coverage remains intact as long as you continue to pay for it. Remarkably, I still have clients who are enrolled in the old Plan J, which has not been available for sale since 2010.

Furthermore, the insurance company cannot single you out for a premium increase. Any premium increase must apply to all individuals on the same plan in your state. Therefore, if you are diagnosed with a medical condition and have numerous claims, the insurance company cannot terminate your coverage or raise your premiums as a result.

Standardized Plans

Medicare Advantage coverage can vary across companies, years, and regions. On the other hand, Medigap plans remain consistent across different companies. For example, the Plan G you purchase from Mutual of Omaha or Cigna is the same as the Plan G offered by UnitedHealthcare or Aetna. This consistency eliminates any confusion regarding your coverage and potential changes. The variation in premiums among companies is primarily based on the claims they cover and their underwriting process for applicants.

No Claim Filing or Paperwork

Most Medigap insurance providers offer electronic crossover filing with Medicare. This streamlines the claims process for you and your provider. When your doctor or healthcare facility submits a claim to Medicare, it automatically goes through to your Medigap company. This eliminates the need for your doctor’s office to file with your insurance company separately. The Medigap company then settles the payment directly with the healthcare provider. With this automated system in place, you can say goodbye to paperwork and enjoy a hassle-free experience for you and your doctor.

Easy To Budget Annual Costs

With a Medigap plan, you can bid farewell to unexpected annual healthcare out-of-pocket expenses. Under Plan G, you’ll have a $240 annual Part B deductible (in 2024). After that, all your other Medicare-approved care will be fully covered. It brings a sense of peace and tranquility. It’s important to note that Medicare does not cover cosmetic procedures. There are also limitations on skilled nursing care, similar to MAPD.

Medicare Supplement (Medigap) CONS

Higher Monthly Costs

With a Medicare supplement, you will have a monthly premium to pay. If you rarely visit the doctor or seldom require healthcare, your costs on a Medigap plan may be higher. However, if you encounter a medical situation or have ongoing medical conditions that demand extensive care, the Medigap plan could prove significantly more cost-effective each year. This is due to the fact that MAPD plans typically have a maximum in-network out-of-pocket limit of $7,550. On the other hand, if you have a Plan G Medigap plan, the maximum annual out-of-pocket expense will be the Part B annual, one-time deductible (currently $226 in 2023), unless you undergo non-approved services (such as cosmetic procedures) or exceed a consecutive hospital stay of 455 days.

No Part D Prescription or Dental Coverage Included

If you have a Medigap plan, it is important to note that you will require a separate prescription drug plan. Additionally, there is an option to obtain a standalone policy that covers dental, vision, and hearing services. However, it is crucial to consider that both of these options come with an additional monthly cost. It is worth mentioning that standalone dental, vision, and hearing coverage typically provides superior benefits compared to what is offered under a MAPD plan.

Policies May Be Underwritten

You have the opportunity to enroll in a Medicare supplement from any company of your choosing during the open enrollment period. This period commences six months prior to your enrollment in Part B of Medicare and extends for six months after. For Medicare Advantage and Part D, you have a 3-month open enrollment window before and after your initial coverage date under Part B. Outside of your Open Enrollment Period, you will need to obtain underwriting approval in order to secure a Medigap plan.

Switching Between Medicare Advantage and Medicare Supplement Plans

This raises another important point. Many individuals inquire about the possibility of starting with a Medicare Advantage plan and then transitioning to a Medicare supplement if they require additional coverage or fall ill. Unfortunately, the answer to this question is typically NO. Once you switch from a Medicare supplement plan to a Medicare Advantage plan, it may not be possible to switch back to your original Medigap plan. Unless you are within your open enrollment or guaranteed issue period, you will likely need to undergo health underwriting to re-qualify.

However, there are a few limited exceptions that I discuss in detail in this video. Medicare provides a “trial right” for individuals who enroll in a Medicare Advantage plan for the first time but are dissatisfied with it. If you return to Original Medicare within 12 months of joining, you have certain special rights to purchase a Medigap plan:

  • If you had a previous Medigap policy before joining, you may be able to reinstate the same policy if the company still offers it. If it’s not available, you can choose another Medigap policy.
  • The reinstated Medigap policy will no longer include prescription drug coverage, even if you had it before. However, you may have the option to join a Medicare Prescription Drug Plan (Part D).
  • If you initially enrolled in a Medicare Advantage Plan when you became eligible for Medicare, you can select from any available Medigap policy.

After the 12-month period has elapsed, if you wish to return to a Medicare supplement plan, you will need to undergo medical underwriting.

Conclusion: Medicare Supplement or Medicare Advantage?

For the best comprehensive coverage, the clear choice is a Medicare Supplement, or Medigap, plan. After assisting countless individuals who found themselves underinsured by a Medicare Advantage program when faced with a severe medical diagnosis, resulting in substantial out-of-pocket expenses, my top recommendation is to obtain the most comprehensive coverage within your budget. Each week, we receive calls from individuals who have watched our YouTube videos about how Medicare covers cancer and other critical diagnoses. They are seeking to transition to better coverage options with greater flexibility than what they currently have with Medicare Advantage plans. Regrettably, once a serious diagnosis is received, it becomes too late to make changes.

If you are willing to accept lower premiums and a narrower network of healthcare providers, while being aware that you may face large out-of-pocket costs in the event of a major health issue, the Medicare Advantage program could potentially save you from paying a monthly premium of $80 – 140 a month. It is worth noting that approximately 30% of Americans currently benefit from the Medicare Advantage program, so you would not be alone in this choice.

There are pros and cons to each program. The decision between Medicare Advantage and Medicare Supplement is one that we assist people with on a daily basis. It is arguably the most significant decision regarding your future healthcare. Each situation is unique, and there is no one-size-fits-all solution. Please feel free to reach out to us for more personalized assistance in understanding your individual options. Our service is provided at no charge

1-888-228-6119

Stanley Keith Murray is an independent agent and the owner of Integrity Senior Solutions Inc. He has been working with Seniors to meet their insurance and financial needs since 1996.

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