It is estimated that approximately 8,000 baby boomers will be turning 65 daily for the next decade or more. While some will continue to work and keep their group health insurance, many more will elect Medicare as their primary coverage. When electing Medicare, it is important to understand your options for supplementing this government run plan.
Medicare has several gaps that when unfilled can add up quickly for a hospital stay, chronic illness or emergency room visit. If you are new to Medicare (in other words, within 3 months of your Part B effective date or six months after) you have three choices:
- Only enroll in Medicare Parts A & B
- Purchase a Medicare Supplement Plan and/or Prescription Part D Coverage
- Purchase a Medicare Advantage Plan
For the sake of this article, let’s say you have ruled out option 1 as it is the most risky. Going without any type of supplemental coverage exposes you to significant out-of-pocket expenses and can also make it difficult to purchase a supplemental plan later if you are in poor health and outside of your six month open enrollment window.
Nationwide, option 2 is most common. That is to say that more people purchase one of the ten standardized Medicare supplements (Plans A-N) than the Medicare Advantage options offered in their area of residence.
Medicare supplement plans are popular as they fill in most, if not all, of the gaps in Medicare Parts A & B – except for prescription drug coverage. Drug coverage is sold separately from private insurance companies and is referred to a Part D coverage. Medicare supplements and Part D plans cannot be purchased in one package.
Plan F is very popular and is sometimes referred to as the “Cadillac Plan.” It fills in all of the gaps in Medicare Parts A & B. If your medical care is a Medicare approved expense, then Plan F will cover the remaining balance. Of course, Plan F is the most expensive Medicare supplement.
Plans C, D, G, N and High Deductible F are also popular. They fill in the majority of the gaps in Medicare, cost less than Plan F, and have reasonable out-of-pocket exposure. And like almost all Medicare supplements purchased today, these plans have no network restrictions. It does not matter which insurance company you choose, you will have the same access to doctors and hospitals for your care. If your doctor accepts Medicare assignment, then he or she will accept any traditional Medicare supplement you purchase. (Medicare supplement “Select Plans” are rare and they only policies with preferred networks.)
That brings us to option 3 – purchasing (or enrolling) in a Medicare Advantage (MA) Plan. This distinction is made as some Advantage plans are offered for $0 monthly premiums. So, what’s the catch?
There is no catch so long as you know what you are getting. Medicare Advantage plans are privately sold insurance plans that cover Original Medicare Parts A & B and some of the gaps left behind. You still pay your Medicare Part B premiums, but your MA plan now privately covers what Original Medicare Parts A & B would have. In other words, your Advantage plan is your primary coverage, not the government run Medicare program.
Medicare Advantage policies are network-driven plans that, generally speaking, have more out-of-pocket exposure than Original Medicare when it is combined with a stronger Medicare supplement like Plan C, D, F, G & N (option 2).
In order to realize the savings in most Medicare Advantage plans, you will want to use their network of doctors and hospitals or at the very least, those medical providers that accept the terms and conditions of the MA plan you have selected. When enrolling, it is also important to review your out-of-pocket yearly maximums both in and out of network. You should also familiarize yourself with the office copay, coinsurance and deductible structure of the plan you are most interested in.
When compared to Medicare supplement insurance, there are more variables to consider when reviewing Medicare Advantage plans. You will want to make sure your doctor(s) are in network, the out-of-pocket exposure is acceptable, it fits your travel needs if you spend significant time in two or more states, and that is offers suitable Part D drug coverage. (Most, not all, Medicare Advantage plans include Part D drug coverage at no additional cost.)
Their is a wealth of information available for those who are aging into Medicare at 65 or turning to Medicare as their primary coverage upon voluntarily or involuntarily losing employer based coverage. Medicare.gov is a very good resource as are agents who specialize in the various Medicare insurance policies available for purchase. You may want to research plans on the Medicare website so you will then be better able to ask your chosen insurance agent questions about the plan(s) you feel best suit your medical needs and budget.
There is a lot to know about Medicare and there are many advocates, websites and agents who can competently help you navigate your open enrollment window and the yearly Annual Election Period. This way you will not miss any deadlines, be subjected to any penalties, nor encounter any surprises with your chosen coverage.