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Is Medicare Advantage an Advantage?

Is Medicare Advantage an Advantage?

October 17, 2024

MEDICARE

Before discussing Medicare Advantage, we need to very briefly describe what Medicare is. “Medicare is federal health insurance for anyone age 65 and older, and some people under 65 with certain disabilities or conditions.1” It sounds like Medicaid, a different government insurance program, and it is often confused with it as a result. Medicaid is a “joint federal and state program that provides health coverage for some people with limited income and resources1.”

Original Medicare has two (2) basic parts:

  • Part A – Hospital Insurance. Part A covers inpatient care in a hospital and may also cover some skilled nursing facility care, hospice care and some limited home health care costs. In the usual case there is no premium for Part A coverage2.
  • Part B – Medical Insurance. Part B covers doctor services, outpatient case, some home health care, durable medical equipment and many preventative services. In 2024, the Part B premium is $174.70 per month per individual. However, this premium may be higher if your modified adjusted gross income is greater than $103,000 as an individual filer or $206,000 as a joint filer2.

If you want drug coverage you can purchase a separate Part D drug plan. These drug plans are offered and run by private insurance companies and have premiums associated with them that depend on the specific plan chosen.

The rules for enrolling in Medicare can become somewhat complicated and they are beyond the scope of this article. However, if you have enrollment questions, please contact your advisor as enrollment errors can be costly – especially for late enrollment errors.

Medicare Parts A and B described above are often referred to as “Original Medicare.” Original Medicare provides coverage for most of the medical services and supplies you might need. However, you could still be responsible for deductibles and co-payments3. In 2024, Part A has a $1,632/benefit period deductible (there may be multiple benefit periods in a year) and Part B has a $240/year deductible6. Moreover, Part B may cover only 80% of most costs leaving you responsible for the remaining 20% as a co-insurance expense6.

To help cover these deductibles and coinsurance expenses you can purchase an extra supplemental insurance policy from a private insurance company. These policies are often called Medigap policies4. They are ONLY available if you have Original Medicare. In general, these policies are standardized, and their cost may depend on which standard policy you purchase, from which company you buy it and where you live5. They are in addition to any Part D drug plan you may purchase.

To sum up the Medicare description, many (if not most) Original Medicare subscribers have Medicare Part A for which they generally pay no premium, Medicare Part B for which they pay a basic $174.70 monthly premium, a Part D drug plan and a Medicap policy to help cover the out of pocket costs.

ENTER Medicare Advantage – PART C

Unlike the fee for service structure of Original Medicare, Medicare Advantage plans are offered by private insurance companies that contract with Medicare.  They provide Part A and Part B coverage and often drug coverage and sometimes other benefits not covered at all by Medicare such as dental, vision and hearing benefits. Even though a private insurer may be providing the coverage, you still need to pay your Part B Medicare premium7.

Medicare Advantage plans can be traced back to Medicare + Choice plans created by The Balanced Budget Act (BBA) of 1997. They were renamed Medicare Advantage under the Medicare Prescription Drug, Improvement and Modernization Act (MMA) of 2003. Medicare Advantage penetration of the market has increased virtually every year since 2007 to 48% in 20228. Medicare Advantage plans might currently insure a little more than half of all seniors on Medicare10.

The current popularity of Medicare Advantage plans seem to stem from a very significant advertising presence9, its apparent simplicity when compared to the 4-plan Original Medicare composite and often lower premiums and additional benefits. However, we know that there are no free lunches in the insurance world. There are several significant distinctions between Original Medicare and Medicare Advantage Plans and unfortunately some of the advertising may not adequately describe those differences that are most relevant to you9. Therefore, we suggest researching your plan choices and discussing them with your advisor.

Some of the major considerations in making the Original Medicare / Part C (Medicare Advantage) decision may include:

  • Original Medicare permits using any doctor or hospital that takes Medicare while Part C plans often restrict these choices to specific groups of providers. In addition, Part C plans often require approval prior to accessing certain services or drugs7. Research reported by Newsweek revealed a significant increase in denied authorization requests for the 2021-2022 time period10.
  • Medicare provides no coverage for vision, hearing and dental issues (and therefore Medigap policies will provide no coverage in these areas). Part C plans may offer some or all of these extra benefits7.
  • Frequently Part C plans have low premiums – sometimes even no additional premium (remember the Medicare Part B premiums must still be paid to Medicare). However, their out of pocket costs (deductibles, co-pays) may be higher or lower than those for Original Medicare7.
  • With Original Medicare, there is no upper limit to your out of pocket cost which is where Medigap policies can help. Part C plans have an upper out of pocket limit after which you may pay nothing7.

One issue to be mindful of is that the cost and coverage provided by Part C plans may change annually. Therefore, if enrolled in a Part C plan, it is prudent each year to review the cost and coverage of the renewal plan to make sure it still meets your goals. If it doesn’t, you may have the ability to switch back to Original Medicare and purchase a Medigap policy to defray out of pocket costs. However, enrolling in a Medigap policy AFTER the initial 6 month Medigap enrollment period (which begins the first month you enroll in Medicare Part B) may result in denial due to pre-existing medical conditions5.

There seems to be a veritable plethora of Medicare Advantage Plan advertising especially during the Medicare open enrollment period (October 15 – December 7).  It is possible that some of this advertising may be misleading or contain incomplete product information or lead to marketing efforts designed to collect confidential information outside of the enrollment process9. Consequently, it is important to fully understand your decision to enroll in a Part C plan. If you would like to discuss this topic further, please contact us. Remember we are here to help.

  1. https://www.medicare.gov/basics/get-started-with-medicare/medicare-basics/parts-of-medicare
  2. chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.medicare.gov/Pubs/pdf/10050-medicare-and-you.pdf
  3. https://www.medicare.gov/basics/get-started-with-medicare/medicare-basics/how-does-medicare-work
  4. https://www.medicare.gov/health-drug-plans/medigap
  5. https://www.medicare.gov/health-drug-plans/medigap/basics
  6. https://www.medicare.gov/basics/costs/medicare-costs
  7. chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.medicare.gov/Pubs/pdf/12026-Understanding-Medicare-Advantage-Plans.pdf
  8. https://www.techtarget.com/healthcarepayers/feature/The-History-of-Medicare-Advantage-From-Inception-to-Growing-Popularity
  9. https://www.kiplinger.com/retirement/medicare/too-much-medicare-marketing
  10. https://www.newsweek.com/medicare-advantage-denying-more-requests-seniors-care-1937124

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