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Medicare Supplement vs Medicare Advantage; Which is Right for Me?


Medicare Supplement vs. Medicare Advantage Plan


If you’ve begun to research Medicare you have undoubtedly heard of Medicare Supplements and Medicare Advantage Plans. If you’re approaching 65, you’re getting massive amounts of mail regarding these types of Medicare coverage, not to mention the barrage of celebrity endorsed Medicare commercials. It’s so overwhelming! As you begin to consider Medicare Supplement vs Medicare Advantage, it is important to understand both types of Medicare plans and how they will help to reduce your out-of-pocket spending.


The two main types of coverage you can buy to help with your healthcare costs are Medicare Advantage and Medicare Supplement (Medigap). It’s important to know how each type of coverage works, so you can select the right plan for your unique circumstances.


Medicare supplements are offered by private insurance companies but are standardized by the federal government. Medicare Supplements set their own premiums and pay as a secondary insurance to Medicare Part A and Part B. This means they pay after Medicare first pays its portion of the bill. Medicare then sends the remainder of your bill to your supplemental company. The supplement company then pays its share according to which plan you are enrolled in. You will continue to also pay your Medicare Part B premium directly to Medicare.


Medicare Advantage plans (Part C) combine Part A and Part B benefits. When you enroll into a Medicare Advantage plan, you get your benefits from private insurance companies approved by Medicare. In addition to Part A and Part B benefits, many plans offer Part D prescription drug coverage, dental, vision, hearing and a wellness benefit. Medicare Advantage plans are often premium free, and you typically pay a copay for covered items. You will continue to pay your Part B premium directly to Medicare. There are six different types of Medicare Advantage plans, but the two most common are HMO and PPO. You agree to use the plan’s network of providers except when you need emergency care. You’ll pay copayments for your health care treatment as you use the plan.


Let’s dive a bit deeper into these coverage options to understand the differences between the two.


Medicare Supplement


Medicare Supplement plans are also called Medigap plans. You can see any provider that participates in Medicare, regardless of which Medicare supplement company you choose. You have access to all the Medicare providers nationwide – no referrals necessary. If you enroll in a comprehensive plan like Plan G, you will have very little out of pocket costs other than your monthly premium. Since Medicare covers medically necessary doctor visits, specialist care, other office visits, surgery, procedures and exams, your Medicare Supplement plans will as well.


When you enroll, your Medicare supplement insurance company notifies Medicare that you have purchased a policy. Thereafter, when Medicare pays its portion of your bills, it will automatically send the remainder of your bill to your Medicare Supplement insurer. It’s seamless, with no claim forms for you to file.


Medicare Supplements have monthly premiums. Plan rates vary by region, age and sometimes gender. When shopping for a Medicare Supplement it is important to remember that the benefits are standard regardless of the insurer. So, it really comes down to price when deciding on a plan.


Medicare Supplements do not cover prescription drugs, so most beneficiaries will enroll in a separate Medicare Part D plan for prescription drug coverage. If you fail to enroll in a Part D plan when first eligible and do not have creditable coverage, you will receive a late enrollment penalty when you apply in the future.


If you enroll into a Medicare Supplement (Medigap) during your initial enrollment period, (within 6 months of your Part B effective date), there are no health questions (underwriting). There are also no waiting periods or pre-existing condition exclusions when you apply during this window. If you miss this window and apply later, then you will usually be required to answer a number of health questions. Underwriting rules will vary with each carrier and state. The underwriter at the insurance company can accept or decline you based on your medical history.


Medicare Advantage


Over 42% of Medicare beneficiaries choose to enroll into Medicare Advantage, which are private insurance plans. They usually have lower premiums than Medigap plans, often times a $0 premium. There are several kinds of Advantage plan such as HMO, PPO, PFFS (private-fee-for service), and SNPs (Special Needs Plans).


When a plan has a $0 premium, it means that you will pay no additional premiums for the plan itself. You will still pay for your Part B premiums monthly to Medicare. A beneficiary must be enrolled in both Medicare Part A and Medicare Part B to be eligible for a Medicare Advantage plan. However, you may not need to enroll in a separate Part D plan since most Advantage plans include prescription drug benefits.


Many ask how a company can offer a $0 premium plan? When you choose a Medicare Advantage plan the taxes and premiums paid to Medicare go back to the carriers to manage the plans. They are monitored by Medicare and must follow Medicare guidelines.

When choosing a Medicare Advantage plan, it’s important to check to make sure your doctors are in the plan’s network as well as your go-to hospital facility. When choosing a plan, you will be part of a network of Doctors, Specialists and Facilities that take the plan. If you stay in the network your out-of-pocket costs will be less than if you were to choose an out of network provider. Look for a plan with a network that has plenty of providers in your service area.


You will pay copays for the services you obtain from providers in the plan’s network as you use the plan. Generally, the copays are reasonable, but you’ll want to review them before you enroll to make sure. The plan can determine which services will have restrictions, such as prior authorization so you’ll to make sure you understand your benefits fully. Your Medicare Advantage insurance company will pay your healthcare bills instead of Medicare paying them.


These copays can vary from plan to plan as well. For instance, one plan might charge $25 for a specialist visit while another plan charges $35. Copays can add up while you are using medical services so think about your medical usage when selecting a plan. Medicare Advantage plans have a built-in financial protection called Maximum Out of Pocket (MOOP). This puts a cap on your out-of-pocket costs for co-pays in a calendar year. Many plans have considerably low Maximum Out of Pocket so it’s important to compare several plans when making your decision. Check the plan’s Summary of Benefits to find out what the MOOP is on the plan you are considering and other information on your potential costs. Then ask yourself- “Do I have enough savings for a rainy day? Can I meet this MOOP if I had to in a year of health challenges?”


One appealing feature to a Medicare Advantage plan is additional benefits that Original Medicare does not cover. Those benefits may include dental, vision, and hearing services, transportation, gym memberships, telehealth services and over-the-counter items. Some plans may even provide coverage on hearing aids.


Most Medicare Advantage plans include a built-in Part D drug plan. It is important to check the plans formulary to make sure you are choosing a plan that covers your drugs.


There are no health questions when applying for a Medicare Advantage plan. However, there are certain times of year that are designated for enrolling in, dis-enrolling from or changing your Advantage plan. Since there are specific enrollment periods for Medicare Advantage plans such as the Medicare Advantage Open Enrollment, you are locked into that plan through December 31st. You can change mid-year only if a circumstance gives you a special election period, such as moving out of the coverage area. This makes it very important that you choose a plan wisely.


Remember that you must be enrolled in both Medicare Parts A and B to be eligible for Medicare Advantage and continue to pay your Part B premium. If you fail to pay your Part B premium, you will lose Part B coverage and be dropped from the Medicare Advantage plan.


Many people ask whether they can start with Medicare Advantage and change to Medigap coverage later if they get sick or need more coverage. This may seem like a good idea, but not always feasible. There is a trial period for people who leave a Medicare Supplement to try Medicare Advantage for the first time. If you decide to dis-enroll from the Medicare Advantage plan and go back to Original Medicare within the first 12 months of Medicare Advantage coverage, then you can return to your Medigap plan with no underwriting. After the 12 months is up, then you are subject to underwriting.


It is important to know all your options when choosing your Medicare coverage. My best advice is to work with a licensed agent that is local to your area, who knows the plans, both Medicare Supplements and Medicare Advantage. This ensures that you are educated and ultimately comfortable with your choice. Plan for your healthcare. A Medicare Supplement offers predictability when it comes to your out-of-pocket expenses. You pay a set premium each month and don’t have to think about copays. Medicare Advantage plans offer lower monthly costs with little to zero additional premium, but you pay copays as you use the plan. You also have the protection of the Maximum Out of Pocket.


I always say every situation is different. No one else has the same unique circumstances as you. It is important that you are getting all the facts when making your choice. It all starts with a conversation. Contact me today to help you decide. My service is free.

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