Seniors and individuals, who are on Medicare, due to a disability, have three options for the type of Medicare plan they can select:
- Original Medicare with/without optional Prescription Drug Plan (PDP)
- Original Medicare plus a Supplemental (Medigap) Plan with/without PDP
- Medicare Advantage (MA) plan with/without PDP.
No plan is ideal for all people. Each plan option has its own strengths, limitations, cost and coverage differences.
Which Type of Plan Should You Select?
You want to be able to comfortably afford your insurance that is protecting you against the cost of treating illnesses and diseases. You should look for the plan that provides you with the best value of your desired coverage at a reasonable total cost.
Remember, you can change the type of plan that you want, need and can afford each year during the open enrollment period (October 15 to December 7).
Original Medicare Strengths:
- Provides comprehensive inpatient, outpatient and rehabilitation medical services.
- 50 years old and accepted by providers nationwide in every state and county.
- If you and your employer(s) paid into Medicare for at least 10 years, there is no additional premium for Part A – hospitalization coverage.
- Your monthly Part B outpatient premium ($122/mo. as of 2016) is deducted from your Social Security benefit. Your premium is higher, if income is greater than $85K individual/$175K couple.
- No restricted networks, required prior approvals or expensive out-of-network charges
- If you are hospitalized, you pay a deductible of $1,288.
- If you use Part B outpatient services, you pay a deductible of $166 and then 20% co-insurance for most medical services.
- Charges for outpatient services are established by Medicare and are relatively easy to understand compared to Medicare Advantage plans.
- Medical office visits commonly result in a $10-$20 charge.
- If you want more coverage, you can generally join a Medigap plan during the year.
Limitations of Original Medicare
- Many costly treatments including: surgery, chemotherapy, dialysis and radiation therapy are routinely performed on an outpatient basis and Medicare and Medicare Advantage plan subscribers can pay substantially more with a 20% co-insurance, than a fixed dollar co-pay.
- There is no annual maximum out-of-pocket limit of medical expenses as compared to MA plans.
- Medications are not included. A separate Prescription Drug Plan needs to be purchased.
Medigap Plan Strengths
- Plans use Medicare as the primary coverage that is widely accepted across the country.
- Plans are available in every state.
- There are 11 different Medigap plan designs that pay for different Medicare medical deductibles, co-pays and co-insurances for an annual premium.
Medigap Plan Limitations
- State insurance departments and Medicare regulate Medigap plans. As a result, states have different requirements regarding: when you can enroll, waiting periods for pre-existing conditions, allowed differences in rates based on age, marital status, health status and smoker status.
- There may be up to a 6-month delay in coverage, when you enroll, if you have pre-existing medical conditions.
- Plan premiums vary widely by insurers, states and counties for the same coverage. For example, you can buy a comprehensive Medigap Plan F in Rochester NY from 11 different insurers with premiums ranging from a high of $356.36/mo. (Bankers Conseco) to a low of $180.50/mo. (United HealthCare). This represents a 97% premium difference for identical coverage.
- Plans only cover services that are part of Original Medicare not Medicare Advantage plans.
- Plans do not cover prescription drugs. A separate PDP is required along with additional out-of-pocket expenses for any premiums, deductibles, co-pays and co-insurance charges.
- Private insurers sell plans directly and through agents and brokers. Many people need and can benefit from independent advice to select the best plan that meets their needs and budget.
Medicare Advantage Plan Strengths
- There are three major MA plan designs: Health Maintenance Organization (HMO), HMO-Point of Service (HMO-POS) and Preferred Provider Organization (PPO). Plan designs are sold in specific geographic areas where subscribers live and where provider networks have been established. Coverage and costs vary significantly among plans.
- MA plans often include extra benefits, not included in Original Medicare, such as a fitness club, an allowance for dental cleanings, glasses/contacts and occasionally hearing aids.
Medicare Advantage Plan Limitations
- MA plans are much more common in urban (86%) versus rural (13%) states and counties.
- People may experience limited choices and high costs for MA plans
- Insurers are under no obligation to offer or continue MA plans.
- HMO plans restrict services to network providers.
- HMO-POS plans allow limited out-of network services (generally $3,000 to $5,000).
- PPO plans do not have a limit on out-of-network services but providers are under no obligation to serve out-of-network patients or accept the insurers’ rates.
- MA plans usually charge subscribers more for using out-of-network providers.
- Plan subscribers are expected to follow the plan’s terms, polices and procedures which can be restrictive, costly and frustrating.
- Medical debts are a major cause of personal bankruptcies.
- You have a significant responsibility to select a Medicare Plans that meets your medical needs and budget.
- If you lead a healthy lifestyle with few medical and prescription drug needs; a high quality, low premium MA plan with prescription drugs coverage may meet your needs and provide you with benefits that will save you money on extras (e.g. health club, eyewear allowance, preventative dental care etc.).
- If you: live in a rural area with few good MA options; and/or you have multiple medical problems that are expensive to treat; and/or you want maximum provider choices, you may want to consider a Medigap and PDP plans that meets your needs and budget. These plans can be very competitively priced and offer a good value for your needs.
- If your area has a variety of MA plans- compare what they offer for your needs, what providers are in their networks, what restrictive policies they have and what is their estimated total annual cost.
Resources to Help You Select a Plan
- Medicare.gov is a valuable resource with information including: Original Medicare, Medigap, Medicare Advantage and PDP. Medicare.gov also has a Personal Plan Finder feature to assist you in comparing MA and PDP plans and estimating expenses in your area.
- Contact your State Insurance Department Each state has an Insurance Department that regulates Medigap plans. All states have websites that includes Insurance Department information insurers that offer Medgap plans, their comparative costs and other helpful information.
- Contact SHIP- State Health Insurance Assistance Program- 877-839-2675 to locate a free local program to provide personal assistance in selecting a Medicare program that is right for you.