Recently Medicare Advantage plans have becoming more popular. The plans are offering more benefits and saving seniors more money on their health care costs. However, like all new products or services, Medicare Advantage plans do have their critics. Many seniors are confused about what option is better, a Medicare supplement or a Medicare Advantage plan. Talking to insurance agents or companies can be very trying because in a lot of cases the companies usually try to push one over another. So, what is the difference between the two types of insurance?
Medicare supplements have been around longer. When supplements first appeared, different insurance companies offered different plans with different benefits. In 1992, the federal government standardized Medicare supplement plans, to make the decisions easier for seniors. The standardization makes every Medicare supplement’s benefits the same regardless of which company it was purchased from. For example, if two different insurance companies offered a Plan C, the benefits would be the exact same. The only difference would be in the plan premiums and the level of customer service. The plans were labeled with sequential letters. As of 2007, the plans ranged from Plan A through Plan L. Not every plan is available in every state. What plan to choose depends on how much benefit is needed.
Medicare supplements work in conjunction with Medicare Parts A and B. Think of Medicare as a truck, the supplement is the trailer. After a doctor or hospital submits a bill, Medicare will approve another amount and pay its part. After that, the supplement will pick up whatever portion of the bill it was designed to pick up. Beyond that, the insured is responsible for the balance, if any. A good supplement, such as a Plan C, will pick up all of the deductibles and most of the coinsurance or co-payments.
The big downfall of supplements, are the plans premiums. The premiums on a supplement can be expensive, especially for someone in good or near good health. Medicare beneficiaries in poor health or are regularly hospitalized can benefit greatly from supplements. However, paying those premiums may not be worth it for those seeing a doctor a few times a year or only carry the insurance in case they may need it. Plus, the premiums go up every year.
Most people carry supplements for years without ever using them for fear of not qualifying when they do need the extra insurance. This is true. Being accepted into a Medicare supplement does require medical underwriting. Some people with a negative medical history may be turned down once they are out of their initial enrollment period. That is the time when someone is first eligible to receive Medicare. The period is three months before, the month of, and three months after one becomes Medicare eligible. This also includes someone in a special election period when they are involuntarily disenrolled from their current health plan. During these special periods, Medicare beneficiaries cannot be turned down for a supplement.
Medicare Advantage plans are the lower cost alternatives to supplements. The premiums are usually lower but the beneficiary must participate in the cost sharing. For example, the premium for the plan may be under $20 a month, but they may pay a $5 or $10 co-pay to see their doctor. They may also be required to pay small percentages for other services. Many people get scared off by the thought of co-payments or co-insurances when looking at these plans. However, for someone in fairly decent health, the costs of the premiums and out of pocket expenses over the year may still be significantly lower than the premiums alone for a supplement.
Many Advantage plans offer additional benefits that supplements don’t. Benefits such as paid gym memberships, paid preventative services, or numerous disease management programs. Many Advantage plans also offer services for dental, vision, and hearing. More and more companies are offering plans that also include Part D prescription plans.
The underwriting for Advantage plans is a lot less strict. The only condition that would disqualify someone from most plans is End Stage Renal Disease (kidney failure). If a Medicare beneficiary enrolls in an Advantage plan for their first time, they are given an additional six months to decide if they want to keep it. Should they decide that an Advantage plan isn’t for them, they may disenroll and enroll into a supplement with guaranteed acceptance. If the beneficiary is already enrolled in a supplement and switches to an Advantage plan, they are still given the six month window to change their mind.
Medicare advantage plan premiums can range anywhere from $0 a month up to $80 or higher. Beneficiaries may need to shop around to find the best benefits for the best price. A word of caution on the plans that don’t cost anything, although a few are good plans with good benefits, many are just a way to get as many policyholders as possible and rise the premiums the following year. Just remember, the only place $0 can go is up. In some cases, Medicare beneficiaries would be better off only having Medicare Parts A & B than a $0 premium policy. It is possible to find very good benefits for a very little premium. The best place to shop for these plans is in the back of the Medicare benefit guide sent to all beneficiaries every year. The plans and premiums are listed in the back. Another helpful source is Medicare’s website at www.medicare.gov.