Of all the decisions you will make when transitioning your healthcare to Medicare, none is more important than this one: Original Medicare or Medicare Advantage? This article is intended to help you reach the right decision for your individual health and financial circumstances. As with most things Medicare, more information leads to more questions, so feel free to contact me here to discuss your specific situation.
It Starts With Original Medicare
As a review, Original Medicare consists of Part A hospital coverage and Part B medical coverage. Decisions about what additional coverage to add follow your enrollment in Original Medicare. Once you have have an effective date for both Original Medicare Part A and Part B, then the decision becomes, what Medicare experience do you want: Original Medicare or Medicare Advantage?
First, a word about terminology:
Original Medicare is also called traditional Medicare. In this article, we'll use the term Original Medicare and abbreviate it as OM.
Medicare Supplement plans are extra insurance offered by private health insurance carriers to help pay your share of out-of-pocket costs in OM. They are also referred to as MediGap plans. We'll use the term Medicare Supplement here.
Stand-alone Part D prescription drug plans provide prescription drug coverage for Medicare beneficiaries on OM. We'll refer to them as PDPs (prescription drug plans).
Medicare Advantage plans are the private carrier plans that replace OM if you choose to get your Medicare coverage that way. These plans are also known as Part C plans and all fall under the category of managed care plans, meaning there is a private carrier responsible for administering your Medicare health coverage. We'll refer to these plans as MA plans (for Medicare Advantage).
Understanding Medicare Supplements (MediGap)
Except for preventative screenings, Original Medicare does not pay for anything 100%. In fact, there are six coverage gaps in Original Medicare, three in Part A and three in Part B. (See graphic: Gaps in Original Medicare)
Without any additional coverage, you would be responsible to cover those gaps out of your own pocket. Further adding to your financial exposure on Original Medicare is the fact that there is no maximum out-of-pocket cap on medical costs. So, in the face of a serious diagnosis, your financial exposure to out-of-pocket costs would be without limit. That's where Medicare Supplement plans come in. They cover the gaps in Original Medicare and protect you from burdensome medical costs.
It's important to note that Medicare Supplements provide secondary coverage to OM which remains primary. This means you can see any provider in the country that accepts OM if they're accepting new patients. This is true no matter what insurance carrier provides your Medicare Supplement plan. If a provider accepts OM then they have to accept your Medicare Supplement plan. With OM as your primary insurance, it's extremely rare you will face prior authorization obstacles to your care since Medicare is the one making coverage decisions and not a private insurance carrier. Medicare Supplement plans must cover all Medicare covered treatments and procedures. At the same time, they do not have to cover things that are not covered by OM, for example, dental, vision and hearing. You can use the tools at Medicare.gov or the What's Covered app (available for iPhone and Android) to learn more about services that Medicare covers.
For a more in-depth look at Medicare Supplements and some of the popular plan types, see my article: All About Medicare Supplement Insurance. See the graphic below for the pros and cons of Medicare Supplement plans.
Understanding Medicare Advantage
MA plans are not provided by the federal government but are a private carrier replacement for OM. Carriers contract with the federal government to offer these plans and the government pays the carrier a flat rate per month to provide Medicare coverage to plan members. Carriers apportion those funds to the various benefits provided by the plan. Plans must spend at least 85% of the money they receive on actual benefits for members (referred to as medical loss ratio).
Important to note about MA plans is the fact that once you enroll in one it becomes your primary coverage. OM is no longer involved in your care. You no longer need your red, white and blue Medicare card for most services. While it's true that MA plans must cover all of the services that original Medicare covers, the difference is in how they provide those services. You'll typically need to use in-network providers to access services. The carrier may deny a prior authorization for a procedure you and your doctor have chosen. The carrier may require you to try other procedures first before they agree to pay for the procedure you and your doctor have chosen. You get the idea.
See the graphic below for the pros and cons of MA plans.
Factors that Affect Your OM vs MA Decision
Here are some of the factors that affect your OM vs MA decision:
Do you routinely spend months out of your residential area, perhaps spending the summer in another part of the country? If so, you would benefit from OM with a Medicare Supplement in that you can receive routine care from any Medicare provider nationwide.
Do you want the option of going to specialty clinics if the need arises such as the MD Anderson Cancer Center, Sloan-Kettering, etc.? If so, you could do so easily on OM with a Medicare Supplement. The participation of such specialty centers with MA plans is narrowly limited with a low likelihood of you being in an MA plan that they accept.
Can you afford to be in OM with a Medicare Supplement? Unfortunately, here in South Florida we have some of the highest Medicare Supplement premiums in the nation. For some it's simply out of the question financially for them to be on OM with a Medicare Supplement.
Can you afford the cost of your drugs on a standalone PDP? Generic drugs are rarely an issue on Medicare but name brand drugs can be. On some MA plans, the funds to the plan are used to subsidize the drug coverage built into the plan, so some popular name brand drugs are available at very reasonable co-pays, for example, between $25-$47 per fill. Those same drugs on a standalong PDP might push you right up the annual $2,000 maximum out-of-pocket drug cap (in 2025) in the first couple of fills.
Here's What HHS-OIG Wants You to Know About Managed Care/Prior Authorization
Watch the video. It's important.
The Long-Term Impact of Your OM vs MA Decision
After reviewing some of these factors with clients, very often they will reason this way: Hey, I'm healthy now, so why pay the costs of a Medicare Supplement and PDP? If in the future I become ill and my MA plan becomes an obstacle to me getting the care I want, I'll switch to OM with a Medicare Supplement at that point.
Unfortunately, it's not that easy. When you first enroll in Medicare Part B at age 65 or older you will have access to your one-time Medicare Supplement (MediGap) open enrollment period. This lasts for six months and it allows you to enroll in any Medicare Supplement plan that you are eligible for without being denied due to pre-existing conditions. After that period, if you want to apply for a Medicare Supplement, in most states (including Florida) you will have to pass medical underwriting before the carrier will sell you the Medicare Supplement policy. Medical underwriting is meant to exclude anyone from buying a Medicare Supplement if they have any of dozens of diagnoses on record. So, while you can apply for a Medicare Supplement after you've passed your Medicare Supplement open enrollment period, there is no guarantee you will be able to buy one.
It should be clear now that your OM vs MA choice should almost always be thought of as a long-term decision. You need to be comfortable with or willing to face the worst case scenarios with whatever coverage you choose:
In exchange for the low or zero premiums and extra benefits of MA plans, if you are diagnosed with cancer, are you okay with potential prior authorization and being confined to a network of providers while paying 20% up to your maximum out-of-pocket for chemotherapy?
On OM with a Medicare Supplement plan, are you comfortable with and can you afford watching your monthly premiums increase by 3-5% or more per year and paying for separate PDP coverage in exchange for provider flexibility and comprehensive coverage with no prior authorization? Are you able to cover expenses for services not covered by OM including dental, vision, hearing, OTC and transportation?
My Personal Guidance on Your OM vs MA Decision
Here's how I run my Medicare business and what I tell my clients when they are making the OM vs MA decision: If you can afford to be in OM with a Medicare Supplement and PDP, don't think twice, just do it. You will always get the best medical access and most hassle-free Medicare experience this way: see whatever provider you want, proceed immediately with whatever care decision you and your provider make, no prior authorization delays, denials or appeals, and so on. If later you decide that you can't manage the premiums, we can always move you to an MA plan. MA plans have to take you no matter your health (no medical underwriting). All we need is a valid MA election period (and there's at least one every year) and we can make the change to MA.
If OM with a Medicare Supplement and PDP are out of the question due to cost, then let's find an MA plan that will give you access to your preferred providers with the minimal of hassle. This usually means finding a plan that does not require a referral to see a specialist. And if you're wondering if my recommendations about your Medicare coverage might be influenced by the amount of compensation I receive when I enroll you in a Medicare Supplement versus an MA plan, fact is, I get paid more to put you in an MA plan. But that is never my first recommendation for Medicare coverage.
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