Now is the time (October 15-December 7) that the 64 million Americans on Medicare must decide whether to stay on their current Medicare Plan or change to another plan.
For many, the choice has always been to remain on Traditional Medicare and supplement that coverage with a Medigap policy.
Over the past several years, more and more people have gone a different route and instead enrolled in a Medicare Advantage Plan. These plans, which were first made available to Medicare-eligible participants on a test basis in 2003, are becoming more popular and now cover 34% of eligible enrollees. This number is projected to grow to 47% by 2029.
What are these plans, and are they right for you? Let’s take a look.
Understanding Medicare Advantage Plans
A Medicare Advantage Plan (MA), also called Medicare Part C, is an option available to Medicare beneficiaries through a private insurance company, usually in the form of an HMO or a PPO. Enrollment in an MA plan is still done via Medicare, and even though a private insurance company administers the insurance, you are still part of the Medicare system. The difference is that instead of having separate Parts A (Hospitalization), B (Medical), and D (Prescription Drugs), they are all combined into one plan. A Medigap policy is not needed under an MA plan, although it may still be beneficial to those who elect Traditional Medicare plans.
Below are some pros and cons for choosing a Medicare Advantage plan over Traditional Medicare.
The Need for Referrals in Medicare
In Traditional Medicare, there are no gatekeepers to services. You can go directly to providers to receive Medicare-covered services as long as the care is deemed reasonable and necessary.
Under an MA plan, you typically go through a gatekeeper (usually a primary care provider) who will then determine if you need to be referred for additional care. The Medical Director of the Utilization Review Team of the MA plan can overrule the determination of your provider that the care is reasonable and necessary and deny coverage.
Different Plans Include Different Provider Networks
Traditional Medicare lets you use the services of anyone who is a Medicare participating provider – which includes most doctors, specialists, pharmacies, therapists, and hospitals. In contrast, MA plans have a more limited network of providers. You may be strictly limited to this network to receive plan benefits, or you may be able to use out-of-network providers at a higher cost. The network of covered providers is located in a specific geographical area, which may be a drawback for those who travel frequently. If keeping your current providers is important to you, you must make sure they are in the network of any MA plan you consider joining.
Medicare Advantage Plans May (or May Not) Cost Less then Traditional Medicare Plans
Cost is obviously a major issue for Americans in obtaining medical insurance. Many MA plans do not charge an additional premium beyond your current Medicare Part B cost. This can represent significant savings over Traditional Medicare where, in addition to your Part B premiums, you may also pay premiums for Medigap and Part D plans.
However, the cost savings in premiums need to be weighed against potential out-of-pocket costs, which are often higher in MA plans than in Traditional Medicare and Medigap policies. Your current health, as well as the likelihood of future health issues, should be taken into consideration before choosing between the two types of plans.
What You Need to Know About Switching from Medicare Advantage Back to Traditional Medicare
While healthy beneficiaries can take advantage of the lower premiums to obtain lower-cost coverage, care should still be taken in choosing an MA plan. It’s important to note that should you fall ill and need to switch back to Traditional Medicare, there can be adverse consequences. For example, you may be subject to medical underwriting if you want to purchase a Medigap policy. If you don’t qualify for Medigap coverage, this can leave you financially exposed for all costs not covered by Traditional Medicare. There is some good news for residents of NY and CT, however, as those states do not permit medical underwriting of Medigap policies.
There is an additional open enrollment period for those wishing to switch from Medicare Advantage back to Traditional Medicare. This period is from January 1 to March 31 and is in addition to the October 15-December 7 open enrollment period for all Medicare recipients.
Final Thoughts About Medicare Advantage Plans
MA plans may also be attractive because they offer additional benefits that are not part of Traditional Medicare. These vary by plan but often include vision, dental, and hearing benefits. MA also has an annual out-of-pocket maximum of $6,700 (adjusted annually for inflation), which Traditional Medicare does not. The maximum figure does not include most prescriptions or the cost of “extra” services (like dental), but it does provide a sense of security in case of catastrophic illness.
Selecting the type of Medicare coverage that is best for you is complex, and you should not be influenced by promotional materials you receive from insurance companies or government sources.
To compare MA plans in your area, visit www.medicare.gov/plan-compare. There, you will see the cost of each service, both in- and out-of network. After reviewing this material to decide which plan works best for you, contact the insurance company to discuss the details of the coverage and examine their provider networks.