By Dana Barrett
As each year begins, the new year ushers in the open enrollment period for making changes to your Medicare. You may be considering whether it’s time to switch from original Medicare to a Medicare Advantage plan, which is often referred to as Medicare Part C. To better understand how that choice could impact your care, we’ve outlined some pros and cons of Medicare Advantage and how it compares to original Medicare.
Signed into law, the Balanced Budget Act of 1997 included the creation of Medicare Choice programs. This private insurance alternative to the federal government’s original Medicare plan was renamed Medicare Advantage as part of the Medicare Modernization Act of 2003. The main goal in creating Medicare Advantage was to improve choices for Medicare recipients, as well as enhance benefits to include additional services such as vision and dental care, while also reducing out-of-pocket costs.
What is Original Medicare?
Original Medicare is a federal medical insurance plan for citizens over the age of 65, as well as certain people under the age of 65 with physical disabilities, including folks on dialysis due to permanent kidney failure. Original Medicare is divided into 4 separate parts.
At no charge, Part A covers hospitalizations, hospice care, and long-term care in skilled nursing homes. It also includes some types of in-home health care. Medicare Part covers certain physicians and outpatient care, some preventative care services, approved EKGs, X-rays, lab tests, as well as durable medical equipment. Be aware that Medicare Part B premium does not come free.
When you’re enrolled in the original Medicare plan you have the freedom to choose your doctors, the fees for their services are paid as they’re incurred. You’ll pay a deductible at the beginning of each year, and you usually end up paying about 20% of the cost of the Medicare-approved service out-of-pocket. If you need prescription drug coverage, you can enroll in Medicare Part D. Under Part D, prescription drug coverage includes generic as well as brand-name medications.
Medicare Advantage Plans
As previously mentioned, Medicare Advantage is covered under Medicare Part C. With Medicare Advantage, you choose from a variety of plans that bundle services including Part A and Part B Medicare, as well as expanded care that can also cover prescriptions drugs, dental care, hearing and vision. The private insurance companies that provide Medicare Advantage plans have yearly contracts with Medicare and are legally required to abide by Medicare’s coverage rules.
If you sign up for a Medicare Advantage plan, you’re still required to pay the original Medicare Part B premium. However, instead of paying the standard 20% coinsurance amount not covered by original Medicare, you’ll only be responsible for the Advantage plan’s copayment amount, if there is any. Medicare Advantage Plans have copays and provider networks that vary based on each specific plan and what services are “bundled” including which of the extra services are included.
Original Medicare vs. Medicare Advantage Plans
An attractive feature of Medicare Advantage plans is most provide you with more comprehensive coverage by including additional services like vision care and dental, which aren’t included with original Medicare. Some plans even cover gym memberships
There is a variety of Medicare Advantage plans to choose from. The most common are HMO’s and PPO’s. HMOs are designed to keep costs down. HMO plans will have a broad network of providers available for you to choose from.Medicare Advantage networks are typically defined by geographic region or state and you must reside in that area for a minimum of 6 months to qualify for the plan.
PPO Advantage plans also include networks that provide the most cost-effective medical care. However, with a PPO you can also choose a physician who accepts original Medicare but may be out-of-network. If you go this route, a smaller portion of your costs will be covered by the plan.
Alternately, with original Medicare, you’re open to choose any doctor who accepts original Medicare, and the cost will be exactly the same for covered services (approximately 20%) no matter whom you choose. Keep in mind some doctors limit how many original Medicare patients they’ll accept in their practice so it’s important to check with the provider first.
Another benefit of Medicare Advantage is in reducing out-of-pocket expenses. If you’ve been enrolled in original Medicare, then you’re aware that having Medicare doesn’t necessarily cover 100% of all your medical bills and the plan does not limit out-of-pocket expenses. Alternately, Medicare Advantage Plans have caps for out-of-pocket costs every year. Once you reach that threshold, you pay nothing for the rest of the year. If you find yourself with a serious long-term illness, the additional costs incurred with original Medicare could be financially devastating.
Medigap vs. Medicare Advantage
If you have original Medicare, there are supplemental policies you can purchase to offset out-of-pocket medical expenses instead of choosing a Medicare Advantage plan. These plans are referred to as Medicare Medigap policies, or more commonly “Medicare Supplemental Insurance”.
Private insurance companies offer both Medicare Advantage plans and Medigap policies. However, Medigap is only available to people enrolled in original Medicare. Medigap plans fill the “gap” to cover the extra expenses incurred by original Medicare recipients after Medicare pays. This includes coverage for fees such as copayments, coinsurance and deductibles.
An important point regarding enrolling in a Medigap plan is that these plans no longer cover prescription drugs. That coverage was phased out of Medicare Supplemental Insurance at the end of 2005. Additionally, unlike Medicare Advantage, Medigap policies don’t offer coverage for dental services, hearing, or vision care. However, some Medigap plans provide foreign travel health care coverage if you find yourself with a medical emergency while traveling outside the United States.
Clearly there are many variables to consider when making decisions about Medicare. It makes sense to start with a list of your medical needs and review any budget limitations. If you want to simplify your medical coverage with a health care plan that bundles a wide variety of medical care including dental and vision, then a Medicare Advantage plan may be the most cost effective. Speaking with a licensed agent can help with your research and finding an option that’s the best fit for you and your health.