When it comes to Medicare, many of us are unfamiliar with what the Medicare program covers and costs until it is time for us to retire.
Understanding insurance lingo and coverage details isn’t exactly easy, but Medicare can be especially difficult to sort out with all the parts and policies involved.
If you didn’t already know, Medicare alone doesn’t cover all your medical expenses once you enroll. Original Medicare by itself covers about 80 percent of your medical expenses and the remaining 20 percent of expenses are left for you to pay. There are also deductibles and copays for you to cover.
Most people buy additional insurance to bridge the gaps between what Original Medicare covers and what it doesn’t cover such as Medicare Advantage plans or Medicare Supplement plans (Medigap plans). The key to weighing your options is to educate yourself and get a clear understanding of the differences between the two different kinds of plans and know which one is right for you.
For those unfamiliar with Medicare Advantage plans and Medigap plans, here’s the breakdown of the differences so you can begin to assess which type of plan is right for you.
Medicare Advantage Plans – What Exactly are They?
About 30 percent of beneficiaries choose to enroll in Medicare Advantage plans which are private insurance plans offered by major insurance companies.
When you enroll into a Medicare Advantage plan, you’ll get your benefits from a private insurance company, not Medicare. You’ll pay copays and coinsurance for your health care treatment as you go along. Think of these plans as an alternative to Original Medicare.
Advantage plans usually have lower premiums than Medigap plans. Sometimes these plans even have a $0 premium, which means no additional premium after you pay your monthly Part B premiums. The reason behind the cheaper premiums is because when you sign up for an Advantage plan, you agree to use the plan’s network providers to get your care. This means you’ll have fewer doctors to choose from than if you chose a Medigap plan.
If you are thinking about getting an Advantage plan, check with your doctors to see if they are in the plan’s network. This is especially important if the Advantage plan you are considering is an HMO, which in many cases don’t offer out-of-network coverage except in emergencies. If you do your homework on this, you’ll avoid any unwelcome surprises.
Additionally, be sure to check the plan’s drug formulary. Often Advantage plans come with Part D coverage, so it’s important to check that the Advantage plan is accepted by your doctors AND covers your prescriptions. This requires a bit more homework, but you’ll be glad you did it.
Medicare Supplement Plans (Medigap Plans) – What are They?
Having a Medigap plan means you are still enrolled in Original Medicare as your primary insurance. When you enroll, your Medicare supplement insurance company notifies Medicare that you have enrolled. Thereafter, when Medicare pays its portion of your bills, it will automatically send the remainder of your bill to your Medicare supplement company. It’s seamless, with no claims forms for you to file.
One of the major benefits of having a Medigap plan is that you can see any provider that participates in Medicare, regardless of which supplement company you chose. You have access to all the Medicare providers nationwide – no referrals necessary.
If you enroll in a comprehensive plan like Plan F or Plan G, you will have very little out of pocket costs. However, Medigap plans generally have higher premiums than Advantage plans because of the huge pool of Medicare providers you can choose from and the more comprehensive coverage.
When it comes to your retail drug coverage, please note that this coverage is separate, unlike some Advantage plans. Medigap plans do help cover medications administered in a hospital setting, such as injectables or chemotherapy drugs. They do not cover retail medications, so most beneficiaries will enroll in a separate Part D drug card. There are Part D plans available in every state starting around $15/month.
Comparing Advantage Plans and Medigap Plans
Now that you know more about Medicare Advantage plans and Medigap plans and their key differences – which one is best for you and your budget? When it comes time to making a final decision on what kind of plan you want, here are the key things to consider:
- Monthly premiums
- Deductibles, if any
- Expected costs of healthcare services on each plan
- How often you use healthcare services
- Areas where you will need access to care
- Expected copays for your medications
- Potential out of pocket spending for you on each plan type
- Remember, you get what you pay for
As you can see, though both policies help cover the gaps in Medicare, they are designed very differently. It’s not necessarily a matter of which one is better, it’s a matter of which one works best with your budget.
If you are comfortable with higher premiums and a wider selection of medical providers, then a Medigap plan may be what you want. If you are fine with limiting the number of medical providers available to you in order to have cheaper monthly premiums, then a Medicare Advantage plan would be the way to go. If there is ever still an area of concern with either of these plans when weighing your options, it’s always recommended you consult a professional before getting locked into a plan.
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About the Author: Danielle K. Roberts is a Medicare Supplement Accredited Advisor, member of the Forbes Finance Council and co-founder of Boomer Benefits located in Fort Worth, TX. Her award-winning agency is licensed and appointed in 47 states and has helped tens of thousands of Medicare beneficiaries understand their benefits since 2004. Since starting her agency 14 years ago, she and her brother have grown their agency into a multi-million-dollar company that employs workers of all ages. They were recently awarded the 2019 Health Insurance Advisory Firm of the Year Award by Finance Monthly.