WHAT IS MEDICARE ADVANTAGE?
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For many Americans aged 65 and older, Medicare covers a significant portion of their healthcare expenses. However, even with Medicare, individuals may still face deductibles, co-pays, and other out-of-pocket costs. In the event of an accident or major illness, they might need to tap into their savings or retirement funds to bridge these gaps.
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This is why, among the 44 million Americans enrolled in Medicare, 9 out of 10 opt for additional coverage through supplemental insurance programs like Medigap or Medicare Advantage. These plans provide options to extend coverage and reduce out-of-pocket expenses.
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HOW MEDICARE ADVANTAGE PLANS WORK?
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Medicare Advantage plans are managed healthcare programs offered by private companies. They must, at a minimum, provide the same benefits as traditional Medicare. However, instead of charging high fees for individual services, they typically charge a single monthly fee and set an out-of-pocket maximum, which can't exceed $6,700 for in-network costs.
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Most Medicare Advantage plans are Health Maintenance Organizations (HMOs) or Preferred Provider Organizations (PPOs). As a result, individuals may be required to visit in-network providers (or pay higher co-pays), making Medicare Advantage plans less ideal for frequent travelers or those with residences in multiple states. Nevertheless, they are an excellent option for individuals seeking to streamline their healthcare expenses and consolidate them into a single plan.
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Choosing a Medicare Advantage plan is similar to selecting private health insurance; each plan offers varying levels of coverage, and individuals must choose the one that best suits their healthcare needs and financial situation.
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Services Covered:
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Medicare Advantage plans are legally obligated to cover all services covered by Original Medicare and generally include additional services. For instance, Original Medicare does not cover most prescription drug costs (except for hospital in-patient stays), but individuals can choose a Medicare Advantage plan that provides prescription drug coverage.
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Original Medicare comprises Part A (covering hospital care and nursing services) and Part B (covering doctor's visits and other medical expenses). Depending on one's work history and tax contributions, Medicare Part A may have no monthly premium or a premium of up to $437 per month. Regardless, there is a $1,364 annual deductible.
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Medicare Part B has a monthly premium of $135.50 (higher for high earners) and covers various services, including physical therapy, mental health care, preventive medicine (such as flu shots and vaccines), medical equipment (e.g., wheelchairs), chemotherapy, ambulance services, x-rays, lab tests, and more. Original Medicare typically requires individuals to pay 20% of the costs for these services, but Medicare Advantage plans may cover them with no out-of-pocket expenses. However, individuals are still responsible for Part B's monthly premium. Additionally, some services not covered by Medicare, like dental care, hearing care, eyeglasses, and cosmetic surgery, may be included in certain Medicare Advantage plans.
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Costs:
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The cost of a Medicare Advantage plan can vary widely, ranging from $0 to over $200 per month. It's important to note that the standard cost for Medicare Part B is $135.50 per month, which individuals must pay unless their Medicare Advantage plan covers it.
Although $0 premium plans exist, they may have higher co-pays and deductibles compared to more expensive plans. Individuals without prescription drug needs or frequent medical visits might find $0 premium plans suitable. Medicare Advantage plans are also advantageous because they have a maximum out-of-pocket limit, legally capped at $6,700 per year (often less, averaging around $5,187).
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Costs for Medicare Advantage premiums can vary by state, with HMO plans averaging $29 and local PPOs costing around $62, as reported by the National Council on Aging. Plan costs may also differ depending on prescription drug needs and coverage.
Rules and Regulations
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While most Americans over 65 qualify for a Medicare Advantage plan, certain restrictions govern enrollment and plan switching. Enrollment or plan changes are typically permitted during the Initial Coverage Election Period (when individuals turn 65), the Open Enrollment Period (January 1st to March 31st each year), and the Fall Open Enrollment (October 15th to December 7th each year). Special Enrollment Periods may apply under specific circumstances, such as losing prescription drug coverage or leaving an employer-sponsored plan. Switching plans due to developing health conditions can only occur during the next enrollment period.
It's important to note that individuals with pre-existing conditions (excluding End-Stage Renal Disease) cannot be denied enrollment in Medicare Advantage plans. However, there may be Medical Special Needs Plans (SNPs) available for individuals with ESRD.
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Drug Coverage:
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There are two ways to obtain prescription drug coverage with Medicare. One option is to enroll in a Medicare Advantage plan that includes drug coverage, while the other is to retain Original Medicare and add a separate Prescription Drug Plan. Simultaneous enrollment in a Medicare Advantage plan with drug coverage and a separate prescription drug plan is not allowed. Drug costs vary based on plan co-pays, deductibles, and in-network vs. out-of-network pharmacies. It's crucial to check whether the required medications are covered by the plan's formulary (the list of covered drugs).
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Using Medigap with Medicare Advantage Plans:
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Medigap and Medicare Advantage plans are typically mutually exclusive; individuals must choose one or the other when enrolling or changing their Medicare coverage. Medigap supplements Original Medicare, allowing individuals to visit any doctor who accepts Medicare, without restrictions imposed by HMO or PPO networks. Medigap covers some out-of-pocket costs but does not include prescription drug coverage, dental or vision care, or other additional benefits. Therefore, individuals may still need a separate prescription drug plan.
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Medigap is a suitable option for individuals who travel frequently or split their time between states but may result in higher overall healthcare expenses compared to a Medicare Advantage plan.
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WHO QUALIFIES FOR MEDICARE ADVANTAGE?
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Medicare Advantage plans are available to most Americans eligible for Medicare Part A and Part B, including individuals aged 65 and older and those under 65 receiving disability payments through Social Security. Eligibility begins during the Initial Coverage Election Period (ICEP), which spans seven months, covering the month individuals turn 65 and the three months before and after. For those under 65 on disability, eligibility starts two years after they begin receiving payments. Additionally, individuals must reside in the service area of the plan they are applying for and be either U.S. citizens or permanent residents.
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Pre-existing conditions cannot be used to deny enrollment in Medicare Advantage plans (except for ESRD), but individuals should ensure that their required medications are covered by the chosen plan and check if their preferred doctors are part of the plan's provider network.
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BENEFITS OF MEDICARE ADVANTAGE:
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Medicare Advantage plans may not be suitable for every healthcare scenario, but they offer several advantages over Original Medicare:
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Expanded Benefits: Medicare Advantage plans often include additional benefits not covered by Medicare, such as hearing or vision services. These benefits can save money in the long run, even if a monthly premium is required.
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Lower Co-pays and Out-of-Pocket Costs: These plans eliminate the 20% coinsurance required by Original Medicare and set annual out-of-pocket maximums, preventing potentially significant expenses during accidents or major illnesses.
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Consolidated Coverage: With comprehensive plans, individuals can bundle vision, dental, and prescription drug coverage into a single plan, streamlining their healthcare expenses and reducing the need for multiple insurance cards.
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Primary Care Physician: HMO plans allow individuals to select a primary care physician who can coordinate referrals to specialists and oversee their healthcare.
While Medicare Advantage plans have many advantages, they may not be ideal for frequent travelers or those with healthcare providers in different states.
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HOW MEDICARE ADVANTAGE IS CHANGING:
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In 2019, the Bipartisan Budget Act of 2018 introduced several changes to Medicare Advantage plans:
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Open Enrollment Period: A new enrollment period, occurring from January 1st to March 31st each year, allows beneficiaries enrolled in a Medicare Advantage plan to make changes, switch plans, or return to Original Medicare. This addresses the frequent plan changes within Medicare Advantage.
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Expanded Supplemental Coverage: Medicare Advantage plans can offer more supplemental services, including home health aides, adult day care, meal delivery, ride-sharing to healthcare appointments, and telehealth services. While not all plans include these services, they can be beneficial for eligible individuals.
These changes aim to increase access to preventive services, reducing the risk of injuries, chronic diseases, and the need for costly treatments.
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Navigating the healthcare system can be complex, but there are numerous Medicare Advantage plans available. With careful research, individuals can find the plan that best suits their needs and potentially save money while improving their benefits.