Were you aware that if you only have Original Medicare Parts A and B only, and nothing else, you could suffer an unlimited financial loss?
Original Medicare is basic insurance* that covers a lot. From the 30,000 foot view, it covers inpatient hospital care and outpatient services, including routine wellness checks. It does not cover some extras, like hearing aids, dental or vision care and other services like that. Those are small potatoes. The challenge is that with Original Medicare, there is no Maximum Out of Pocket (MOOP) that you may wind up paying.
Original Medicare will fall way short helping you cross the chasm of a major illness, like kidney disease, diabetes, heart troubles, or cancer for example. Those challenges are accompanied by long hospital and rehab stays, ongoing therapies, as well as expensive prescription drugs required for life.
What can help? A Part D prescription drug plan is a good place to start. These plans limit and control the amount you have to pay for prescription drugs.
You should also compare options between Medicare Advantage plans and Medigap plans. These plans limit your MOOP – Maximum Out of Pocket.
Some Medicare Advantage plans include prescription drug coverage. Generally Medicare Advantage plans are inexpensive and sometimes have $0 premium associated with the plans. You’ll still pay your Part B premium, co-pays and MOOP. Medicare Advantage plans are designed to be actuarially equivalent to Original Medicare, which means that based on large numbers of a similar group of insureds, each Medicare Advantage plan would pay out the same amount in future benefits. All provide Medicare Part A and B coverage, but they are also able to offer coverage that fills in some of the gaps in Original Medicare. When you obtain services, you’ll show your Medicare Advantage card to your provider. You won’t need your Original Medicare red, white and blue card, because the Medicare Advantage insurance company processes your claims.
The big difference with Medicare Advantage plans over Original Medicare is that Medicare Advantage plans generally require that you see doctors and go to hospitals within their network of providers. This can be limiting, if your doctor is not in their network or if you’re away from home/travelling for long periods. Check the plans list of physicians/providers to be sure your doctor is on the list.
You also need to watch out for drugs. The Medicare Advantage Prescription drug plans publish a unique formulary of drugs with their costs to you. It’s important to screen your prescription drugs against their list to be sure your unique set of medications are covered at low cost to you.
With Medicare Advantage plans the network of doctors and hospital providers – and the drug formulary – can change anytime throughout the year. That’s a challenge, but if the insurance company is efficient and well-run – and you do your homework selecting the right insurance company – you can extract some great benefits for the limited cost of a Medicare Advantage plan.
Medigap plans can be more expensive, but they are also more flexible. Medigap plans are accepted by all doctors that accept Original Medicare. I like to think that Medigap plans surround Original Medicare and provide greater benefits than Original Medicare. Medigap plans limit your MOOP. You pay Medigap premiums, co-pays, your MOOP and your Part B premiums. They cost more, but they do a lot more. To obtain services you present your Original Medicare red, white and blue card and your Medigap card.
Medigap plans are subservient to Original Medicare, which means they do exactly what Medicare tells them to do. There are different plan designs that are labeled (A thru N**). The plan designs are fixed, and each insurance company offers the same level of coverage for each plan. Premium is the only difference between Medigap plans for the same plan design.
Medigap plans may not be for you; however. If your near your 65th birthday, then you can enroll in a Medigap plan without any medical underwriting. However, if you miss the initial enrollment period or change plans later, you will need to answer a few medical questions at the least, or they may dig much deeper into medical records and tests. Generally, the insurance companies are screening against current major medical issues, like cancer, heart attacks or strokes in the last few years.
In summary, then
- Original Medicare has unlimited Maximum Out of Pocket (MOOP)
- Medicare Advantage plans limit MOOP
- You pay Part B premium, co-pays, and MOOP, very low or $0 plan premium
- They’re usually restricted to a network of providers
- Screen these plans for your doctors and hospitals
- These plans are sold alone or along with a Part D Prescription Drug Plan
- Prescription drug plans are not purchased independently outside these plans
- Make sure your drugs are on the plan’s drug formulary and find the plan that costs the least
- Medigap plans limit MOOP
- You pay Part B premium, co-pays, and MOOP, very low or $0 plan premium
- All providers and hospitals that accept Original Medicare are available to you
- You may need a Part D Prescription drug plan with this option
- Premium is the only difference among plans of the same type
We have designed a simple 3-Step process to help our clients become informed and make sound decisions about medicare. The steps are:
- Identify and understand your unique situation
- Screen plans that meet your criteria
- Offer choices and assist you in making an informed decision about the health insurance plan that is right for you.
The purpose of this post is to get to the “Why” behind these plans – why we have them and how they’re important to our senior clients. We want to simplify your understanding, so that you can focus on the major issues that are important to you. This is an area of expertise for our firm and a service we offer our clients to help them identify their best options, reduce their costs and make informed decisions about Medicare options that are right for them. Please contact us with any questions or to set a time to begin Step 1.
*The purpose of this post is pointing out some major issues of concern – not to dig into the finite details of Medicare. So please forgive me for glossing over some details. The major point is that many agents and financial advisors have a limited understanding of why additional insurance beyond Original Medicare is worth considering.
** A thru N for simplicity, but actually A, B, C, D, F, G, K, L, M, N. They skip E, H, I, J.