By Lisa Zamosky
“What is the best way to make a decision to stay in original Medicare with supplement or change to the money-saving advantage plans? It seems to depend on who you are talking to.”
That was a question recently asked by a reader of this blog, and it’s one that many people have about how to pay for the gaps in Medicare coverage.
Here is a quick primer on Medigap and Medicare Advantage:
Medigap is insurance offered by private insurance companies. These plans work with original Medicare to pick up most out-of-pocket costs that Medicare alone does not.
Medigap plans are standardized, so benefits will be the same no matter which insurance company you purchase from. But costs can vary, so you need to shop around.
Medigap plans generally cover more out-of-pocket expenses than Medicare Advantage (think co-pays and co-insurance). But the cost of the monthly premium tends to be significantly higher than Medicare Advantage. You’ll also need to purchase a Medicare Part D plan, which pays for the cost of prescription drugs.
Here’s one more critical detail about Medigap plans: You are guaranteed a plan within the first six months of turning 65. After that, insurers can take the state of your health into consideration and either deny you coverage or charge you more for it, if you have pre-existing health conditions. There are a few exceptions to this rule, which you can learn about on Medicare.gov.
That means if you’ve already left original Medicare for a Medicare Advantage plan, it may be difficult, and in some cases impossible, to go back.
Medicare Advantage plans are also offered by private insurers and help to pay for the cost of services that Medicare does not. Unlike Medigap, these plans vary greatly from one insurer to another. They also fold all parts of Medicare — Parts A (hospital coverage), B (doctor visits), and in most cases, D (prescription drugs) — under one plan, which many people find convenient. You’re also likely to get extras you won’t get with original Medicare, such as a vision plan or coverage for dental care.
Open enrollment for Medicare Advantage and Part D prescription drug plans just got underway on October 15 and it will run through December 7.
In terms of cost, premiums are typically lower with Medicare Advantage (some have no monthly premium at all), but you’re likely to be hit with more co-pays when you go for care.
But here’s some good news: Starting in 2012, total out-of-pocket costs for Medicare Advantage plans must be limited to $6,700 for the year. That includes deductibles, co-pays, and co-insurance (the cost of prescription drug costs will not count toward this maximum). Many plans are setting a cap even lower than that, for the first time bringing coverage closer to what you might expect from a Medigap plan.
Calculating Costs, Evaluating Benefits
The changes that take place each year to Medicare Advantage plans, and particularly this year because of new features brought on by health reform, are why it’s so important to shop around during this open enrollment season.
As I’ve said many times before in this blog, when it comes to choosing a health insurance plan of any kind, you need to do the math to figure out which is best for you. That means adding up the monthly premium, co-pays, deductibles, and coinsurance so you know what your total out-of-pocket costs are likely to be based on your usual use of medical care, as well as what it could be in a worst-case scenario.
Of course, it’s also critical to make sure your doctors accept the insurance you have, and that your prescription drugs are covered by the plan.
To compare Medicare Advantage plans and their costs side-by-side, visit the Medicare Plan Finder on Medicare.gov.
Medicare is confusing, so it really pays to get expert help. I recommend getting in touch with your State Health Insurance Counseling and Assistance Programs (SHIP), which you can find by visiting the Medicare.gov Medicare Helpful Contacts page (click on the Help & Support tab on the home page, then select Useful Phone Numbers) or by calling (800) MEDICARE.