This single question is arguably the most important and confusing of all the Medicare decisions beneficiaries will make. It can make or break how you receive healthcare in your retirement years. These two coverage options often get compared like apples to apples. The reality is they are far from apples-to-apples in their structures and how they work. The good news is that for most, it is not a permanent decision. Let’s break down the two options:
Medicare Advantage Part C “All-inclusive”
Medicare Advantage (Part C) is a type of coverage offered by a private insurance company that contracts with Medicare. Medicare Advantage coverage is not’‘Original Medicare.’ Medicare Advantage plans must offer the basic Medicare Part A and Part B benefits. Most plans include Part D prescription drug coverage.
There are two major differences between Medicare Advantage and ‘Original Medicare’:
- Medicare Advantage plans are network-based in the form of HMO, PPO, or PFFS.
- Claims are paid through the private insurance company, not through the federal Medicare program.
While many Medicare Advantage plans are advertised as having no additional or zero premium, that does not mean they have no or zero out-of-pocket costs. Usually, outside of a primary care visit and certain preventive screenings, a Medicare Advantage plan will have a copay or coinsurance associated with a service. Copays and coinsurance are usually capped annually.
Medicare Advantage is often associated with or marketed as having benefits missing from Original Medicare. There is some truth to that; most plans include some dental/vision benefit, gym membership, and over-the-counter benefits. These benefits need to be viewed as strictly icing on the cake and not a reason to choose Medicare Advantage.
So, Medicare Advantage has two major factors in its corner: zero premium and some extras that come with the coverage. Let’s dive into the negative aspects of the coverage. Medicare Advantage is a managed health plan, i.e., a PPO or HMO. Networks are the basis for how these plans function. Using in-network providers and care will result in the best outcomes for beneficiaries.
Continuing the managed care topic, there can be some negative consequences outside of just dealing with the networks. Medicare Advantage plans often require what is called prior authorization. This means the insurance company must approve tests, care, and drugs ahead of time. This mechanism was originally designed to combat waste and fraud but has at times morphed into a cumbersome burden for beneficiaries. Some plans also require a referral to see a specialist. Travel on a managed health plan like Medicare Advantage can be a challenge because networks don’t necessarily translate from state to state or region to region. Finally, these plans are not guaranteed renewable year to year, meaning the insurance company can drop the plan next year or change the benefits next year.
Medicare Supplement
Let’s look at the other side of the Medicare decision equation: Medicare Supplement. Medicare Supplement coverage is a secondary coverage that pays in conjunction with Original Medicare. Under this type of coverage, beneficiaries remain on Original Medicare, and Original Medicare processes the claims. Under the Medicare Supplement setup, Part D drug coverage is a separate stand-alone plan (can be customized to your drug list and pharmacy). Unlike Medicare Advantage, the only prerequisite for approval is that Medicare covers the services. If Medicare covers the service, the Medicare Supplement will pay right alongside Medicare.
Since Medicare Supplement plans function as secondary to the primary coverage of Original Medicare, there are virtually no network restrictions. If the doctor or hospital accepts Medicare, Medicare Supplement coverage will pay along with Medicare. Not only does Medicare Supplement have no network restrictions, but it also has very low or even fixed out-of-pocket expenses.
The two most common types (there are 10 total supplement plans) of supplements these days are Plan G and Plan N. Plan G is the most comprehensive plan beneficiaries just getting on to Medicare can buy. The only out-of-pocket expense is a Part B deductible; it’s a fixed, low-cost out-of-pocket expense. A Plan N differs from a Plan G in one way. Plan N will have the deductible and some copays up to $20 for outpatient services and a $50 copay for ER visits when not admitted. In short, Medicare Supplements offer no network or prior authorization headaches and have a low, predictable out-of-pocket cost.
Now let’s look at some of the negatives of Medicare Supplements. First and foremost, Medicare Supplements cost an extra premium. The premiums can vary by age and location. The second negative factor of Medicare Supplements is that, like Original Medicare, they do not cover dental checkups, eyeglasses, gym memberships, or over-the-counter items.
To summarize the never-ending debate between Medicare Advantage vs. Medicare Supplement, it boils down to how you, the client, want the coverage to work on the backend. If you’ve already decided and regret it, don’t fret; in most cases, Senior Legacy Partners can help get you on the right path. Senior Legacy Partners will independently help educate and guide you to the outcome that is best for your healthcare. This is not a decision to rely on what someone said or a random video you saw online. Get in touch with someone who works independently in this space and walk through it with them. Our consultations are always zero obligation; give us a call!