Should You Choose Medigap Or Advantage?


I just finished reading, “Medigap Vs. Advantage Plans.”  So many articles about Medicare supplements  only tell part of the truth.   Like the old song says, they “Accentuates the Positive and Eliminate the Negative.”  While they do not mess with Mr. In Between, they do not tell the entire truth.

Both Medigap and Advantage are wonderful options provided they are used correctly.  Either can be a nightmare for a senior if they use their plan incorrectly.

MEDIGAP

If you are a Medicare beneficiary and must be admitted to the hospital, all of your hospital bills will be paid, except for the “per admission” deductible.  You will have to pay that each time you are admitted.  The only exception is if you are readmitted to the hospital for the same condition within 60 days of being discharged.

While you are in the hospital Part B of Medicare will pay 80% of the “Medicare Approved” portion of your doctor’s bills.   You will be liable to pay anything that Medicare does not.

Medicare B will also pay your medical bills anytime you get medical treatment outside of the hospital.  Even then, Medicare will only pay 80% of any “Medicare approved” charges.  You will have to pay the additional 20% of “Medicare’s approved” amount plus any excess charges your doctor may add to your bill.

Medicare B has no “stop loss.”  That is insurance jargon to describe the point at which you will stop paying and your insurance company will pay everything.

The only way to add a “Stop-Loss” to traditional Medicare is to purchase a Medigap plan that will pay some, or all, of the bills that are left over after Medicare pays.

Medigap will supplement anything for which Medicare pays.  Other than medical treatment overseas in some Medigap plan, if Medicare does not pay for something, neither will Medigap.

ADVANTAGE

It is no secret that the Medicare system is slowly losing money.  As Baby Boomers enter the Medicare system, they will be a significant drain on an already strained system.

The Advantage program was authorized under a different Democratic Administration.  It began life as “Medicare Choice.”  It allowed those who wanted someone other than the federal government to administrate health insurance to elect to use a private health insurance company for their health needs.

Currently, the federal government gives insurance companies the money that would be spent on your health care needs.  If they are able to take care of your needs for less than traditional Medicare, they get to keep the savings.  If it costs them more to take care of you, they have to eat the loss.

Most Advantage plans are built on the HMO model.  Members may only go to “Network” doctors and hospitals.  If you go to a medical provider that is not in the “Network” for non-emergency care, you will pay a significantly larger amount of the bill.

I find that there are two major advantages to the Advantage program.

  1. Since insurance companies do not rely totally on premiums to collect enough money to pay your medical bills, most Advantage plans have extremely low premiums, if any.
  2. All Advantage plans limit the amount that you have to pay for Health Care.  Unlike traditional Medicare, you know up-front what the maximum you will have to spend on Health Care for the year will be.

I am a bit of a skeptic.  I have learned that things that sound too good to be true, often are.  Since most Advantage plans are built on an HMO model, members must receive their non-emergency medical care through a “Network” provider.

That means that Advantage plans can be a terrible option for those who live in different areas of the nation for several months at a time or those who travel frequently outside of their Advantage area.

If you have an Advantage plan, it also means that before you seek health care from a doctor or hospital, you need to verify that they are part of the Advantage “Network.”  If they are not, you will find yourself with a medical bill in a few months on which you had not counted.

SUMMARY

Regardless of the scare tactics that politicians use to frighten seniors into voting for them, both Medigap and Advantage are fine programs.  The key is to use them correctly.

If your retirement plans include travel or commuting, I strongly urge you to consider Medigap.

If your traveling and commuting days are behind you, or you are just cost conscious, there is nothing wrong with the Medicare Advantage program.  Just make certain that you understand and are comfortable with your plan’s restrictions.

Medicare’s Annual Enrollment Period for 2012 is October 15 – December 7.  If you read this before then, make certain that you read your renewal paperwork from your current Advantage plan.  They are allowed to make changes to the plan.  Your only option to change to a different plan if yours makes changes that are unacceptable is during the Annual Enrollment Period.

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