Medigap vs. Advantage 2014


Click to learn more.
Click to learn more.

Medicare’s Annual Enrollment Period (AEP) starts tomorrow.  Between October 15 and December 7, if you want to make changes to your current Medicare Advantage or Medicare D plan for the 2014 plan year, you are allowed to make changes, with no questions asked.

Additionally, if you are already enrolled in Original Medicare and choose to change to Medicare Advantage for 2014, you can do so, regardless of your current health, but only during these 6 weeks.

Before you do, however, make certain you make your changes, or stay with your current election, based on correct information.

Medigap and Medicare Advantage plans are NOT the same.  In this post I will try to explain how they differ.

MEDIGAP

Medigap is a term used for true Medicare Supplement.  It pay all, or a portion, of what Original Medicare does not.

Most people who buy it do so, not because they are afraid of the Medicare A deductible they have to pay if they are admitted to the hospital.  They buy it because they are concerned that Medicare B only pays 80% of the bill for their outpatient medical bill (doctor office visits, imaging, lab work, etc.)

The number 1 reason for a Medigap is to limit the amount of exposure to medical bills that a person has during retirement.

Yes, the cost of premiums for Medigap is expensive.  However, the premiums that insurance companies charge for Medigap are small when they are compared to the potential cost of medical bills for you during your retirement years.

If you are considering Medigap, it is important for you to remember a couple of facts.

  1. Medicare B has no “stop-loss.”  Although Medicare will pay 80% of your bill, with no limits, you will have to pay 20% of your medical bills with no limit.
  2. The average person will spend over $240,000, after Medicare, on health care during retirement.

On top of all that, Medigap is regulated by a division of the Department of Health and Human Services.  CMS (Centers for Medicare and Medicaid Services) have standardized what plans insurance companies can offer.

As a result, a Plan F with XYZ insurance company is the same as a Plan F with ABC insurance company.  When you decide what insurance company you wish to use, keep in mind that since the Medicare supplement plans they offer are identical, your decision needs to be based on which company, premium and/or insurance agent you wish to use.

There is one other point that I want to emphasize about Medigap.  It is Guaranteed Renewable.  That means that the only thing that can change is the premium.

Benefits that you buy in 2013 will still be there in 2023.  You can count on them.

MEDICARE ADVANTAGE

Many people, erroneously, think that Medicare Advantage is also a Medicare Supplement.  It is NOT!

Medicare Advantage replaces, rather than supplements, Original Medicare.  If you are among the millions of Americans who elect a Medicare Advantage plan, you have not necessarily made a bad choice.  Just remember that they are different from Original Medicare.

Geography –  Original Medicare pays for health care that you get from any doctor in the U.S. who accepts Medicare.  You are free to travel anywhere in the nation, knowing that if you get sick, you would not have to cut your vacation short in order to return home.

Medicare Advantage, however, is often more restrictive.  Many Advantage plans are built on a HMO chassis.  If you require “non-emergency” health care and attempt to get it from a provider outside of the Advantage network (list of approved doctors and hospitals), there is a good chance that the insurance company will not pay anything.

My advice, is that if you are going to use Medicare Advantage, choose one that is built on a PPO chassis.  That way, if you are traveling, and must see a doctor who is outside of your network, the insurance company will still pay some of the bill.

The amount they pay will not be as generous as it would have been had you gone to a doctor that is already in your network, but it will be significantly more helpful for you than a plan that pays $0 for seeking health care outside of the plan’s network.

OOP –  The Out-of-Pocket maximum is a major difference between Original Medicare and Medicare Advantage.  Medicare B has no OOP.  That means that while Medicare will continue to pay for your outpatient medical bills, they will only pay 80% of them.  You are responsible to pay the additional 20%.

Medicare Advantage limits the amount that you could be responsible for during any given year to around $6500.  Some plans have an even lower Out-of-Pocket Maximum.  Read the terms of your policy to know what your’s is.

Term – Medicare Advantage plans are not “Guaranteed Renewable.”  They are “Annually Renewable” contracts.

Insurance companies who offer Medicare Advantage plans must renew their contracts with Medicare each year.  That means that they are free to increase their premiums and/or decrease the benefits they offer each year.

MY OPINION

In my opinion, both programs are nice, for what they do.

Medicare Advantage plans are an excellent option for those who are willing to take a little risk, knowing that the amount they will have to pay for health care, especially if they have to be admitted to the hospital, is capped.

They also take a risk with Medicare Advantage that the low-premium plan they get this year will not renew at a higher premium or fewer benefits in future years.

Medigap is a preferred option for people who are not willing to take any risks.  Since it is Guaranteed Renewable, people with Medigap plans know that they can go to any doctor or hospital in the nation that accepts Medicare and get any health care treatment they need without fear of their benefits being denied.  They know that if Medicare pays for something, their Medigap will pay all, or a portion, of the bill.

Advertisements