Last week, two friends and I were discussing their Medicare coverage. Friend 1 told me she never pays anything when she goes to the doctor or hospital. Friend 2 said he pays all the time when he visits the doctor or hospital.
Which one has the most cost-effective plan?
Most people automatically think it’s friend 1. Actually, the answer depends on proper analysis of all your medical factors by a qualified professional independent agent.
First, let’s decipher the confusion about Medicare Advantage and Medicare Supplement, or, as some call them, Medigap plans. Yes, that’s right. Medigap and Supplement plans are the same!
Most people call any additional plan to basic Medicare a Supplement plan, which is not correct terminology. While private insurers sell Medicare Advantage and Supplement or Medigap plans, each can have a number of differences that can impact your out-of-pocket costs.
Medicare Advantage Plans
The most appropriate way to understand the Medicare Advantage plans is to think of them as a pay-as-you-go plan. Each time you visit your doctor or specialist, have a preventive or diagnostic test, or a hospital stay you make a payment.
The payments range from 0 to several hundred dollars depending upon the carrier and plan chosen, as each carrier has several Advantage plans in this area. Your cost will also depend on whether it’s an office visit to a doctor (low cost) or a hospital stay (higher cost). The plan also might have a monthly premium, which is also carrier specific.
All Advantage plans have a MOOP, which is the maximum out-of-pocket expense per plan year. The MOOP is also carrier specific but within a fairly narrow range.
Advantage plans use specific networks such as an HMO or PPO. Each carrier has their own network and some even have out-of-state coverage along with vision and dental coverage. In addition, your Part D prescription drug coverage is included in your Advantage plan.
Medicare Supplement or Medigap Plans
Medicare Supplement or Medigap plans are the ones with the letters assigned to them. As opposed to the Advantage plans, I feel the most appropriate way to think of them as a pay-in-advance option.
You pay a monthly premium to the carrier. Then, depending upon which letter plan you have, most, if not all, of your costs are covered in advance. Therefore, when you see the doctor or go into the hospital there is no cost to you.
There is also is no MOOP with these plans, though some do have a deductible. You can go to any doctor or hospital in the U.S. that accepts Medicare and you are covered.
In addition, if you have a Supplement or Medigap plan, you will have to purchase a separate Part D prescription drug plan as well, creating an additional monthly premium.
One of the most important things to consider about Supplement or Medigap plans is that each letter plan by government regulation is exactly the same in most states. However, there are large cost discrepancies from the carriers.
Finding the Most Appropriate Plan
For example, this week I have worked with clients and simply had them change carriers in order to save a significant amount of dollars for the exact same plan. Think of it this way: The supermarket you’ve been going to sells your favorite brand of coffee for $8 a bag. Then, a new supermarket opens and has the same bag for $4 all the time. Where are you getting your coffee?
Now that we made Advantage plans and Supplement plans as easy as buying coffee, how do you find the most suitable plan for you or your family member?
This depends on a number of factors, such as current health status, frequency of doctor visits, prescriptions drugs being taken, and carrier choices in your area.
This brings us back to my strong recommendation from last week’s article about how confusing and daunting trying to research all of this by yourself can be. Instead of stressing, call an independent agent who is licensed and certified with all the carriers who can help you sort through all the noise.
Next week’s article will be about Part D prescription drug coverage.
By Robert Remin