Understanding Original Medicare and Medicare Advantage

Original Medicare offers flexibility, allowing you to see any doctor accepting Medicare nationwide, with no prior authorizations (reportedly 98%+ of all physicians and hospitals). It comes with predictable monthly premiums and stable benefits. However, out-of-pocket costs can be higher for those with substantial healthcare needs who may not have purchased Medigap (see below).

Medicare Advantage plans, offered by private insurers, tend to be less costly overall and many offer additional benefits like vision, dental, and hearing coverage. They may also provide better care coordination within their network. However, these plans may limit your provider choices. These are also one-year contracts and are profit-driven. There is potential for reduced benefits and increased rates under reduced government payments to the insurers.

Understanding Medigap Policies (Supplemental A to N)

Medicare Supplemental Insurance, commonly referred to as Medigap, are add-ons to Original Medicare that cover out-of-pocket costs including most of the 20% coinsurance that Medicare does not pay.   Without purchasing a Medigap plan, you could see your health care expenses become nearly unlimited with Original Medicare. While nearly all states have standardized Medigap plans, offering comprehensive coverage at varying premiums, a few states have their own unique policies. It’s crucial to choose a Medigap plan during your initial enrollment period to ensure guaranteed access. If not, an underwriting process will most likely be required if looking to purchase in the future.  (This requirement varies by state; you need to determine your own state’s policy).

Managing Costs and Enrollment

Enrolling in Medicare is a crucial step which must be completed within a seven-month window (three months before turning 65, the month you turn 65, and three months after turning 65). This is not a requirement if you are covered by a health care plan at yours or a spouse’s employer that covers 20 or more individuals; in that case you can enroll when your employer coverage ends.  The initial enrollment period offers the best chance to secure a Medigap plan. Remember, Medicare can be a better financial option than some employer plans, especially those with high deductibles.

Both Original Medicare and Advantage enrollees pay the standard Part B premium with income-related monthly adjustment amounts (IRMAA) for both Parts B and D based on your income from 2 years prior. Original Medicare has predictable costs when combined with a Medigap and Part D supplemental policy; though overall expense will be higher than Medicare Advantage. Medicare Advantage plans often have lower premiums with a cap on out-of-pocket spending, but benefits and costs can change over time as can physician networks.  In addition, for those who travel frequently or have more than one home, your network options may be a limiting factor which is not the case with Original Medicare.

Exploring Resources and Reviewing Plans

Medicare.gov provides valuable tools for finding and comparing drug plans and Medicare Advantage options. Consider your current medications when selecting a drug plan, and always verify information with the insurance company.

Remember, even if you choose Original Medicare initially, stay informed about drug plan changes. Reviewing your plan annually is crucial to ensure it aligns with your evolving needs and to identify potentially cost-saving alternatives.

Choosing the Right Plan for You

The ideal plan depends on your individual healthcare needs and preferences. If you anticipate high healthcare usage, Original Medicare’s predictability might be ideal. However, if you prioritize lower premiums and extra benefits, Medicare Advantage could be worth considering.  Be aware, however, that you may be subject to medical underwriting in the future should you choose to switch back to Original Medicare.

Also note that brokers may be more inclined to recommend Medicare Advantage plans due to higher commissions, which could lead to clients being sold plans that aren’t necessarily in their best interest. Insurance companies make more profit from Medicare Advantage plans than Medigap plans. So, clients should be aware of all their options and not feel pressured to make decisions at the time of initial enrollment as for-profit insurers may not always prioritize the client’s best interests