The Choice is Yours
You have a choice whether to stick with Original Medicare or sign up for a Medicare Advantage Plan. Both Original Medicare and Medicare Advantage Plans cover most kinds of mainstream medical care like hospitalizations, speech therapy, physical therapy, occupational therapy, professional fees, and common preventive health care such as colonoscopies and certain screenings for heart disease or cancer. Also, prescription coverage is available whether you choose Original Medicare or a Medicare Advantage Plan.
What is the Difference?
If both Original Medicare and Medicare Advantage Plans cover mainstream health care, how do they differ? Original Medicare is single payer indemnity health insurance as was typical in the United States before managed care became popular with employers in the late twentieth century. As you probably can guess, Medicare Advantage Plans provide managed care similar to that offered in many employee benefit plans.
Indemnity and managed care are dramatically different approaches to funding health care. Indemnity plans pay a percentage of reasonable and customary charges for covered care. For instance Medicare Part B pays only 80% of most professional fees leaving you to pay the rest either directly or by purchasing Medicare supplement (also called Medigap) insurance. In contrast a Medicare Advantage Plan pays the full cost of covered care other than a (typically small) co-payment and perhaps an annual deductible. Some Medicare Advantage Plans also provide additional benefits like dental care, vision care, or gym membership subsidies.
Which Is Better?
If Original Medicare only covers 80% or so of many health care costs and can have hefty per diem charges for other care unless you buy costly Medigap supplemental insurance while Medicare Advantage Plans fund nearly the full cost of covered care and may even include extra benefits, why wouldn’t everybody choose a Medicare Advantage Plan? It all boils down to the age old tension between cost and quality.
There is little doubt that Medicare Advantage Plans typically offer lower cost health care than original Medicare. However, Medicare Advantage Plans bring with them the features of managed care that bother many people.
Many participants in Original Medicare also purchase Medicare Supplement (a.k.a. Medigap) insurance policies to cover Original Medicare’s deductibles and co-payments and expand coverage for blood and international travel. Unlike Original Medicare, Medicare Advantage Plans are sold by private insurers and are managed care plans (along the line of the employee benefit group health care plans provided by many employers). Medicare Advantage Plans provide the benefits of Original Medicare and sometimes add additional benefits (like vision care or gym subsidies).
Medicare Advantage Plans can cost less and include greater benefits than Original Medicare. But as usually is the case, the cost savings come at a price. While Original Medicare plus a Medigap policy may cost more than a Medicare Advantage Plan that provides comparable benefits, Medicare Advantage Plans have all the detriments of managed care.
Medicare Advantage Plans usually have networks and require referrals to see a specialist. Although strictly anecdotal, I sense that Medicare Advantage Plans are more likely than Original Medicare to try to avoid covering costly care like new cancer treatments that arguably are more effective than older less expensive kinds of care. Original Medicare has no networks or referral requirements.
The principal advantage to Original Medicare is greater control over your own care. You don’t have to convince a managed care organization to approve costly surgery or other care and can choose facilities and providers without worrying whether they are in-network. However, you also have to buy a Medigap supplemental policy unless you are willing to self insure. The principal advantages to Medicare Advantage Plans are lower total cost and avoidance of high deductibles and co-pays.
Medical Underwriting– the Hidden Danger
If you initially choose a Medicare Advantage Plan, you may not be able to buy a Medigap supplemental policy if you later switch to Original Medicare. If you are under Original Medicare but don’t have a Medigap supplemental policy, you may face potential high hospitalization deductibles, additional high costs for hospital stays beyond 61 days, Part B co-payments, and other costs.
During your Medigap open enrollment period (usually, but not always, when you first enroll in Medicare), insurers must offer to sell you a Medigap supplemental policy at standard premiums even if you have major pre-existing conditions. Thereafter, typically, insurers may refuse to sell you a Medigap policy or charge higher premiums if your health is bad. Provided you buy a Medigap supplemental policy during your Medigap open enrollment period, you can keep it at standard rates for the rest of your life even if your health becomes precarious.
If you switch from a Medicare Advantage Plan to Original Medicare, you risk medical underwriting when buying a Medigap policy. This can be a catastrophe for a Medicare Advantage Plan participant who becomes dissatisfied with his/her Plan.
So, are you better off with Original Medicare or a Medicare Advantage Plan? It depends which is more important to you cost or choice. While a Medicare Advantage Plan may cost less than Original Medicare plus a Medigap supplemental policy, do you want Medicare Advantage Plan administrators to decide what health care you can and can’t have? FriedmanLaw can apply our extensive knowledge of Medicare to help you choose coverage that is right for you.