Medicare Primer

Original Medicare covers hospitalization, professional fees and other common health care costs.  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.

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. The principal advantages to Medicare Advantage Plans are lower premiums and avoidance of high deductibles and co-pays.

Advantage to Original Medicare

Original Medicare is available everywhere in the United States whereas Medicare Advantage Plans may have limited coverage areas and availability.  You may be forced to switch plans or return to Original Medicare if you move or your Medicare Advantage Plan ceases to serve a locale or goes out of business.

Original Medicare covers all providers and facilities that accept Medicare with no networks and no referrals required. Medicare Advantage Plans may limit providers and facilities to networks and require referrals and to see a specialist or obtain certain kinds of care.

Medicare Advantage Plans manage care. Therefore, they sometimes refuse to cover treatments that would be eligible for coverage by Original Medicare.

Advantage to Medicare Advantage Plans

Medicare Advantage Plans typically have lower costs than Original Medicare.  Original Medicare has co-payments such as 20% for most Part B benefits and over $300 per day for hospital stays after 61 days. There also is a Part A deductible of over $1,000 for each hospital admission and relatively small deductibles for Parts B and D as well.

Original Medicare participants must purchase Medicare Supplements (a.k.a. Medigap insurance) if they want to avoid costly deductibles and co-payments. Participants in Medicare Advantage Plans don’t need (and can’t buy) Medigap policies.

Except for very limited situations, Original Medicare does not cover care outside the United States. Medicare Advantage Plans can (but don’t have to) cover care outside the U.S.

Medigap Underwriting– Hidden Risk in Medicare Advantage Plans

If you initially choose a Medicare Advantage Plan, you risk an unpleasant surprise on later switching to Original Medicare.  Many people initially choose Medicare Advantage Plans to save money, but as health declines with age, the limitations of managed care may prove more of a concern.  Therefore, some participants in Medicare Advantage Plans may want to switch to Original Medicare during the general Medicare open enrollment period or the separate Medicare Advantage open enrollment period.

When switching from a Medicare Advantage Plan to Original Medicare you also must buy a Medigap policy (a.k.a. Medicare Supplement) or face potential high hospitalization deductibles, additional high costs for hospital stays beyond 61 days, Part B co-payments, and other costs.

During a Medigap open enrollment period (typically but not always when you first enroll in Medicare), you may buy a Medicare Supplement policy at standard premiums regardless of health or pre-existing conditions. Except in limited circumstances, beyond your Medigap open enrollment period, insurers may refuse to sell you a Medigap policy or charge higher premiums if your health is bad.

Once you have a Medigap policy, the insurer can’t charge more because your health declines. Therefore, provided you buy a Medicare Supplement 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.

For instance, Medicare Advantage Plans’ lower premiums or broader benefits may seem attractive while healthy, but networks, referral requirements, and limitations on costly care may lead a Medicare Advantage participant to switch back to Original Medicare if he/she becomes seriously ill. But the very illness that causes an individual to switch from an Advantage Plan to Original Medicare may make it impossible or too expensive to obtain a Medigap policy. In that case, there can be hefty deductibles and co-payments such as 20% of many Part B charges.

Conclusion

As with so much of elder law, there is no obvious one size fits all choice between Original Medicare or Medicare Advantage Plan.  No question that you can save some money by buying a Medicare Advantage Plan.  But are you willing to let strangers who administer a Medicare Advantage Plan decide what 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.