Medicare Advantage (MA), also known as Medicare Part C, is a comprehensive alternative to original Medicare. It is offered through private insurance companies in partnership with Medicare. These plans consolidate hospital coverage (Part A), doctor and outpatient services (Part B), and often prescription drug coverage (Part D) into a single package.
You’ve seen the TV commercials advertising Part C plans. They sound wonderful. Why wouldn’t everyone get one as soon as possible?
When navigating Medicare options, individuals face a significant decision between traditional Medicare, managed directly by the government, and Medicare Advantage (MA) plans, administered by private insurers.
While discussing government programs may not always be exciting, bear with me. It’s seldom that I tout anything managed by the federal government, but hang in there with me.
Opting for a Medicare Advantage plan requires enrolling in both Medicare Part A and Part B, along with paying associated premiums. While Part A is typically premium-free for most, Part B costs $174.70 a month in 2024, with higher rates for high earners due to IRMAA rules. I write about IRMAA in many of my books.
Understanding all costs and the associated benefits of each option is crucial for decision-making.
Unlike original Medicare and Medigap policies, which offer coverage with any Medicare-accepting provider, most Medicare Advantage (MA) plans operate within a provider network and may have limitations on out-of-network coverage. At a 10,000-foot level, I compare MA plans to HMOs.
When contemplating between a Medigap policy and Medicare Advantage, consider whether you prefer the federal government’s coverage through original Medicare, possibly supplemented with a private Medicare Supplement policy commonly referred to as a Medigap policy (I recommend NOT going without one), or coverage from a private insurer through Medicare Advantage (Part C).
Let me preface this blog post by saying that I do not and have never sold any Medicare supplement or Part C plan. And I never will.
Opting for original Medicare allows flexibility in choosing healthcare providers, albeit requiring separate Medigap and Part D coverage. Conversely, choosing Medicare Advantage may offer low or no premiums beyond standard Part B premiums, along with additional benefits like vision and dental coverage and much more, but may involve network restrictions and varying out-of-pocket costs.
Critics of Medicare Advantage plans raise concerns about prior authorization requirements, which can lead to delays in care, particularly for critical conditions like cancer. This issue underscores the importance of balancing value and affordability with access and choices in healthcare decisions.
Understanding the implications of prior authorization restrictions is crucial, as they can impact access to timely care. Data shows that beneficiaries in Medicare Advantage plans experience higher rates of care delays and affordability challenges compared to those in traditional Medicare.
“Larger shares of beneficiaries in MA plans experienced care delays due to prior authorization restrictions (22% vs. 13%) or couldn’t afford care because of copayments or deductibles (12% vs. 7%).” (Medicare News)
“And last year, Sarah Jane Tribble started hearing from CEOs of rural hospitals. They were telling her that Medicare Advantage plans are killing us. We’re spending a ton of time and money fighting with these insurance companies to get paid. And sometimes we don’t get paid. Sarah Jane Tribble: And then I was also hearing about patients showing up at the hospital and these local hospitals saying, ‘Oh, no, we actually don’t take your plan.’
And so, you’ve got these small towns, you know, folks who have only one hospital and a long, you know, large radius. And they would show up, and the hospital would be like, ‘Ah, you’re going to have to pay out of pocket because we don’t take this Medicare Advantage plan.”
It’s essential to weigh these factors carefully when selecting a Medicare plan to ensure it aligns with your healthcare needs, your location, and financial considerations.
It’s essential to recognize that Medigap and Medicare Advantage serve as coverage options for Medicare beneficiaries, but they differ significantly. Medigap (supplement) policies complement original Medicare, whereas Medicare Advantage offers a private insurance alternative to federally administered Medicare. These distinctions mean their coverage types cannot be combined.
Enrolling in a Medicare Advantage plan means you forfeit the option to utilize a Medigap policy for covering out-of-pocket expenses. Consequently, you will be responsible for paying any deductibles, copays, or coinsurance on your own. Additionally, it’s important to note that it’s illegal for insurance companies to sell you a Medigap policy if you’re already enrolled in a Medicare Advantage plan.
It’s worth emphasizing again that individuals who opt for a Medicare Advantage plan when initially enrolling in Medicare may face regrets later on. If their health deteriorates and their plan, or any other Medicare Advantage plan, creates barriers to accessing necessary care, they could find themselves underinsured once they are outside the six-month Medigap guaranteed-issue period.
My concerns revolve around the possibility that, in pursuit of profitability, private health insurance companies offering Medicare Advantage plans may resort to tactics reminiscent of those that prompted regulatory measures under the Affordable Care Act.
Presently, the Medicare Advantage program operates effectively for Medicare, enabling the government to mitigate its risk by paying private insurers a predetermined rate per enrollee. This rate allows some insurers to offer low or even no premiums while providing additional benefits such as gym memberships and transportation to the doctor’s office.
The flexibility of Medicare Advantage plans to alter their terms annually poses a risk to clients.
Once insurers are aware of the government’s reimbursement rate, they can adjust their benefits and premiums accordingly. While stability may prevail under certain conditions, variations in factors like the rate or the health status of the members could lead to changes in plan offerings over time. Therefore, clients entering a well-managed Medicare Advantage plan may anticipate consistent health benefits from year to year under stable circumstances, but that’s not guaranteed.
Looking ahead, I foresee two significant factors that could disrupt the current balance. Firstly, the aging of the baby boomer generation is a substantial concern. With approximately 12,000 individuals turning 65 every day in 2024, this demographic shift will inevitably impact insurers’ costs as the health of enrollees deteriorates with age.
Secondly, the mounting federal budget deficit poses another challenge. This deficit could potentially reduce insurers’ revenues as policymakers seek to curtail Medicare spending. Many politicians would like to scrutinize the considerable profits insurance companies derive from Medicare’s annual rates as a primary area for cost-saving measures.
While understanding these factors from both insurers’ and the government’s perspectives is essential for anticipating future trends, my primary concern remains with my clients.
Unfortunately, the outlook appears concerning. A New York Times article, “Private Option Is Gaining Popularity, and Critics,” highlights the story of a once-healthy 72-year-old who opted for a Medicare Advantage plan at age 65 due to its low premiums and additional benefits. However, seven years later, he was diagnosed with bladder cancer.
Realizing that he could access better care outside his plan’s network, he made the decision to switch to Original Medicare. Yet, he encountered unexpected challenges. He was unaware that Part B only covers 80% of his expensive medical treatments, and Part A involves high deductibles before covering hospital costs. Furthermore, he didn’t anticipate the need for a Medigap (supplement) policy to bridge these gaps, only to find himself ineligible due to his circumstances.
The Medigap guarantee-issue period, lasting six months following enrollment in Part B, is critical. Once this period lapses, individuals are subject to underwriting, potentially leading to policy denial based on health status. Unfortunately, Mr. Stein’s enrollment in a Medicare Advantage plan after Part B enrollment placed him well outside this guaranteed-issue period when he received his cancer diagnosis, leaving him without Medigap coverage.
While Mr. Stein eventually found another Medicare Advantage plan with suitable network coverage, the process was challenging. It’s important to note that Medicare Advantage plans must accept everyone, regardless of health status, as part of their agreement with the government. However, this practice can result in adjustments such as benefit reductions, narrower provider networks, or increased premiums, particularly if plans attract an older, sicker demographic.
This underscores the critical nature of the initial choice individuals make when enrolling in Medicare at 65 or upon retirement. Opting for Medicare Advantage without a Medigap policy could permanently confine individuals to the Medicare Advantage marketplace. Exceptions exist for residents of certain states (New York, Connecticut, Maine, and Massachusetts), but for many, Original Medicare with a Medigap policy may offer greater security, particularly in regions with limited Medicare Advantage plan availability.
I know this was a very long blog post, but this information is critical to be aware of as one decides on their Medicare options.
My advice is the work with a Medicare specialist who is appointed with multiple insurers covering both Medicap and Part C availability in your local area. And then weigh your options based on your health (current and down the road), your doctors and prescriptions, and your budget. This is a big decision and deserves great attention.
all the best… Mark