When people are weighing their Medicare options the most fundamental thing we discuss is the difference between Original Medicare Supplement with a Medicare Supplement (aka ‘Medigap’) and Medicare Advantage plans. I’d be willing to lay down a bet of five dollars that the majority of folks who have a Medicare Advantage plan believe they have a Supplement to Medicare. A Medicare Advantage plan is not the same as buying a Medicare Supplement to fill-in the gaps of Original Medicare. The reason, I think, is because Medicare themselves have complicated the issue by having the word ‘Medicare’ be used in describing their insurance plan. If they called it something without the word ‘Medicare’ it would probably help when I explain the difference between the two as well. But we live in the real world so we’ll deal with the reality of the situation.
The way I get most to understand the difference is by focusing on who the ‘Primary’ insurance is through. Most of us, by having had insurance the majority of our working lives, are familiar with the concept of having a primary provider. When I worked for an advertising company my ‘primary’ insurance was through Blue Cross Blue Shield of MI. I usually had to meet a deductible for the year, and then BCBS of MI would pick up 80% and I had to pay 20%. So, in this instance, BCBS of MI was primary and I was secondary once the deductible was met. Most of us who work or got our insurance through a spouse or parent are familiar with this set-up.
So back to Medicare. In the case of Original Medicare being primary, you have the chance to buy what’s called a Medicare Supplement (aka ‘Medigap’) to fill in the gaps of Medicare. So, if you have a Med Supp, your provider, a doctor or hospital, will bill Medicare first and then send the remainder to your supplement provider. And here’s something that’s important, it makes virtually no difference which company you have, all that matters is that Original Medicare is accepted by the provider. If the provider accepts Original Medicare, and they pay the claim, then whomever you have your Med Supp through, will pay their share automatically. This is because the claims payment system is electronic and all Supplement carriers use it. This also means you don’t have to concern yourself with whether your provider accepts your Medicare Supplement company. By law, each company pays according to which letter plan you have. There are no networks. This means a plan F or G or N (the most popular type of Med Supp plans) is exactly the same in what benefits it covers. The only difference is the premium you pay can vary wildly from company-to-company. That’s why we offer so many different Medicare Supplement carriers. Since all Medigap rates go-up over time we stay contracted with the companies that are the most competitive.
One thing to keep in mind is that if you have Original Medicare with a Med Supp, you will have to buy what’s called a stand-alone Part D plan, which has an additional premium, if you want prescription drug coverage. We also offer a variety of different stand-alone Part D options to go with your Med Supp. However, as a courtesy to our Med Supp clients, we will do a Drug Plan search annually for free if you’d like. If the Part D plan that’s best for you happens to be one we sell we will enroll you personally. If it’s not one we are authorized-to-offer we can tell you the company which is best and you can contact them directly, or we’ll sign you up with the understanding we aren’t the agent-of-record and can’t work with them on your behalf if there’s any issues that arise.
In the case of Medicare Advantage (aka Medicare Part C), what happens is Original Medicare is no longer your primary insurance. Instead you’ve selected a private company to administer all of your Medicare benefits for certain co-pays, and unlike Original Medicare, they’re able to add additional benefits that Medicare can’t. Some examples include:
-Over-the-counter items such as vitamins, medical items that we spend our own money on, medical equipment
– Post-hospitalization meals
– Emergency response systems
– Prescription drug coverage
-Gym memberships or at-home fitness packages
So what, in effect, happens is you pick a company (Blue Cross, Blue Shield, Aetna, Cigna, et al) and Medicare pays them so much per month to cover all of this for you. Often at a zero premium or low-monthly premium over-and-above what you pay Medicare for Part B coverage ($135.50 monthly for most people).
The thing to keep in mind is these are very similar to insurance most of us have had prior to being eligible for Medicare. They are HMO’s and PPO’s, which are network-based. This means, prior to enrolling, you need to be careful to make sure your doctors accept the plan you choose if that’s something that’s important to you. One thing we do at Mr. Nice Guy Medicare Advisors is confirm your doctors are in-network before we enroll you into a Medicare Advantage (aka Part C) plan.
They also have co-pays (or cost-sharing) that are equal to or, in most cases, superior to having Original Medicare without a Med Supp. For example, you’d pay a co-pay of $10 to see your primary-care doctor and $40 to see a Specialist. Depending on the Medicare Advantage plan you pay a co-pay for every Medicare-service covered.
The other thing we do is look up your prescription drugs (if you take any) to see how they’re covered by each company. The majority of Advantage plans include Part D prescription drug coverage included in the plan itself for no additional premium.
On Medicare Advantage in an emergency or urgent care situation you’re covered the same way you would be if you were in-network. However, if you go to a provider that’s out-of-network and it doesn’t fall under an emergency or urgent situation, there’s a great chance you’d pay for the entirety of the cost in an HMO. In the case of a PPO you’d likely pay a higher cost-share (co-pay) than seeing someone in-network.
One key feature to keep in mind is all Medicare Advantage plans have out-of-pocket maximums ($6700 or less per year) so if you had a rough year health-wise there’s a limit to what you’d spend out-of-pocket. Also the plans can improve or weaken their benefits every year, which is why we call our clients every October to update them on their particular plan.
To help compare the 2 here are some at-a-glance pros & cons of each
Original Medicare with a Med Supp (aka ‘Medigap’)
- No networks – Rates increase over-time
- Cost-certainty (you pay premium and go on) – Have to buy stand-alone Part D
- Low-risk – No additional benefits beyond Medicare
- Good across the U.S. – Pay premiums whether you use it or not
Medicare Advantage (aka ‘Part C’)
- Often have zero or low premiums – Network-based (HMO or PPO’s)
- Coordinate care better than Original Medicare – Costs vary by health (higher risk)
- Prescription drug plan included w. no premium – Plan has to approve certain procedures
- Can save significant money – Plans vary by county
- Usually include additional benefits (see above)
- No deductible to meet on most plans