Baby Boomers are beginning to see the differences between Medicare and Medicare Advantage plans. We are seeing an increased awareness as to why we see Medicare Advantage policies as a potential liability when long-term planning for our clients involves discussion relating to future medical expenses and end of life care.
Medicare Overview:
- Part A: Hospital Insurance. Free when reaching the age of 65.
- Part B: Original Medical Insurance often supplemented with Medigap plans D-G for doctor and out-patient care.
- Part C: Medicare Advantage. Includes cost of Part B. Includes doctor and out-patient care.
- Part D: Prescription drug Medigap supplement to Part B.
- Part E: Previously offered Medigap-discontinued but still covers legacy members enrolled pre-2010.
- Part F: Comprehensive coverage available to those turning 65 prior to January 2020.
- Part G: Most comprehensive coverage and recommended by many financial advisors.
Enrolling in Part B can be done at age 65. There are many requirements if you do not elect at age 65 but those requirements will not be covered by this article.
First of all, everyone pays for Part B. Medicare Advantage members pay the same monthly premium as they would on Original Medicare. Premiums are subject to IRMAA which stands for Income-Related Monthly Amount Adjustment. Premiums are determined according to AGI as reported on your tax return so may vary accordingly.
Members are drawn to Medicare Advantage for the extra benefits of dental coverage, gym memberships and debit cards for over-the-counter medical supplies that are not covered by Original Medicare.
Medicare Advantage (Part C) is regulated and reimbursed by the federal government. It is substantially cheaper than purchasing Part D & G Medigap policies. Coverage on the Advantage polices are restricted to a network of doctors meaning you may not be able to maintain existing relationships with primary and specialty doctors you are already using. Advantage plans may not provide out of state coverage and may limit coverage for international travel.
A recent article in the May 2024 Kiplinger Retirement Report outlines allegations against private insurance companies servicing Advantage plans. This includes but is not limited to:
- Home Health care coverage is found lacking for Advantage members.
- More fraud is being reviewed by the Justice Department as it relates to claims.
- Treatment delays and high costs due to approval delays. Advantage members are reporting that they are not able to afford co-pays or deductibles.
- Scams are being reported as it relates to offers for free medical equipment and gift cards.
Advantage plans, while less expensive, are not providing the level of care at an affordable cost when it may be needed for a life changing event i.e. cancer, orthopedic care, heart disease, diabetes, etc. Denial of prescription drug coverage may require out of pocket costs that are not affordable.
The U.S. government pays premium and regulates insurers offering Advantage plans. Enrollment has doubled nationwide since 2013. Advantage plans are considerably lower cost and brokers selling the plans are being paid larger commissions than those selling Medigap plans. Medigap alternatives and limitations of the Advantage plans are not being discussed. If you are relatively healthy without a network of existing doctors, you may not be aware of potential pitfalls. Members may not be aware that out of state and international travel claims may not be covered. Denial of claims can delay care unless you are able to pay out of pocket for your healthcare and prescription needs. Appeals for a denial can take time thereby delaying care.
If you joined Medicare Advantage during your Initial Enrollment period, you can go back to Original Medicare within the first three months of having Medicare Part A and Part B. Initial enrollment into Original Medicare with a Medigap plan does not require underwriting and pre-existing conditions are covered immediately.
Switching from an Advantage plan to Original Medicare may require underwriting. Unfortunately, members are realizing the lack of care/coverage once insurance is needed for a life changing event. You cannot be denied coverage due to a pre-existing condition but there may be a 6-month waiting period if you have been enrolled for more than 1 year. Medigap plans are standardized but premiums vary by company according to their own underwriting guidelines regarding pre-existing conditions.
The good news is that there is a 12-month window after initial enrollment to change plans without underwriting for pre-existing conditions. Additionally, you have 63 days after your current Medicare Advantage Plan coverage ends to by a Medigap policy. Open enrollment dates may play a factor into the timeline.
Best advice, prior to reaching 65, is to speak with an insurance agent specializing in the various Medicare plans. It is essential to compare available options to find the one that best fits your healthcare needs, your travel plans during retirement and your budget. Understanding the limitations of an Advantage plan plays a significant role in insuring access to necessary services outside of hospital stays. Speak with your financial advisor for a referral or contact us here at Fruition Financial for a reliable agent that will work with you to secure affordable care for the future.