Those who work with Medicare and related issues on a daily basis, like the staff at AgingOptions, tend to assume everyone has a solid, basic understanding of our nation’s complex health care system for retirees. But then open enrollment comes around – the period between October 15th and December 7th when beneficiaries can make penalty-free changes to their coverage and those new to the program can enroll – and we’re bombarded with questions, reminding us once again that Medicare is complicated and many enrollees are confused. For that reason, and as an effort to provide you with useful information, we wanted to bring to your attention this recent article from Motley Fool, asking a fundamental question: what’s the “advantage” in Medicare Advantage plans?
Medicare Advantage: a Bit of Recent History
Before we address that question, it’s worth considering a bit of recent history, drawn from an insurance website called Medicare Resources. Medicare Advantage plans have been an option for beneficiaries since 1997 as an alternative to original Medicare. These MA plans often incorporate additional benefits, including prescription coverage and extras such as dental and vision care, and they typically cap out-of-pocket costs which Medicare alone does not do. In 1997 President Clinton signed the law creating what was originally called the “Medicare + Choice” program, a name which was changed in 2003 to Medicare Advantage. Medicare Resources reports that, “As of 2019, there are 22 million Americans enrolled in Medicare Advantage plans, accounting for about 34 percent of all Medicare beneficiaries. And the federal government expects this to grow to 24 million in 2020.”
The Motley Fool article explains Medicare Advantage this way. “Medicare Advantage is an alternative to traditional Medicare that serves as your all-in-one health plan (as opposed to original Medicare, which consists of several distinct parts). Each Medicare Advantage plan sets its own rules but must provide at least the same level of coverage as original Medicare.” The article lists four reasons why Medicare Advantage might be your best choice – and a few major cautions to beware of before you choose. Here are the plusses.
Medicare Advantage Plans Offer These Four Big Advantages
- A wider scope of coverage. “Original Medicare doesn’t cover a number of important services for seniors, like dental care, hearing aids, and vision checks and eyewear,” says Motley Fool. “One major perk of Medicare Advantage is that these services are typically covered, which means you won’t need to pay for them completely out of pocket.” What’s more, because the federal government is actively encouraging people to choose MA plans, companies are sweetening the pot with additional perks like wellness programs, meal delivery service, nurse hotlines, gym membership and more.
- Lower premiums. “You’d think that a wider scope of coverage would translate into added costs for you under Medicare Advantage,” says the article, “but that may not be the case.” In fact, premiums for MA plans are often lower than the cost of Medigap or Medicare Supplement Plans which many people purchase to augment traditional Medicare. You’ll still be required to pay your Part B premium if you enroll in a Medicare Advantage plan, but in some cases you can purchase coverage with a zero-premium. Use the Medicare Plan Finder tool to compare deductibles and co-pays.
- Maximum out-of-pocket limits. “With original Medicare, it’s hard to know how much money you’ll spend on healthcare each year,” the Motley Fool article warns. “If you wind up needing a lot of services or several hospital stays, your costs could easily skyrocket.” By contrast, Medicare Advantage plans set out-of-pocket limits so you can estimate a worst-case scenario for your healthcare spending. “Once you hit that [out-of-pocket] limit, you won’t pay anything for covered medical services until a new year kicks off.”
- Coverage overseas. Many retirees do a lot of traveling – and if that’s you, traditional Medicare may not provide the coverage you need. This lack of overseas coverage often proves problematic for traveling seniors, requiring them to buy extra coverage. However, some Medicare Advantage plans do offer health coverage outside U.S. soil. Check the terms carefully before you decide.
However…Medicare Advantage Plans Have a Few Significant Disadvantages
So, with those advantages plus all the extras, Medicare Advantage is a slam-dunk choice, right? Not so fast. Before you make up your mind, consider these drawbacks.
- A limited network of medical service providers. Limiting the number of doctors you can see is one way MA plans can offer less expensive coverage compared with traditional Medicare, which is accepted almost everywhere. “With [Medicare] Advantage, you’re limited to what could be a somewhat narrow network of providers,” says Motley Fool.
- Steep out-of-network surcharges – or no coverage at all. The other side of the “limited provider” coin is the high cost of seeing a doctor who is not part of your network. “Go out of network, and your Advantage plan most likely won’t pick up the tab for the costs you incur,” says the article, or else your plan will hit you with a hefty surcharge. This can also be a problem for snowbirds and others who divide their year living in multiple locations: many Medicare Advantage plans offer coverage only in limited geographical regions. By contrast, original Medicare, which is a nationwide program, has an extensive number of providers for you to choose from in every corner of the U.S.
Do Your Homework – with Medicare Advantage and All of Retirement Planning
Finally, the Motley Fool article reminds readers that not all Medicare Advantage plans are created equal, so it’s important to explore your options carefully during open enrollment, now through December 7th. (There’s also a Medicare Advantage open enrollment period during January, February and March when MA beneficiaries can switch to another MA plan or revert back to original Medicare if they want to.) We would also urge you to use this opportunity to take a hard look at all aspects of your retirement plan, not just your medical care – aspects such as your financial plans, your housing strategy, your family situation and your legal protection. It’s essential that these “puzzle pieces” all fit together if your retirement plan is going to work the way you want it to, and there’s one comprehensive approach that ensures that they will: a LifePlan from AgingOptions.
We invite you to learn more at a free LifePlanning Seminar with Rajiv Nagaich – an information-packed, highly enjoyable session in which you’ll find answers to many of your retirement questions. For a calendar of upcoming seminars, visit our Live Events page and register for the seminar of your choice. There’s still time, before open enrollment ends. We’ll look forward to meeting you at an AgingOptions LifePlanning Seminar – and meanwhile, age on!
(originally reported at www.fool.com)