November 05, 2020
We are in the midst of open enrollment period for Medicare beneficiaries, during which anyone can make changes to their coverage. I want to make sure that those of you considering changing from Original Medicare to a Medicare Advantage (MA) plan do a thoughtful analysis. For those of you with parents, grandparents or friends who are Medicare-eligible, I hope you will read this as well and help those near and dear to you make an informed choice.
Medicare Advantage plans can work well. Their upfront appeal is that they tend to offer lower premiums and broader coverage than Original Medicare. For example, Medicare Advantage plans typically include vision and dental cover. Original Medicare doesn’t.
And Medicare Advantage can be appealing because it is easier to navigate. Many Medicare Advantage plans roll all your care into one package: hospitalization, doctor care, and prescription drugs are all covered under one plan.
With Original Medicare, prescription drug coverage (known as Medicare Part D) is a separate plan you must opt to purchase. And when you’re in Original Medicare it’s so important to also enroll in a Medigap policy. Original Medicare typically requires people to pay 20% of their bills for doctors and tests. A Medigap policy typically covers the majority—if not all—of those out of pocket costs.
So right off the bat, Medicare Advantage can seem to be just easier to deal with. But I want you to make sure you understand how it works when you actually need care.
Most restrict you to their network of doctors. Most people who use MA are in an HMO. With an HMO (health maintenance organization) you are allowed to only see doctors in the HMO network. If the MA plan in your network has a broad network, that can work out great.
If you are healthy today, a closed network doesn’t seem like a big deal. But I encourage you to ponder what happens if you develop an illness that requires specialized care. With Original Medicare, any specialist who accepts Medicare (most do) will be covered by the plan. With Medicare Advantage, your coverage is limited to the specialist in the network. I want you to understand you don’t have the freedom to choose the care you want.
Some MA plans also offer PPO coverage, where you can choose from a network of preferred doctors. If that is more appealing, you might want to compare the MA-PPO to your current Original Medicare plan.
Understand your potential out of pocket costs. With Original Medicare there is no limit to annual out-of-pocket costs, but that’s why it’s crucial to have a complementary Medigap policy: the Medigap policy—it’s a policy sold by a private insurer—covers those out-of-pocket costs. If you are considering an MA plan you may be responsible for some copays. Make sure you understand what copays you may have. And make sure you understand the annual out-of-pocket (OPP) limit you may be responsible for. In 2020, people enrolled in a MA HMO typically had an OOP limit of nearly $5,000.
You need preapproval for most tests and therapies. Beyond basic preventative care, MA plans require you (or your medical caregiver) to get approval for procedures and medications. If you are denied preapproval for care, or if payment (reimbursement) is denied, it’s very important to stick to your guns and appeal the decision. A government report found that when MA enrollees or their care providers appealed a denial of care or denial of payment they were successful 75% of the time. But the problem is that only 1% of denied claims were appealed.
If you end up in the hospital for more than a few days, you will pay more. Enrollees in Original Medicare have a flat deductible they pay when they are hospitalized. This year the Medicare Part A deductible is $1,408 each time you are hospitalized. Doesn’t matter if you’re in the hospital for a day or a month. You are responsible for $1,408 of hospital charges before Medicare takes over. With Medicare Advantage you typically are charged a daily copay. If you are only in the hospital for a few days, the MA cost will be lower than the deductible for Medicare Part A for people using Original Medicare. But an analysis by the non-profit Kaiser Family Foundation says that if you ever need to be hospitalized for more than 5 days, the odds are that your MA copay will be more than if you had Original Medicare.
Switching to MA is basically irrevocable. If you choose an MA plan, you can technically switch back to Original Medicare during open enrollment. But this is such a misunderstood part of Medicare. It is true that you can definitely always switch back to Original Medicare. But that only covers Part A (hospitalizations), Part B (doctor and treatment bills), and you will be able to enroll in Medicare Part D (Prescription Drug coverage.) But that’s all you are guaranteed to be able to enroll in.
Remember I just explained how crucial it is to also have a Medigap policy when you have Original Medicare? A Medigap plan will cover the typical 20% copays that are part of Medicare Part B. Well, if you want to return to Original Medicare, you may not be able to purchase a Medigap policy if you have a pre-existing condition.
When anyone first becomes eligible for Medicare, if they choose Original Medicare and want to purchase a Medigap policy, the law is that they must be offered Medigap coverage regardless of any pre-existing conditions. And the premium will not be based on any pre-existing conditions.
But that doesn’t apply if you want to enroll (or re-enroll) in Original Medicare after your initial enrollment period (generally a six-month period around your 65th birthday.)
Outside of your initial enrollment period, if you apply for a Medigap policy the insurer is allowed to deny you coverage based on pre-existing conditions or charge a premium that is higher because of your age and health. That can make it financially impossible to switch back to Original Medicare. If you want the freedom to choose your doctors/facilities that might be a reason to stick with Original Medicare.