In the world of Medicare when we turn 65 and retire we have options when it comes to Health Care Insurance Providers and they are;
- Original Medicare (Centers of Medicare & Medicaid Services (CMS))
- Medicare Advantage; Private Health Insurers that have to follow CMS guidelines and be approved by CMS.
- There is really no third option unless the retiree can live without Social Security and fund their healthcare completely out of pocket
There are no other options for most because of the ramifications of a ruling by Judge Rosemary Collyer back in March of 2011. Ultimately, she ruled that due to the new Health Care Bill the way the law was written anyone receiving Social Security must take Medicare and vice versa.
So, this leaves the majority of retirees with just two options; Original Medicare or a Medicare Advantage Plan, but what are the differences.
Option 1 – Original Medicare;
A federal system of health insurance for people over 65 years of age and for certain younger people with disabilities.
The Healthcare Insurance is broken up into “parts”. Which are A, B & D with the opportunity to purchase a MediGap Supplemental Plan.
- Part A covers Hospitalization
- Part B covers Medical (doctors/nurses/equipment)
- Part D covers prescription drugs that are not already covered in Parts A & B
- MediGap Plans cover the gaps that are left open in terms of deductibles, co pays, excessive charges. There are 10 plans to choose from that all offer features for a cost.
The pros of Original Medicare;
- A beneficiary can see any doctor, specialist or hospital that accepts Medicare as long as the care is medically necessary.
- If paying for benefits through Social Security the Medicare premiums only adjust upwards when there is a COLA for Social Security benefits. This is why most people on Medicare do not pay $115.40 a month for Part B but are still paying either $96.40 or $110.50
- There are limits on how much doctors and hospitals can charge (15% excess charge)
- Ability to file claims with Medicare directly
- Ability to purchase to a MediGap Policy without being rated during the initial enrollment period.
The Cons of Original Medicare
- Separate Bills; Social Security will deduct the premiums for Part B directly and can also deduct directly for Part D is opted but payments for MediGap Policies will be separate. In later years this may be very confusing
- Coverage; Medicare does NOT cover dental, vision, hearing, podiatry and routine physicals.
- Legislative risks; At any given moment the federal government can change coverage and or fees. Advantage Plans run the same risk as well but the Private Insurers can still opt to carry the same coverage/expense while shifting the cost to something else
- Does not pay in full for coverage, so there can be out of pocket costs (15% excess charge)
Option 2 – Medicare Advantage Plans;
These are private run health insurance plans that have to carry the exact same coverage as Original Medicare’s Part A & Part B, this is possible because Medicare is paying for it. To quote Medicare.gov “Medicare pays a fixed amount for your care every month to the companies offering Medicare Advantage Plans. These companies must follow rules set by Medicare. However, each Medicare Advantage Plan can charge different out-of-pocket costs and have different rules for how you get services”
MA Plans tend to have a network and work through referrals to provide for care.
Included in a typical Advantage Plan;
- Part A
- Part B
- The opportunity to purchase a Part D plan through the same provider if available. If one is not available then a Part D Plan can be purchased through Medicare.
Types of MA Plans;
- HMO – care and services from doctors or hospitals in the plan’s network (except emergency care, out‑of‑area urgent care.
- PPO – network doctors and hospitals, but you can also use out‑of‑network providers for covered services, usually for a higher cost.
- PFFS – You can go to any Medicare‑approved doctor or hospital that accepts the plan’s payment terms and agrees to treat you.
- SNP – You generally must get your care and services from doctors or hospitals in the plan’s network
The pros of a Medicare Advantage Plan;
- One payer for all services
- Co-pays and deductibles are defined and can be very low depending on the company and type of plan chosen.
- Possibility of wider variety of coverage. There are MA Plans that include vision, hearing, podiatry, and dental in health plans for an added cost.
- Have an annual cap on the amount of out of pocket costs one would face.
- Depending on the type of plan chosen there may be more access to a wider variety of doctors throughout the country.
The Cons of MA Plans;
- With many different types of private insurers offering different types of plans the options can become confusing
- There is usually an extra monthly premium on top of what Medicare would charge.
- There is no coverage for Hospice Care
- The issue of a network or referrals could bother some
- An insurer may just decide to opt out of offering such plans.
- There may be higher out of pocket costs due to networks & plans
- For those that may have a chronic illness or a family history of an extended hospital stay the biggest and the most relevant con is the inability to own a MediGap Policy.
There may be other points that may have to be taken into consideration. Those that are already in or nearing retirement must realize that each person has unique situations and their own individual health is no different.
For more information please see Medicare.gov or ask your Financial Professional, they should be able to help point you in the right direction; remember they, financial advisers, are “retirement experts”.