Welcome back, readers. With Medicare’s annual enrollment upon us, we are delighted to bring you the second installment of our Q&A with Kelly Allen at Kelly Allen Agency. We spoke to her about the ins and outs of Medicare and found answers that everyone enrolled in Medicare needs to know.
Our team at TFS is fortunate to foster these strategic relationships to bring our clients professional service. We forge these relationships with the sole purpose to give clients versatile and comprehensive care.
Last time, we looked at how Medicare operates. We also discussed the difference between Medicare and Medicaid, as well as how both of these systems relate to long-term care. Kelly told us that she thinks of Original Medicare (Part A and B) as an admissions ticket to an amusement park. But that admissions ticket only gets you so far. Today, we are going to figure out the best way to buy tickets for the rides.
Original Medicare is step one, but it won’t cover all of the ancillary costs associated with treatment and care. To supplement expenses that original Medicare doesn’t cover, you can enroll in a supplement plan or an advantage plan. How does each of these systems work and which is right for you? We are going to find out.
Healthcare planning is essential for a happy, healthy retirement. Without further ado, let the amusement park rides open.
What’s the difference between a supplement plan and an advantage plan?
When asked this question, Kelly immediately began with a provocative analogy. “Supplement plans are like free-range chickens and advantage plans are like a caged bird,” she said. While both provide proper treatment, one has more freedom and flexibility. Let’s take a closer look at each.
Medicare Supplement Plans
Medicare Supplement plans, also known as Medigap plans, are plans that fill the holes in Original Medicare. Supplement plans offer a wide variety of coverage options. It is important to note that those new to Medicare can’t enroll in plans C or F (the Cadillac of Medigap plans according to Kelly). Should you already be enrolled in Medicare, you are grandfathered into these plans.
Supplement plans have a few defining features:
- You can receive coverage from any provider who accepts Medicare.
- Your plan can be updated or changed at any time. Kelly said that theoretically, you could change your supplement plan 11 times a year. While that isn’t recommended, the point is that these plans offer more flexibility.
- Most services don’t require prior authorization or approval from the insurance provider.
- Each supplement plan is defined by the government, and therefore the same no matter which provider you purchase it from. A Medigap N plan is the same no matter who sells it which makes your coverage consistent across the board. While premiums can shift depending on the company, you have more freedom to choose a company with reasonable rates since the coverage remains the same.
- Supplement plans don’t offer prescription drug coverage. Those enrolled in a supplement plan need to purchase separate Part D coverage.
The ability to receive medical care from any provider who accepts Medicare is hugely important for people who travel often, especially snowbirds. If you spend half of the year in Arizona, you don’t have to worry about obtaining treatment as long as the provider accepts Medicare.
Supplement plans aren’t subject to the Medicare open enrollment period (October 15 – December 7). You can make changes at any time outside of the October to December window. That means if your needs change, you can select a different plan to suit your evolving situation, and not be stuck in a plan that isn’t working for you.
Supplement plans do have premiums which can vary dramatically depending on the coverage and the specific provider. These premiums can turn people away, but the benefits often outweigh the costs incurred.
Medicare Advantage Plans
Medicare Advantage Plans are offered by private companies contracted by Medicare to provide Original Medicare to participants. These plans often cover additional expenses that Original Medicare doesn’t. Advantage plans are similar to Supplement plans with a few fundamental exceptions.
Kelly views Advantage plans like a caged bird because while you still receive proper care, there are more limits, restrictions, and roadblocks along the way. While supplement plans have higher premiums, advantage plans tend to have higher co-pays and out-of-pocket costs.
Medicare Advantage plans must set out-of-pocket limits for participants but those can be quite high. These costs are regulated by the government and can change annually.
In 2020, the maximum out of pocket expenses is $6,700 for in-network services. If you go out of network, that limit can be much higher, exceeding $10,000 in some cases. Advantage plans can elect for lower limits, but that is up to each provider. Check with your specific plan to see what the costs are. Keep in mind that these out of pocket expenses don’t cover the cost of prescriptions.
While supplement plans allow you to receive care from any provider that accepts Medicare, Advantage plans require participants to receive care in-network. They give a list of providers where you can receive treatment and most out of network care isn’t covered.
These plans are even zip code specific, meaning you can only receive care at certain places. This provision is difficult for snowbirds or people who split their time between states. While your Advantage plan might cover multiple zip codes, it isn’t a holistic approach.
Most Advantage plans have prior authorizations, which means the insurance company must review your treatment plan before deciding if they will cover it or not. If your doctor recommends a specific surgery, for example, and the insurance company doesn’t deem it necessary they can deny coverage. This provision adds time and unpredictability to your medical treatment.
Advantage plans operate in the open enrollment cycle which means you can only change or update your plan during the enrollment period. This could prove difficult if you discover your plan doesn’t work for you in March and you are stuck in it until mid-October.
As you can see, there are significant impacts that an Advantage Plan can have on your flexibility to take charge of your health. There are also essential financial considerations which can prove costly for many people. But these plans also have well-rounded benefits including
- Vision, dental, and hearing
- Wellness programs, even gym memberships
- Coordinated care
- Worldwide emergency coverage
Emergency coverage is critical. Even if you are out of network and break your wrist, for example, that would be covered in your plan. The physical therapy for your recovery, on the other hand, would not be covered.
Some advantage plans have built-in Part D coverage, but most plans don’t and require you to purchase it separately. Most advantage plans offer solid, strong coverage but there are restrictions you must be aware of to make a well-informed decision.
Which plan is best for you?
Kelly says that discovering the right plan is a delicate balance of health, lifestyle, finances, and risk. It’s imperative to understand your health needs, potential future needs, your budget, and prepare for the unknown. The most important aspect is obtaining coverage that will protect you and work with your desired lifestyle.
Let’s take a closer look at how certain factors can impact your decision.
- Your lifestyle
- Are you traveling frequently? Will you likely need care out of network? Would you prefer to choose where and how you receive treatment?
- Your location
- Are you in a more rural area or in a city? For those living in a rural area, you might want access to highly accredited professionals outside of your space. City dwellers may have excellent access to doctors they want to receive treatment from.
- Current health conditions
- Do you frequent the doctor? What do you go to the doctor for (routine check-up or more serious illness)? What underlying conditions do you have? What is your family’s health history?
Why should you pay for a supplement plan when you are healthy?
While supplement plans aren’t right for everyone, Kelly finds that these plans are often the most suitable for her clients’ short and long-term needs. The premiums in supplement plans turn many people away. They see an Advantage plan that has a $0 premium and thinks why should they pay a higher premium when they are healthy?
This is an excellent question and one that Kelly enjoys talking about. She gave us a scenario to consider. Larry has a supplement plan. His premium is $240 per month and with a $198 deductible, he is spending just under $3,000 per year for that plan.
You might say, jeez that sounds expensive.
Kelly’s rebuttal, compared to what?
Sure, $3,000 is a big-ticket item, but not when compared to $7,000. Should Larry have an unexpected health scare like a stroke, his payment with a supplement plan would be significantly lower than with an advantage plan. These high out-of-pocket expenses with Advantage plans can prove difficult for older retirees who are trying to stretch their savings to last through retirement.
It’s imperative to choose a plan that not only works for you now but also supports you in the future. We are happy to speak with you about any questions you may have concerning supplement plans and advantage plans. Each provides different types of benefits that will serve people in unique ways. This example was for informational purposes only. Please note that individual situations can vary.
Stick around, because the last piece of our Medicare series is coming up next.
This information is being offered to you as a courtesy. It is not a recommendation of Kelly Allen or Kelly Allen Agency. As with matters of this nature, you should consider all of your options prior to engaging the services of any insurance professional.
Kelly Allen and Kelly Allen Agency are not affiliated with FSC Securities Corporation.