One topic I never expected to cross my radar until my early 60’s was the topic of Medicare. However as my father turned 65 and more family members hit the same milestone, I realized how important it was for me to be aware of the maze of options available. After all, if I, a native English speaker with a background in financial services, found Medicare’s alphabet soup confusing, how much more confusing would it be for my aging immigrant parents? The last thing I wanted was financial pressure from medical bills to force my family into making unwanted healthcare decisions. Helping my parents stay healthy now and in the future started with fine tuning their health care coverage.
Original Medicare (also known as “Part A” and “Part B”) is a federal health insurance program available to seniors age 65 or older. As it turns out, there’s no annual limit on what you pay out-of-pocket unless you have supplemental coverage like a Medicare Supplement, or alternative coverage like Medicare Advantage. Making the right choice about Medicare Advantage or Medicare Supplement was an important decision that would impact how much my father paid for health insurance coverage, what services were included, which doctors he would see, and his quality of care for many years to come.
If you are trying to figure out Medicare supplemental coverage for yourself or assisting an aging parent or spouse, here are a few key details I learned about Medicare Advantage and Medicare Supplement when I helped my own father determine his health care needs.
What is Medicare Advantage?
Medicare Advantage (also known as “Part C”) is a type of Medicare health plan offered by private insurance companies that is an alternative to original Medicare. If you have Medicare Advantage, your plan bundles Part A, Part B, and usually Part D. Medicare Advantage plans may have lower out-of-pocket costs than original Medicare, maximum out of pocket protection, and according to Centers for Medicare & Medicaid Services (CMS), the average monthly premium for Medicare Advantage was approximately $19 per month in 20221. Some Medicare Advantage plans, however, even offer premiums as low as $0 per month.
Tyler Munson, CEO of Medicare Advantage plan Aspire Health, had this to say when asked what misperceptions about Medicare Advantage plans he encounters:
“Medicare Advantage can offer a wide range of additional benefits beyond traditional Medicare alone, including an integrated pharmacy benefit, and supplemental benefits like vision, dental, hearing, and care team support. At Aspire Health, we also work closely with our robust network of local providers to ensure our members have access to high quality, coordinated, and connected care.”
What is Medicare Supplemental?
Medicare Supplemental (also known as “Medigap”) is extra insurance offered by private insurance companies that helps cover out-of-pocket costs that occur when you have original Medicare, such as co-pays, coinsurance, and deductibles.
According to the CMS, the average monthly premium for Medicare Supplemental coverage is projected to be approximately $31.50 in 20232.
Comparison of Plan Features
A summary comparison of Medicare Advantage and Medicare Supplemental features can be found in the table below.
May be limited to In-network doctors and hospitals.
Unlimited choice of doctors and hospitals.
You may need referrals and may be required to use specialists in your network.
No referrals required.
May be restricted to in-network only. Emergency care is covered for travel within the US and sometimes abroad.
No network restrictions. Coverage goes with you across the US.
There are specific periods during the year when you can enroll or switch to another Medicare Advantage plan. Not subject to medical underwriting.
Elligible to enroll any time after age 65 and join Medicare Part B. May be subject to medical underwriting.
You pay a low or $0/mo premium in addition to your Medicare Part B premium. However, when you use services, you pay co-pays, co-insurance and deductibles.
You pay a monthly plan premium in addition to your Part B premium. When you use services, your out-of-pocket costs are limited.
Prescription Drug Coverage
Prescription drug coverage can be included on some plans.
Prescription drug coverage is not included. Medicare Part D plan is purchased separately.
* Table adapted from source (3).
Can you switch plans?
Yes, changing plans is challenging, but possible. For example, if someone wanted to enroll in a Medicare Advantage plan now and switch to original Medicare with Medicare Supplemental later, the individual would be required to answer some medical questions about their health history and the policy issued may be prohibitively more expensive than if the person had chosen to enroll in Medicare Supplemental from the beginning.
Which plan is best suited for you?
In summary, a Medicare Advantage plan offers extra benefits and often no monthly premiums. A Medicare Supplemental plan offers unlimited choices for location of service, doctors, and quality of care, but tends to be more expensive than a Medicare Advantage plan.
If you travel often, have a second home, need frequent medical care, or prefer the flexibility of choosing your doctor, a Medicare Supplemental plan might be a better choice for you since there are no network restrictions and you have access to specialists without waiting for a referral.
On the other hand, a Medicare Advantage plan might be better suited for retirees who enjoy an “HMO” experience, expect to be relatively healthy, prefer $0 or low monthly premiums, live in an area with an extensive network, or enjoy the convenience of additional benefits such as vision, dental, and hearing.
Making the right decision will ultimately depend on your larger financial picture and your expected health care needs. When I reflect back on the conversations I had with my father about Medicare, it was time-consuming and ridden with anxiety. However, taking the time to understand the details of each option ultimately empowered my family to make great decisions for their future health and financial stability.
Sources: (1) www.cms.gov/newsroom/press-releases/cms-releases-2022-premiums-and-cost-sharing-information... (2) www.cms.gov/newsroom/news-alert/cms-releases-2023-projected-medicare-basic-part-d-average-premium (3) www.wpshealth.com/medigap-versus-medicare-advantage/ (4) www.medicare.gov/Pubs/pdf/12026-Understanding-Medicare-Advantage-Plans.pdf (5) www.nerdwallet.com/article/insurance/medicare/medigap-vs-medicare-advantage
The information provided herein is for educational purposes only, and should not be construed as advice, including, but not limited to tax, legal, insurance, investment, or retirement advice. For your specific planning needs, please seek the advice of Integris Wealth Management, your tax accountant, attorney, insurance agent, or other professional as appropriate. Investing involves the risk of loss.