Today, there are more Medicare options than ever before! There are countless Medicare Advantage plans to choose from in addition to Original Medicare. But this can make it hard for you to choose – which is right for you, Original Medicare or Medicare Advantage?
For many beneficiaries, the cost has a significant impact on which plan they may choose. You should consider the premiums, but the deductibles, coinsurance, and copayments should also be considered when assessing a Medicare plan’s value. Other factors also should be considered, such as prescription drug coverage and provider networks.
It can be hard to know which type of plan will be the best fit for your health needs – and your budget. Medicare Pathways has complied some tips here to help you choose the best plan.
With Original Medicare, you get your benefits directly from the federal government and pay the same standard rate as most other beneficiaries. Less than 5% of beneficiaries with high income pay an income-related adjustment to the standard Part B premium. Due to being standardized by the government, the benefits are the same for all beneficiaries, and there are no pre-existing conditions, limitations, or waiting periods.
Original Medicare Part A covers inpatient hospital care or skilled nursing care. It also covers some home health and hospice care. Original Medicare Part B covers outpatient expenses like doctor visits, lab tests, x-rays, and durable medical equipment (wheelchairs, oxygen supplies, etc.).
You will be able to use any healthcare provider who accepts Medicare, including over 900,000 physicians nationwide. You pay the same amount for covered services from any provider, regardless of who and where you choose to receive care.
However, Original Medicare alone provides no prescription drug coverage, but you can enroll in a Medicare Part D plan. Part D is somewhat like a pharmacy card; these plans are offered by private insurance companies providing at least the minimum benefits of Original Medicare.
Original Medicare Costs
Here is a rundown of the costs of Original Medicare in 2021
Part A Premium – $0 with qualifying work history or $471 monthly without
Part A Deductible and Coinsurance – $1484 deductible for each benefit period
Days 1-60: $0 coinsurance for each benefit period
Days 61-90: $371 coinsurance per day for each benefit period
Days 91 & beyond: $742 coinsurance per each “lifetime reserve day” after day 90 for each benefit period (up to 60 days over your lifetime)
Part B Premium – The standard Part B premium amount is $148.50 (high-income earners pay more)
Part B Deductible and Coinsurance: $203 per year and then 20% of the Medicare-approved amount
Keep in mind – there is no limit to your out-of-pocket costs with Original Medicare. With any expensive procedures, that 20% could add up to a lot.
This is why many people enrolled in Original Medicare also choose to enroll in a Medigap (Medicare Supplement) plan. These plans pick up the gaps left behind by Original Medicare – some even pay your deductibles. These are known as “first-dollar” plans.
Now that we’ve covered Original Medicare let’s move on to Medicare Advantage.
Who is ago
Most people enrolled in Original Medicare & Medigap value the freedom of access provided by Original Medicare’s network. There is ultimate flexibility, and you do not need referrals to see specialists. This is appealing to those who travel frequently or are snowbirds to see doctors wherever they may go. Some may also choose Original Medicare because their doctor does not participate in any Medicare Advantage plans.
Others choose Original Medicare for the predictable back-end costs. They like the peace-of-mind that comes from knowing exactly how much they spend on hospital stays or chronic illnesses. These kinds of people don’t mind spending a bit more for that peace of mind.
Do I need a referral to see a specialist with Medicare Advantage plans?
If you are enrolled in a Medicare Advantage plan, you might need a referral; this depends on your specific plan’s rules.
How Medicare Advantage Plans Work
Medicare Advantage was not an option before the 2003 Medicare Modernization Act. There was no choice – only Original Medicare for those who did not have retiree coverage.
Now, Medicare Advantage plans have become a popular alternative to Original Medicare. These plans are very similar to group health insurance that you may have had during your work years. These are plans that have networks, and you pay for medical services as you go along.
You may also see Medicare Advantage plans referred to as Medicare Part C; they are still a part of Medicare, just not managed by the government. The government has set rules and guidelines, but the plans are administered and sold by private insurance companies.
Medicare Advantage will cover the same services as Original Medicare Parts A & B; there will be different networks, copays, and drug formularies. Overall, about one-third of all Medicare beneficiaries are enrolled in Medicare Advantage plans.
Typical Medicare Advantage Plan Types
There are different types of Medicare Advantage plans, but these two are the most common:
Health Maintenance Organization (HMOs)
HMOs have closed provider networks, and you generally must get anything besides emergency care within your plan’s network. You will choose a primary care doctor who oversees all medical care; you may be required to receive a referral from them for specific tests and procedures. HMO plans almost always include Part D prescription drug coverage.
Preferred Provider Organizations (PPOs)
PPOs do have provider networks, but you can still use any provider who accepts Medicare. You will pay significantly less out-of-pocket if you stay in-network, though. These plans do not require a primary care doctor & do not require referrals for specialists. These plans also often include Part D coverage.
Any Medicare Advantage plans will include the same benefits covered under Original Medicare, but many also go above and beyond those benefits. Some offer routine vision and dental or even wellness programs & gym memberships. Some plans also even offer access to a 24-hour nurse hotline.
Medicare Advantage Costs
It isn’t easy to give a snapshot as we did with Original Medicare because each Medicare Advantage plan is different. Each company sets its premiums, deductibles, and copays.
There are “zero premium” Medicare Advantage plans available. These are plans that mean you do not pay any additional premiums above what you are paying for Original Medicare Part B – you must have both Part A & Part B to enroll in a plan.
On average, beneficiaries were paying $21 a month for Medicare Advantage plans. Depending on where they live, 80% of beneficiaries had access to a “zero premium” plan.
In terms of deductibles, not all Medicare Advantage plans will have one. Some deductibles may apply to inpatient services, outpatient services, or even Part D. Around half of all Medicare Advantage plans with Part D do not have a Part D deductible.
Generally, lower premiums coincide with a higher deductible.
Medicare Advantage plans usually charge a copayment when you receive healthcare. This is usually around $10-$20 for doctor visits and up to $75 for emergency and urgent care. Some prescription drugs will have tiered copayments. For example, generic medications are often around $3-$5, where brand name drugs will have higher copays.
Maximum Out-of-Pocket Limit
One of the most critical differences between Original Medicare and Medicare Advantage plans is that Medicare Advantage plans have a maximum out-of-pocket limit (MOOP). Once you reach your MOOP, you will not pay anything for covered healthcare for the rest of the calendar year.
The mandatory MOOP is $7,550 in 2021, but many plans choose to set theirs much lower. Last year, only around 20% of plans had their MOOP set that high.
Finally, unlike Original Medicare, Medicare Advantage plans do require a health question for you to qualify. Is the question – do you have End-Stage Renal Disease? If so, you are not eligible for a Medicare Advantage plan. So, Medicare Advantage plans are not hard to obtain as long as you live in the service areas and are enrolled in Part A & B.
Which plans are better?
With Original Medicare, you are only getting Part A & Part B, and you have no out-of-pocket limit. Unless you add on a Medigap plan, there is no limit to what you can pay in a year on Original Medicare.
On the other hand, with a Medicare Advantage plan, you are locked into a network instead of seeing any doctor in the country who accepts Medicare.
Will Medicare Advantage replace Original Medicare?
Sometimes you will see Medicare Advantage plans referred to as Medicare Replacement plans. This is misleading because although you are in a Medicare Advantage plan and are paying according to its benefits – you are still enrolled in Original Medicare. You cannot have a Medicare Advantage plan without being enrolled in Part A & Part B. Still, you won’t be subject to the cost-sharing expenses of Original Medicare – only those on your Medicare Advantage plan.
How do I know which one I have?
You will enroll in Original Medicare through the social security office. Once you are enrolled in Parts A & B, you can either add a Medigap plan or a Medicare Advantage plan. These will both be purchased through insurance carriers.
Downsides to Medicare Advantage plans
Like we mentioned before, one of the most prominent downsides for Medicare Advantage plans is often the network. If you are traveling outside of your network, you are subject to higher cost-sharing or even possibly no coverage at all. So, unlike a Medigap plan covering your cost-sharing fully, you are subject to copays, coinsurance, and more with a Medicare Advantage plan.
Who should enroll in Medicare Advantage?
Medicare Advantage plans are often appealing because they are convenient. Since they often include Part D coverage, you don’t need a separate card for the pharmacy. For people with low medical usage, these are appealing due to cheaper premiums and ease of access.
Medicare Advantage plans are also appealing to those on a limited or fixed budget. Many people on Social Security alone cannot afford a Medigap plan along with Original Medicare. If you make sure that you find a plan with your doctors in the network, it is not difficult to find a Medicare Advantage plan that fits your budget.
Another incentive people find in signing up for Medicare Advantage is that many plans offer ancillary benefits such as dental or vision coverage.
Can I switch from Medicare Advantage to Original Medicare?
The answer is yes. You can return to Original Medicare during the Annual Election Period (AEP) or the Medicare Advantage Disenrollment Period. Be aware, though, that adding a Medigap plan requires answering health questions in most states, and the company can decline your coverage based on your health. This is important to consider before switching any coverage.
What is right for you?
Everyone is different, so there is no standard answer. Both types of coverage are reputable health coverage. Just make sure you are considering the total costs and your healthcare needs to get the big picture before making any decisions.
Some people like the security of a MOOP with Medicare Advantage, even though some plans incur heavy spending before you reach the cap. Set aside money for copays and coinsurance to help make sure you are covered in the event of a chronic illness.
If you are a frequent traveler, a Medicare Advantage plan may not be the best choice due to the networks. If you travel south in the winter, Original Medicare is possibly your cheapest bet. Paired with a Medigap plan, this will provide you will more predictable costs, and it will be more manageable for you to find providers.
For those on a budget, Medicare Advantage with a Part D plan may be appealing – it is convenient, and all of your benefits are covered in one monthly premium.
In the end, it is always good to consult with a professional, such as someone here at Medicare Pathways, to see what plans are available in your area. That way, we can help you compare and decide between all of your options to help you find the best coverage fit for your health needs and your budget and avoid any late enrollment fees.