Medicare Advantage: Thank you for the advice Joe Namath, but is this the right plan for me?
Key Takeaways…
Medicare Advantage (Medicare Part C) can be more cost-effective during good health years.
You must have Medicare Part A and Part B to join a Medicare Advantage plan. However, many Medicare Advantage plans will cover your Part B premium.
Beware trying to change from Medicare Advantage to Traditional Medicare later – you may not be able to get a Medigap policy if you can’t qualify medically. Remember, guaranteed insurability is only available at initial enrollment.
How many times have you seen TV commercials with famous actors and sports heroes promoting Medicare Advantage plans that have $0 premiums? Probably a lot.
The ads talk about saving money over Original Medicare and offering benefits that Medicare doesn’t cover. While this is often true, it is rare that those 30 second soundbites give you ALL the information you need. Before any decision is made about your healthcare in retirement, it’s important to understand the total picture – what Medicare Advantage is, what benefits it can provide and some cautions if you decide to choose Medicare Advantage over Traditional Medicare.
While private health insurance plans have been a part of Medicare since the mid 1960’s, they didn’t become what they are today until the Balanced Budget Act of 1997 and the introduction of Medicare+Choice that eventually was named Medicare Advantage in 2003. Medicare Advantage was designed to give recipients an alternative to “Traditional” Medicare. As of 2021, 42% of the Medicare population is enrolled in Medicare Advantage.
What is Medicare Part C and What benefits will I receive?
Medicare Advantage, also known as Medicare Part C, combines Medicare Part A (hospital insurance), Medicare Part B (medical insurance), and sometimes Part D (prescription drug coverage). In fact, this looks a lot like your traditional group HMO/PPO coverage that you had while you were working. As a result, Medicare Advantage is a one stop shop, and for the most part, your benefits are combined in a single policy. Whereas Traditional Medicare requires you to enroll in the four separate elements: Part A, Part B, Part D and a supplemental Medigap policy.
Additional benefits that are traditionally available with Advantage plans are:
Dental Care, vision screening, hearing aids – not covered by Traditional Medicare.
Other quality of life benefits that MAY be available – fitness benefits, home safety devices & modifications, emergency response devices, non-emergency medical transportation, telehealth.
For those that enjoy travel in retirement, especially international travel, most Advantage plans cover worldwide emergency care. However, with Traditional Medicare you are not covered and would likely have to pay for Travel Insurance separately or it may be covered by a Medigap policy.
So what about those costs?
If you start to shop for plans on your own via www.Medicare.gov/find-a-plan, you’ll find MANY plans that are low or no cost. In 2022, the average monthly cost for Medicare Advantage when you include all the no-cost policies purchased, on average is $19 per month. According to the Centers for Medicare & Medicaid Services, 59% of Medicare Advantage plans will charge no premium.
HOW IS THIS POSSIBLE?? Medicare pays the private companies offering the plans to take on your health risk. It’s a competitive market and the insurance carriers create attractive plans for Medicare beneficiaries and Medicare pays the insurance company a fixed amount per month to provide coverage to each enrolled beneficiary. To keep their premiums low, private insurers will make up their costs through higher deductibles, copays, and coinsurance.
So for the consumer, a $0 premium does not mean that it’s FREE. You still need to pay your Part B premiums and your deductibles, copays, and coinsurance. Deductibles may be high to keep your premiums low, you will have copays for various medical services like x-rays, diagnostic tests, and then coinsurances for expensive services things like chemotherapy, dialysis, etc.
Medicare Advantage DOES have an Out-of-Pocket Maximum. In 2022, that is $7550 for in-network services and $11,300 for in-network and out-of-network combined. So costs beyond that amount will be automatically covered by the plan. There is no out-of-pocket maximum for Traditional Medicare, HOWEVER, many beneficiaries will pay for a Medicare supplement policy that will cover those costs.
Some things to consider…
Your network may be limited – Medicare Advantage plans are generally regional and might possibly have a smaller network of doctors. You will have a Primary Care Physician that will require a referral to see a Specialist. With Original Medicare you can go to any doctor that takes Medicare, anywhere in the US.
If you first elect Medicare Advantage and ultimately decide to transition back to Traditional Medicare which often happens as people’s health care needs rise, you will likely want to purchase a Medicare Supplement or Medigap policy to cover the copays, deductibles, etc. HOWEVER, you must now be medically underwritten to purchase this policy. If your health is poor at that point, adding a Medigap policy may be very expensive or even unattainable.
When can I enroll in medicare advantage?
You can enroll when you are first eligible for Medicare. After that you have two opportunities to enroll in Medicare Advantage:
OPEN ENROLLMENT - October 15 – December 7th
Opportunity to switch to a different Medicare Advantage plan or join a new plan or drop a plan and switch to Original Medicare. Coverage then begins on January 1.
Opportunity to switch from Original Medicare to a Medicare Advantage Plan
MEDICARE ADVANTAGE OPEN ENROLLMENT – January 1 – March 31st
If you are already enrolled in Medicare Advantage, you can switch to a different plan
You can also switch to Original Medicare
Coverage starts the first day of the month you ask to join the plan
What can’t you do? Switch from Original Medicare to an Advantage plan
before picking from the list of medicare advantage plans…
It is important to evaluate Medicare Advantage not just from the ads you see on television but by doing your due diligence to evaluate your personal health care needs: your access to doctors, your healthcare usage, etc. to make sure you are selecting Medicare Advantage because it is the best fit for you.
For state-by-state information on Medicare Advantage in 2022, please visit: https://www.cms.gov/files/document/92921-state-state-fact-sheets-2022-medicare-advantage-and-part-d-landscape-final.pdf
For individual assistance, each state has a local State Health Insurance Assistance Program (SHIP) that helps Medicare beneficiaries navigate both Traditional Medicare and Medicare Advantage. They can help you review your choices, answer questions about coverages, costs, etc. http://www.shiptacenter.org/
Want to learn more?
Coming up next in our Medicare series is an article written by Michael Mikonis, where he discusses more specifics about when to enroll in Medicare and the annual updates that you should be aware of. In addition, we created an online course called The Retirement Continuum that delves further into the topic of Medicare. If you would like to get more in-depth information, you can watch our free online course here.
SOURCES
Freed, Meredith. “Medicare Advantage in 2021: Enrollment Update and Key Trends”. Kaiser Family Foundation, https://www.kff.org/medicare/issue-brief/medicare-advantage-in-2021-enrollment-update-and-key-trends/. June 21, 2021.
Freed, Meredith. “Medicare Advantage 2022 Spotlight: First Look”. Kaiser Family Foundation, https://www.kff.org/medicare/issue-brief/medicare-advantage-2022-spotlight-first-look/. November 2, 2021.
“CMS Releases 2022 Premiums and Cost-Sharing Information for Medicare Advantage and Prescription Drug Plans”. Centers for Medicare & Medicaid Services, https://www.cms.gov/newsroom/press-releases/cms-releases-2022-premiums-and-cost-sharing-information-medicare-advantage-and-prescription-drug. Sep 30, 2021.
Wang, Penelope. “The Pros and Cons of Medicare Advantage” Consumer Reports, https://www.consumerreports.org/medicare/pros-and-cons-of-medicare-advantage-a6834167849/. October 14, 2021, Updated November 15, 2021.
IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Paragon Wealth Strategies, LLC [“Paragon”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Paragon. Please remember that if you are a Paragon client, it remains your responsibility to advise Paragon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Paragon is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Paragon’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.wealthguards.com. Please Note: Paragon does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Paragon’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please Also Note: IF you are a Paragon client, Please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.