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Is Medicare Advantage Really An Advantage?

Is Medicare Advantage Really An Advantage?

November 28, 2022

Let's start by defining these plans...

What is Medicare?

Medicare is the federal health insurance program primarily for the benefit of people who are age 65 or older, but also for those younger with disabilities and End-Stage Renal Disease (kidney failure). Traditional Medicare includes Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance). This will provide coverage for things like hospital stays (up to 60 days), lab tests and X-Rays, surgery, therapy, doctor visits, vaccinations, and more.

You usually pay a co-insurance cost of 20% of Medicare-approved services when you receive services. For those looking for drug prescription service, you may also add Part D (Drug Plan). While Part D plans can vary in cost and coverage, they must provide a standard level of coverage set by Medicare. It is very important to check the "formulary" annually to ensure your current prescriptions are covered.

Did you know that up to 44% of medical costs in retirement are paid to expenses like co-payments, co-insurance, and deductibles for doctor’s visits, according to Fidelity Benefits Consulting? For that reason, many people will purchase a Medicare Supplement policy, often referred to as “Medigap,” for assistance in paying additional costs like copayments, coinsurance, and deductibles. For the most comprehensive coverage, many individuals seek to have Medicare Parts A, B, and D, along with a "Supplemental Policy."

Everyone with traditional Medicare (Medicare Parts A and B) receives the same benefits. There are no networks, copays, waiting periods, or pre-existing condition limitations (assuming you enroll on time). You can see any doctor that accepts Medicare, and any out-of-pocket costs remain the same.

What is Medicare Advantage?

Many have become increasingly interested in Medicare Advantage and its "perks," but we advise clients to approach it cautiously. When you purchase Medicare Advantage, you opt out of traditional Medicare (Parts A, B and D), and your care is covered by one policy, the Advantage plan.   When comparing the differences between traditional Medicare with a supplemental policy and Medicare Advantage, it is important to note that these all-in-one managed care plans are offered through for-profit, private insurers like United Health Care and Anthem.

While lower costs today and added benefits may appear attractive, we recommend taking a long-term approach to your healthcare considerations. These "bundled plans" include Part A, Part B, and usually Part D, often at far lower costs today. Medicare Advantage plans may also offer some "extra benefits" as well that traditional Medicare does not cover like vision, hearing, dental, fitness, etc.

At age 65, with a clean bill of health and little-to-no drug prescriptions, this may sound like a highly attractive offering!

So, what is the catch?

Medicare Advantage Plans have annual contracts with Medicare, which is where they receive their funding. Each plan can charge different out-of-pocket costs and have different rules for how you qualify for and receive services, which can change annually. If you opt for Medicare Advantage and remain on the plan for over one year, you will need to prove "insurability" should you decide to change over to traditional Medicare. 

Additionally, Medicare Advantage plans often have limited provider networks, which makes seeing a specialist much more challenging. Oftentimes, it's not until someone gets sick and needs help while enrolled in a Medicare Advantage Plan that they learn how their plan has changed and they no longer qualify for the services they need. It is important to consider if you wish to play "hopscotch" with your medical care needs as you continue to age.

What should I consider when evaluating my options?

  • How much money will I need to fund my healthcare expenses in retirement?
  • How do Medicare and Medicare Advantage work? How do I evaluate my options?
  • When do I sign up?
  • How do I avoid penalties?
  • What do the various plans cover and not cover?
  • I am considering transitioning from Medicare Advantage to Medicare. What should I know?
  • Do I need prescription drug coverage? What is the “formulary” and how do I evaluate it?
  • What will my out-of-pocket costs be?
  • What are Income Related Monthly Adjustment Amounts (IRMAA), and how does it apply to me?
  • How do I coordinate Medicare planning with Social Security and retirement income?

If any of these questions apply to you,
click here for some Medicare checklists