Congratulations, you’ve made it to Medicare age. Not everyone is so lucky, you finally get to reap some rewards from the taxes you’ve been paying all these years. Now you are faced with one of the most important decisions of your Medicare journey:
Which type of Medicare plan do I sign up for?
Wait … I just signed up for Medicare, and they are charging me $170.10 a month (what most people pay in 2022) … why do I need another plan?
Good question, the answer is that the Medicare Program (Traditional Medicare) does not cover 100% of your covered health care costs. To start you will pay a few deductibles. Some of these deductibles are a once-a-calendar year deal (like the small potatoes’ $233 Part B deductible for 2022) others can sting you more than once each year like the Medicare Part A inpatient hospital deductible that beneficiaries pay if admitted to the hospital (which is $1,556 in 2022). If you have an awful year, you may pay this more than once plus other coinsurances depending on the length of your hospital stay. Once you are released from the hospital you can now be subject to 20% of an unlimited bill (outpatient). Have you ever seen one of those bills? They look like phone numbers … 20% of that is no joke and can seriously bankrupt a retiree (no trips to the beach for you unless you’re pushing the Fudgy Wudgy cart up and down the shoreline) No, you need to hedge your bets and pick up a secondary (Medicare supplement or Medigap) or an all in one plan (Medicare Advantage) to keep you out of the poor house and get you back to the pour house (I think every town has a pub named that).
Medicare Supplement vs Medicare Advantage
Medicare supplement
The old adage “You get what you pay for” didn’t become an adage for nothing … and applies perfectly to this comparison. If you have budgeted well for your retirement health insurance needs, having a Medicare supplement will give you all the benefits of ‘original’ or ’traditional’ Medicare. These are: being able to see any doctor that accepts Medicare (which is most), not having to worry about referrals or, with most plans, a majority of the deductibles and coinsurances I mentioned previously. Want to go to Johns Hopkins? Mayo Clinic or Sloan Kettering? No problem. The world is your oyster. These plans normally will require you to pass a health underwriting review (in most states) except for the first 6 months after your part B is active (known as your Medicare supplement open enrollment). You’ll pay a hundred or two extra a month for the privilege of knowing that you are covered if life deals you a severe blow during your golden years. The downside, these plans do not cover prescription drugs or dental, eyeglasses, or hearing aids. You’ll want to pick up your dental, vision, and hearing plan and a separate part D plan (Medicare drug plan) if you don’t have other creditable coverage (VA, employer retiree paid, etc.) Unfortunately, the privilege of this Medigap plan will get more expensive as you age in most states. Insurance companies are allowed to charge age-based rates (Attained-Age-Rated is most common) so if you’re lucky enough or unlucky enough (depends on how you look at it) to outlive your money we may need to, at least eventually, preview the next choice…
Medicare Advantage
Do you like to gamble? You may like Medicare advantage despite the strength of your checkbook. You’ve probably seen the countless commercials, JJ Walker, Joe Montana, and Joe Namath, all crying out like carnival barkers telling you about all the benefits you’re missing out on and how they will insure you with extra benefits and pay you money. If you are of sound mind the red flags go flying, but… is it true? The answer, well… it’s complicated. Yes, you won’t pay a monthly premium on most of these plans but you will pay something, you’ll need to temporarily give up your original Medicare to enroll. The upside? You may pay no premium other than your Medicare Part B premium and in some cases, the plan will pay a portion of that too (they call it the giveback option). Are there really extra benefits? Yes, most plans will add prescription drug benefits that you don’t get with Original Medicare and a little bit of dental, vision, and hearing benefits. How is this possible? Well, Medicare pays the insurance company to take over your care from A to Z. How much exactly is undisclosed but enough to make it a lucrative endeavor for the insurance companies. These are the highest marketed plans and pay a higher commission to insurance agents so, unfortunately, you may not hear of all the other options depending on who you first speak with. The downside to that is now the insurance company is the gatekeeper, they can decide if you ‘really need’ that new knee even if you and your doctor agree that you do. There are also networks to contend with. Is the top doctor treating your newly diagnosed disease, not in your network? You may be on the outside looking in at your best possible care. These plans are also allowed to charge you copays and coinsurances not to exceed $7550 for the year 2022. Your out-of-pocket costs could be higher if you choose a plan that allows you to see in and out-of-network doctors like a PPO. Don’t get me wrong, some people love these plans, especially if you never have to use them for a serious health crisis.
Conclusion
I’ve painted this comparison with a broad brush. Your particular situation will be unique and it is wise to speak to an expert. As you can see the comparison can’t be made on money alone. These plans become like apples and oranges when you need them most, especially for the unsuspecting few that become seriously ill. I believe the prudent path is to keep your original Medicare with a supplement in place as long as you can afford it. When the time comes that you no longer can, the transition from a Medicare supplement to a Medicare Advantage plan can happen without complication (this is not so easy in the other direction). Medicare Advantage plans are guaranteed issues, meaning you can’t be turned down as long as you apply during an appropriate enrollment period and you are currently enrolled in Medicare Part A and Part B. This is just the advice of one man who’s been enrolled in both types of plans in the past, do your research and make the decision that works best for you…
Wishing you the best of times throughout your retirement.
John F Egger “I Speak Medicare”
Delaware Valley Medigap
(888) 416-6532