In last week’s blog, we discussed the basics of Medicare and Donut Hole coverage. This week, we are going to look at Medigap and Medicare Advantage Plans and what they mean to you. Here at Connelly Law Offices, we have discussions about Medicare with our clients who are doing Estate Planning to make sure that they are in the right plan that meets their needs. For those in the retirement age group, the right Medicare plan is just as important as other parts of their estate planning portfolio. The reasons are multiple so it's important to start with these questions:
Are you paying too much for your plan?
Does your plan cover the conditions that you currently have?
Does your plan cover the medications you are now on and will they be covered in the future?
Does it make sense to pay additional money for a more comprehensive plan so that you are protected for the future?
Is your current condition progressive?
The only way to know that is to explore the plans that are being offered thoroughly and understanding what these plans mean. For that, we refer them to the State SHIP office (we will discuss this later), for a thorough analysis, and even better, that advice is free.
As we mentioned last week, October 15 begins open enrollment for Medicare. For those who are unhappy with their current Medicare Advantage Plan they purchased last year, they can explore other options and for those who want to opt-out altogether from these plans and just return to their original Medicare, they can do that as well. But one area of confusion that does arise with the enrollment season is an understanding of the difference between Medigap Plans and Medicare Advantage Plans.
What's the Difference?
If you have the Original Medicare Plan, you most likely will find gaps in your coverage that you may want to close. The good news is, there are options to help supplement your Medicare. The way to do this is through Medigap and Medicare Advantage plans. However, you must choose one since Medigap and Medicare Advantage can’t be used together. You have to decide which plan works for you through education, research, and knowing what your future may hold based on your current health. Plus, in some cases, you may not be eligible for a Medigap plan. Let's briefly look at the differences.
This plan is also known as Medicare Supplement Insurance, which is a type of health insurance that offers additional coverage for normal Medicare plans. It helps fill in those “gaps”, or areas where you are not covered for expensive health issues, in normal Medicare coverage by helping you pay for these costs. Some of these expenses include:
Health care costs when you travel internationally.
These plans are offered by private insurance companies that are licensed by the state to provide the plan. There are several different types of Medigap plans, each providing different degrees of coverage. Although the number of plans varies from state to state, most companies offer 10 different types of Medigap coverage. We will discuss this in detail a little later.
Medicare Advantage Medicare Advantage, usually “Plan C,” can offer alternatives to the original Medicare plans. These plans consist of a bundled Medicare Plan A and B plans, that can offer complete coverage for the insured person. If you decide to opt for Medicare Advantage, you are still a Medicare patient, nothing changes. Medicare Advantage plans are typically provided by private insurance companies that are approved by Medicare, but they are funded by the government.
In addition to your Medicare coverage, a Medicare Advantage plan usually covers expenses for:
Wellness Programs, which includes, for most plans, even paying for a gym membership.
Medicare Advantage plans are also designed to cover costs related to chronic illnesses or conditions that you may have. These plans may also cover additional expenses, such as:
Transportation to doctor’s visits;
Adult daycare services.
The majority of these plans also include Medicare Part D, also known as prescription drug coverage. If your plan does not include this, you can still buy into Plan D through Medicare.
Now we will look at these plans closer.
This has been confused by many seniors with Medicare Advantage Plans, but these plans are very much different. Medigap is a supplemental Medicare insurance that can be purchased usually when the person begins Medicare coverage. These plans consist of A, B, C, D, F, G, K, L, M, and N plans.
If Medigap is not purchased at that time (and for some they may not be eligible at that time anyway), trying to buy it after you have been on an Advantage Plan may be next to impossible.
Medigap covers some or all out of pocket costs that are associated with original Medicare. This may include deductibles, co-payments, and even coinsurance. This minimizes a senior's financial liabilities and under original Medicare, there is no limit to the out of pocket costs as compared to Medicare Advantage Plans which do have annual limits.
Private insurers are required to offer Medigap policies only when people first enroll in Medicare (there are a few special situations that allow this to happen at other times). If this is not done at that point, insurers can refuse to write this policy for those with pre-existing conditions like heart disease and diabetes.
There are ten different types of Medigap plans, each with standard benefits to the senior and all covering coinsurance and copayments for Part A, Part B, and hospice care. Some plans pick up coinsurance costs for skilled nursing homes while some do not. Drug costs, however, are not included in the benefits.
Aside from having more comprehensive coverage in general, one of the top benefits of Medigap is the cost. While the premiums can be higher than Medicare Advantage, these premiums result in few to no out-of-pocket costs. Premiums for Medigap depends on the senior's age, gender, where they live (yes, some areas of the country are riskier than others) and smoking history. Costs for these policies run from around $100 a month to as high as several hundred dollars monthly.
If you originally just had Part A of Medicare and now want to enroll in Part B, insurers are required to offer you a Medigap policy, no matter what your health status is, for the next six months, and, for the record, most people decide to select Medigap Plan F, which has the broadest coverage out of all the different types of Medigap available.
However, insurers can exclude you from coverage or even charge higher premiums if you have been recommended for a surgical procedure or have pre-existing conditions like asthma, chronic bronchitis, or rheumatoid arthritis.
A couple of final things to be aware of with Medigap, if you’re on Medicare, because of a disability, Social Security Disability Insurance (SSDI), and are under 65, you are not eligible to enroll in a Medigap plan. Contact your state insurance assistance program (SHIP) for more information.
Another warning: If you drop your Medigap policy for any reason, you might not be able to get it back. Before dropping a plan, be sure you fully understand the Medigap laws in your state.
Medicare Advantage Programs
The ads you are currently seeing on television, for the most part, are for Medicare Advantage Programs (however AARP, as well as others, are running a Medigap ad with various providers). These programs, known as Medicare Part C, can provide you with more help at a lower cost than the traditional Medicare with Medigap.
Instead of paying for Parts A, B, and D, you enroll through a private insurance company that may cover everything that is provided by Parts A, B, and D as well as additional services. In most cases, you pay your Medicare Part B ($144.60 in 2021) along with your Medicaid Advantage premium, which could be no cost for some or up to several hundred dollars for others, depending on where you live and the type of coverage you desire.
These programs work like private health insurance plans with services such as office visits, lab work, surgery, and other medical procedures covered after a small co-pay. These programs range in cost from area to area and could offer HMO or PPO network plans that place a limit on your total out of pocket costs.
Just like private plans, each has its own rules and benefits and most provide prescription coverage. Some plans may require a referral from your PCP to see a specialist while others have no such provision. However, most Medicare Advantage plans limit you to doctors within the HMO or PPO and have limitations on out of network providers.
Also, like private plans, each has different benefits and rules. Most provide prescription drug coverage; some may require a referral to see a specialist while others won’t. Some may pay some portion of out-of-network care, while others will only cover you for doctors and facilities that are in the HMO or PPO network. Traditional Medicare and Medigap policies cover you if you go to any doctor or facility that accepts Medicare.
The other drawback to most Medicare Advantage plans is that they only operate within a certain region. So if you are a resident of Rhode Island with a house in Florida, you may not be covered. In cases like that Medigap is a better option however, there are some Medicare Advantage plans that do cover seniors almost anywhere, even when traveling out of the country. So doing your research on what works best given your situation is important. Once again, we recommend sitting with a SHIP counselor.
The Key Takeaways
Although both have advantages and disadvantages, as we described above, let's review the key things to remember between the two.
When it comes to cost, Medigap and Medicare Advantage plans vary. In general, Medigap plans have higher premiums than Medicare Advantage plans. However, Medicare Advantage plans often cover less out of pocket costs than Medigap, but many plans offer coverage in areas not paid by Medigap plans. You can save by choosing the plan that makes sense for your specific conditions and lifestyle.
Choice of Physicians
This is a big one. A huge difference between Medigap or Medicare Advantage plans is the choice of physicians they offer. Although both plans have limitations, you could lose your ability to choose a doctor or specialist, including the one you have been seeing for years, under a Medicare Advantage plan. Medicare Advantage offers a limited selection of physicians and facilities and they must be within their network of providers. In some cases, Medicare Advantage plans will not cover out-of-network physicians at all, leaving you to pay the bill. Medigap plans, on the other hand, offer more flexibility. Both Medigap and Medicare Advantage will cover any physician or facility that accepts Medicare.
Believe it or not, where you live and your lifestyle can affect the cost of your plan. If you live in one state and rarely travel, then Medicare Advantage might be best suited for you. If you live in more than one state throughout the year or travel frequently, then Medigap may be a better choice (for instance, having a home in Connecticut and traveling to Florida for the winter). Medicare Advantage plans usually offer regional coverage only and do not typically offer coverage when traveling internationally. Medigap, however, provides coverage in all 50 states and when traveling outside of this country.
Purchasing a Plan
Overwhelmingly, most well-known companies are honest and above board, but some unscrupulous insurance brokers have been caught in the past trying to sell both Medigap and Medicare Advantage programs to seniors. This is illegal.
Bottom Line - Is Just Having Medicare Enough?
This is a question we hear a lot in our offices when discussing long term care planning with clients. They often point out that they have been “very healthy” their entire lives and see no reason for that to change. They may also say that they have enough assets to cover any minor illnesses so paying extra money every month for Medigap or a Medicare Advantage plan is “just a waste of money”.
In such cases, we must be brutally honest. No one gets out of life without dying and we will all die of something. You could be healthy today and have a stroke tomorrow. And as we age, our health will surely deteriorate – it's part of the life cycle.
In some cases, seniors can self-insure but remember the rates will increase as they age because they become a higher risk. So this route could be taken but the consequences must be taken into consideration.
What if I Enroll Later?
If a senior decides at some point that they do need Medicare after passing on it, they will be hit with a lifetime enrollment penalty for Part B and Part D and may not be able to get a Medicare Advantage Plan. Even worse, the seniors could face a six month waiting period before Medicare becomes effective, resulting in enormous out of pocket costs should a catastrophic illness or accident occur.
So even if a senior or couple has substantial assets, such a situation could wipe out what someone has worked and saved for. Remember, Medicare is about insuring your future when you will not be as healthy, not about what you need today. Remember, even the fittest and healthiest living people face significant medical bills as they age.
The State Health Insurance Assistance Program (SHIP) provides Medicare beneficiaries with information, counseling, and enrollment assistance. Its mission is to strengthen the capability of grantees to support a community-based, grassroots network of local SHIP offices that assist beneficiaries with their Medicare-related questions.
SHIPs present and distribute information to groups and individuals to inform them
on Medicare benefits, coverage rules, written notices and forms, appeal rights and procedures, and more. They also provide free, in-depth, one-on-one insurance counseling and assistance to Medicare beneficiaries, their families, friends, and caregivers.
SHIPs assist people in obtaining coverage through options that include the Original Medicare program, Medicare Advantage (Part C) Plans, Medicare Prescription Drug (Part D) Plans, and programs designed to help people with limited incomes pay for their health care, such as Medicaid, the Medicare Savings Program, and the Low-Income Subsidy. They can help people compare Medicare Supplemental (Medigap) insurance policies and explain how these and other supplemental insurance options (e.g., insurance plans for retirees) work with Medicare.
SHIPs also provide information on long-term care insurance and, when needed, refer beneficiaries to agencies such as the Social Security Administration and local Medicaid offices for additional assistance. Many SHIP counselors are volunteers who are trained and certified to help navigate systems for older adults and some people with disabilities.
We at Connelly Law Offices encourage you to contact your local SHIP office and make an appointment if you have insurance questions.
In next week's blog, we will be discussing Dual Eligibility - those individuals who qualify for both Medicare and Medicaid coverage.