Pros and cons of Medicare advantage vs Medigap plans
Pros and Cons of original Medicare
Traditional Medicare was established as a ‘safety net’ and provides basic health care benefits to millions of American seniors. However, Medicare does not pay 100% of your medical expenses. You won’t have any prescription drug coverage with this basic package, nor are costs for dental care, vision, or hearing aids covered. Plus, the costs for the medical services that are actually covered by Medicare, are typically only paid to 80%. This means, due to the sky-rocketing costs of medical expenses, Medicare beneficiaries need to contemplate to add a Medicare advantage plan, a supplemental policy or a prescription drug plan in order to manage the costs of their medical treatments.
How do Medicare, advantage and supplement plans work together?
- Part A of original Medicare helps to pay for inpatient care in a hospital or skilled nursing facility (following a hospital stay), some home health care and hospice care.
- Part B of original Medicare helps to pay for outpatient services such as doctor’s visits and other medical services and supplies.
- Part C is optional insurance coverage you may select in order to replace Part A and B. If you opt for a Part C plan, you will receive all of your health care services through a private Medicare advantage policy.
- Part D is additional optional coverage for prescription drugs to help pay for prescription medications.
You have the following Medicare options:
If you are on Medicare, you need to take the time to understand the differences between your options so you can be sure to select the best option for your health care needs and budget.
- Original Medicare only (Part A and B)
- Private insurance (Part C) with a Medicare advantage plan (many include drug coverage), replacing your original Medicare
- Keeping original Medicare and adding a supplemental policy (Medigap) which will help you cover the before mentioned ‘gaps’ of traditional Medicare
- Adding a Part D prescription drug plan to either your original Medicare or your private insurance
Original Medicare Part A and Part B is administered by CMS, the Centers For Medicare and Medicaid Services. Medicare advantage, supplement and prescription drug plans are offered by authorized private insurance companies which have to adhere to federal regulations to provide these services.
Since the limitations and out-of-pocket costs for Medicare without additional insurance can be significant, especially if you must take prescription drugs, seniors should seriously consider to get extra coverage with more benefits and lower costs. Because there is a lot of competition among private insurers, Medicare beneficiaries who know all their options, thoroughly check their medical needs and their insurance plan each year, and shop around for the best rates, can find a plan that covers most or all of their health care needs.
Pros and Cons of Medigap (Medicare Supplement Plans)
Medicare supplemental plans are standardized into 10 so called ‘Medigap’ policies labeled A, B, C, D, F, G, K, L, M and N, which each offer a different set of benefits, from basic to full coverage. Each of the plan choices may be offered by different private providers, but must by law have the same benefits. This makes it easy to compare plan F offered by one insurance company to plan F from another insurer as you only have to compare the price. With supplemental insurance, you can continue seeing health care providers of your choice (provided that they accept Medicare). Medigap policies however, come with higher premiums, compared to Medicare advantage plans.
Pros and Cons of Medicare Advantage Plans
Medicare advantage plans on the other hand typically offer many benefits that are not included in traditional Medicare nor in supplemental Medigap policies. While Medigap is supplemental to traditional Medicare coverage, advantage plans effectively replace your Medicare insurance coverage. The government partly sponsors advantage plans in order to help cut costs. This is why you will find zero premium plans that still have better benefits than original Medicare. Many also include prescription drug coverage. One of their biggest advantages however is that they take persons regardless of pre-existing health conditions. However, the insurance companies can only offer extra benefits at a low premium because they are able to save costs by requiring their enrollees to use a network of providers. While with an affordable HMO policy you must use the plan’s network, you are able to use out-of-the-network health care with a PPO or PFFS plan, but you won’t get reimbursed for all costs or have a higher premium.
Choosing between supplement and advantage plans, and shopping for the best and most cost-effective policy is often a daunting task. If you live in a big city, you will most likely have an almost overwhelming amount of plan offers, but not all alternatives are suited for anybody. Just because one plan is popular or your spouse or your friend is enrolled does not mean that it is best for you. The best advice is to do your homework and compare your medical and medication needs to policies that are available to you.
