The “senior market” is generally regarded as those 65 and over and receiving Medicare benefits, although we recognize that many under the age of 65 may be receiving benefits due to disability or other personal circumstances. In that case this page also applies.
As there is quite an abundance of information available on the internet, not a great deal of time will be spent in a rehash of that. The single best source of the information is http://medicare.gov That gives a lot of information, but not a lot of “how to”. I’ll try and fill those gaps.
The Tremendous Liabilities that Remain for Those on Medicare Only
Medicare is good… as far as it goes… but it does not go far enough. The basic parts leave gaps to be covered by the individual.. Part A has a deductible for hospital admission that can run well over $1000 in a year. Part B has an initial deductible of $147 (2013/2014) and then only pays 80% of the medicare allowed amount. If one is having a year of using several “Part B” services, the amount of liability to the patient can be unlimited. And so far, nothing has been said about prescriptions or drugs.
To help eliminate the burden on the seniors, the govt introduced 3 programs: The Medicare Supplement or “meigap” program that operates much like conventional insurance, the Part D drug prescription insurance programs which operate much like a fixed discount program, and lastly the Medicare Advantage program(s) which usually/often integrate a prescription coverage and often offer not only “gap filling”, but additional benefits.
The latter two programs are closely regulated by CMS, where the Medicare Supplement programs are not as closely regulated federally, but usually are at the state level.
A Look at Medigap or Medicare Supplement Coverage
As mentioned above, it’s a program much like conventional insurance. You pay a premium each month in able to receive a set of pre-defined and contracted benefits, and you pay this each month whether you use them or not. In a way, it’s like your car insurance: You pay each month whether you have a crash, car gets stolen or not, etc. To make it simple, the govt has defined 11 standard benefits which are lettered, and all company’s Plan A benefits are equal to every other company’s same lettered plan. This makes it easy to shop and compare as it primarily becomes a price issue once the person decides the benefit level they want. The problem is that not all companies offer all of the 11 plans, so an individual shopping only through one company or agent may not be aware of a benefit provision more suitable.
In general, Plan F (think “finest”) is the most comprehensive, essentially paying for everything up to standard medicare allowed amounts.
All Medicare supplement plans allow the plan holder to use any medicare provider any where in the country. In addition, a plan holder can change companies or plans at will (but being aware that a change may result in the loss of some coverage due to pre-existing plan transfer provisions).
The other large attraction of a plan of this nature is the ultimate control and knowledge and predictability of medical expenses. If the plan costs $300 per month, is all inclusive, and there are 12 months in a year, then the annual, predictable cost is $3600. This is also referred to as the MOOP or max out of pocket cost… and this is the cost that really should be the comparison benchmark of any medical insurance plan. Note that the premium did NOT include anything to do with prescriptions, so a Part D plan is recommended and usually purchased to work along side a Medicare Supplement.
While this site will not go into the detail (leaving that to the reader and their agent), a High Deductible F should always be considered, and this is mentioned only as it’s not available from all leading companies.
Looking at Part C or Medicare Advantage Plans
Part C is a much newer concept, and is designed to help those people who want simplicity of integration of a pharmecutical program with medical insurance in one place, and who either c an not afford, or choose not to afford the monthly costs associated with the Medigap/Part D combinations. In general, Medigap programs are offered at zero insurance prem costs or very low costs… although the consumer must continue to pay their Part B preemuims unless these are covered by a financial assistance program such as Medicaid.
It’s fair to ask “how is this accomplished” and the answer is the use of “managed care” programs. Managed care programs come in two basic “flavors”: The HMO Model and the PPO model. Some insurance companies offer both type of plans (see following for sub sets known as Special Needs Plans).
In the HMO model the insurance company negotiates with a usually smaller and more tighter group of medical providers (or conversely, the providers may be the basis point and offer the insurance program), but in any case, the negotiation essentially takes a major percentage of the cash flow from the govt to the insurance company, and directs the largest part of this to a cash flow stream to the HMO. You belong to the HMO group, and whether you use the services or not, the HMO receives a cash flow that you could think of as “your part”. The cash flow that is “your part” from CMS/Govt is essentially totally committed, but as it is, you have the advantage of some ot the lowest copays (if any) of the two models. However, for this benefit, you have given up nearly all flexibility to use providers other than whose within the contracted HMO organization. There are still co pays, and every plan is required to establish and publish what the max they could collect from you would be (generally in a bad health year). This is one of the most valid numbers or pieces of data you should look at. (The other is the star rating for quality).
The PPO Model. This is another very popular model. Like before, as you enroll in an MA plan with an insurance company, they receive a “stipend” essentially in your name, and they have flexibility in using it. The only mandate is that as they manage a program, y ou must be assured of receiving every benefit you would be entitled to if you were under plain or basic Medicare.f And of course, you agree to keep paying your Part B. The PPO differes in the negotiation with the providers, as they are paid the majority of their due on providing of services. There is not a pre-committed cash flow to them in toto of “your share”. Their motivation is that the insurance company sends them a large volume of patients, and thier job is to keep you. They do this by discounting prices you pay… but note not all the money is commited to them in advance. You have flexibility of options of using providers outside the network! The provision of any one outside the network being available to you under plan is not guaranteed, and those outside the network know what they will receive.. and you know what it will cost you.. which is always more than “in network”.. but you do have this option.
If you were to compare a Summary of Benefits offering from an HMO plan and a PPO plan you will see in the PPO there are columns provided for both in network and out of network, where with the HMO, only “in network”. There are many, many, many people who do not want to be locked in, and who will opt to pay a little more to have the flexibility. That flexibility is not as great as the flexibility within a Medigap plan, but the insurance cost premiums are generally less… HOWEVER.. as the model is based on “Pay as You Go”, the max out of pocket costs again could be much greater than the Medigap Model.
Which is Better: Medigap or Medicare Advantage?
If our health issues and needs were totally predictable, the answer would be simple. If funds were unlimited to us, it sitll would be an easy question to answer. However, neither of these usually apply, so it boils down to maybe a choice. Regardless of which answer may be the better one academically, if a person can not afford the Medigap plans, the question is mute.
It boils down to this: we look at the purpose of insurance first: To provide financial protection in the event of a sudden, unplanned, and catoostprhich event. In shot, it could be an occurenc of cancer, a stroke, Heart attack, kidney failure, etc. While some degree of medical history may give general risk indicators, the fact is none of these are totally reliable. So it’s risk management.
In a worst case situation, which is why we buy our insurance, there’s no doubt we’d have the lowest out of pocket with the Medigap/Supplement/Part D arrangement, particularly with a Plan F.
But what if we had a good year. In other words, the car did not crash or get stolen.. and we stayed healthy. We dodged the bullet another year. Not even a fall or broken bone! If we had a Medicare Advantage plan, we made out like a bandit. Zero dollar premiums and only a couple hundred maybe in copays for a checkup. (And hopefully, we banked some money for the bad years in an HSA or something similar!). But if we had that same Medicare Advantage plan, chances were that the out of pocket were around 3 times as much as the Medigap. Over time an applying the rule of averages, and knowing that at some time at this point in our lives, SOMETHING is going to happen, the old saying of “pay me now or pay me later” applies. In short, there is no pat answer to the question of which is better: Medicare Supplement or Medicare Advantage. Our recommendation however always trends toward the Supplement for those who can afford it. Reasons: 1) Complete control 2) Bypass the history of provider changes in the Plan Cs, along with the higher annual price increases 3) Lower out of pocket costs in a bad year, playing the odds that 1 out of every 3 could be.
Special Needs (Medicare Advantage) Plans (SNPs)
There are three general categories of Special Needs Plans. These are 1) Plans for persons with Chronic Illnesses such as Heart, Lung, and Diaereses, 2) Those in institutions and 3) Those with special adverse financial conditions (such as being on medicaid). When an individual is qualified for one or more of these, then various insurance companies offer plans that have both increased benefits, as well as requirements for recurrent evaluation of the causing condition. People on SNPs also bypass the normal plan selection periods and can choose a plan or change plans at virtually any time. Most of the time people who have one or more of the qualifying conditions are aware of these plans, but we have also found many who are not aware they may qualify. This is especially true of those with chronic conditions whose conditions do not cause substantial financial hardship. If you are a reader of this site and have diabetes, a heart condition, or a lung condition, and you are on medicare, you should check with your agent, or the owner of this site (see request appointment) to discuss if this applies to you.
This concludes the discussion. If this reading was for more than academic purposes, we suggest a sit down with your professional, multi line, health insurance broker.. a person that is not captive to one company but who can and will present options from various companies.