By: David K. Carboni, Ph.D., CFPⓇ
Consumers enrolled in Medicare can buy Medicare Supplemental Insurance Plans to fill in the gaps Medicare leaves in co-pays and deductibles. These plans, along with a Medicare Prescription Drug plan (Plan D), provide Medicare recipients with significant health coverage. However, there is another alternative for health care coverage for those eligible for Medicare: Medicare Advantage Plans (MAP). With MAPs, insurance companies contract with the federal government to offer Medicare benefits through their own policies. They are different types of MAPs, including: Health Maintenance organizations (HMOs), Preferred Provider Organization (PPOs), Medicare Private Fee for Service (PFFS) plans, and others. Costs, extra benefits, and rules vary by plan. With MAPs there’s no need to buy a Medicare Supplemental Plan.
MAPs are required to provide the same services as traditional Medicare. But there are catches. First, they can do so in different amounts, that is, they can offer different co-pays, coinsurance, and deductibles for these services. With MAPs, you continue to pay Medicare’s Part B premiums ($148.50 in 2021), except for high incomes folks), and then (usually) pay an addition premium. MAPs commonly offer services Medicare does not, such as: vision coverage, health club memberships, and even dental care. Drug coverage is also common in MAPs. This eliminates the need to buy a separate Plan D prescription drug plan. In fact, the Center for Medicare Advocacy says it’s possible to have lower out-of-pocket costs with MAPs.
Never the less, there are serious caveats with MAPs. Some plans add benefits that may have little value (e.g., health club memberships), while paying less than traditional Medicare for hospital stays or nursing care. Hospitalizations and nursing care expenses represent the real financial risks you face later life. Unfortunately, MAP coverage limits can be obscure or be buried in footnotes not readily apparent. Therefore, it’s imperative to carefully scrutinize the deductibles and co-pays for doctor and hospital care and compare these with traditional Medicare (together with Supplements).
Medicare Supplemental Plans used in concert with Traditional Medicare are portable, that is, a plan holder may receive care from any Medicare authorized provider. In contrast, MAPs typically run like HMOs or preferred provider organizations, with networks of providers. If you want the freedom to see any provider (or if your current providers don’t participate), you should probably not enroll in a MAP. Likewise, if you expect to travel a lot (or spend time outside the service area), you should likewise think twice before enrolling in a MAP. In the recent past, aggressively marketed MAP private fee for service (PFFS) plans were said to offer the freedom of choice of providers while providing the savings of MAPs. These freedoms can be illusory, as providers can refuse to accept patients in such plans, and recent legislation has further restricted their use.
MAPs present other problems as well. If your doctor leaves the plan during the year, you could be faced with higher medical charges, as the doctor would then be considered an out of network provider. Your other choice would be to find a new in network doctor. Also, a serious illness could prompt you to seek care from non-participating specialists or hospitals. These could be at potentially much higher charges, or you may be forced to pay the entire cost of the covered service. So a MAP’s seemingly lower premium could come at the price of less flexibility in seeking and paying for needed care. Likewise, if you are on a prescription drug regimen, it’s a good idea to check the formularies (prescription drug protocols) offered by the MAPs you are considering. If a MAP charges significantly more for the drugs you require, the lower premiums may be offset by your higher out-of-pocket prescription costs.
You can join a MAP or other plans when you first become eligible for Medicare-called your initial enrollment period. You may also enroll during prescribed enrollment periods. Likewise, you may only switch plans during certain time periods. For example, each year an Annual Election Period (AEP) occurs from October 15 to December 7, and the plan you elect becomes effective January 1. MAP open enrollment periods (MA-OEP), Jan. 1 to March 31, are also available to allow you to switch plans. There are restrictions on what changes you’re allowed to make among plans during MA-OEPs. For example, you can’t add or drop Medicare prescription drug coverage during OEPs unless you already have Medicare prescription drug coverage. Refer to www.Medicare.gov for other change limitations during MA-OEPs. In addition, there are special enrollment periods (SEPs) which allow consumers to switch MAPs if:
-they move out of the plans service area
-they move to an area that has new MAP or Plan D options available
-their plan leaves the Medicare program, and other special situations
Medicare websites tool: The Medicare Options Compare (www.medicare.gov/mppf) displays the MAPs in your area. By clicking on estimated annual cost, you receive out of pocket estimates based on your general medical condition. Two other excellent websites with tips for comparing plans are: Medicare Rights Center (www.medicarerights.org) and Medicare News Watch (www.medicarenewswatch.com). This latter site also displays estimates of out-of-pocket estimates for MAP HMOs and MAP preferred provider organizations (PPOs). Your State Health Insurance Assistance Program (SHIP), easily accessed through www.medicare.gov., can provide access to health insurance counselors who can offer guidance on selecting MAPs available in your state.
Key: Currently, only four states (Maine, Massachusetts, Connecticut, and New York) allow you to switch from an Advantage Plan to a Medicare Supplemental Plan without demonstrating evidence of that you’re in good health. This could lead to a situation that if you develop a serious health issue, you could be unable to seek out the best providers available for your condition if they are not in your MAP network. This suggests that Medicare Supplemental Plans are nearly always a better choice than MAPs unless you are simply unable to afford what may be a higher premium of a traditional Supplemental Plan, or you live in the Northeastern states mentioned earlier.
As with many areas of financial planning and retirement planning, retire health care planning is a dynamically changing. Health care and how its financed remains a major challenge facing the USA, and new plans and approaches will no doubt emerge. Therefore, you must remain informed on this changing landscape as you plan for your health care needs in retirement.