Which Is Better: Medicare Advantage or Original Medicare Insurance?
It’s Medicare open enrollment time again so I thought I’d address a question that comes up a lot, especially for those reaching age 65: which is better, Medicare Advantage or original Medicare?
First, a brief review of original Medicare:
- Part A, also known as hospital insurance, covers in-patient hospital stays, surgeries, and post-hospital skilled nursing care. If you have contributed to Social Security (SS) for 40 quarters or more, you and your spouse will be entitled to Medicare Part A coverage at no cost once you reach age 65.
- Part B, outpatient services, covers eligible medical costs such as doctor and clinic visits, as well as select pharmaceutical equipment, supplies, lab tests and medications administered on an outpatient basis. Unlike Part A, Part B requires the payment of a monthly premium.
- Medicare Supplement (aka Medigap) plans are offered by private insurers and cover some of the coinsurance, copayments, or deductibles charged under Medicare parts A & B. There are multiple standardized plans. The best one, plan G, covers all the above costs except for a small deductible.
- Part D is private insurance that covers prescribed medications not administered in a doctor’s office. As with Medigap plans there are monthly premiums, but coverage and costs can vary widely.
Medicare Advantage plans are offered by Health Maintenance Organizations (HMOs) such as Kaiser or by insurers covering preferred provider organizations (PPOs) such as Sutter Health. These organizations provide all the services above to Medicare patients and effectively replace original Medicare. However you still must be signed up for Medicare Parts A and B and pay the premiums for the latter in order to participate.
Some of the advantages of Medicare Advantage over Medigap are:
- Logistics. Under original Medicare you have three different parties involved (the federal government, the Medigap insurer, and the part D insurer). Under Advantage all billing is handled through the HMO or PPO insurer.
- Benefits. Original Medicare doesn’t cover dental, vision, hearing, or other ancillary services such as gym memberships. Some Advantage plans include these things.
- Cost? It is unclear whether or not Advantage is less expensive than Medigap plus Part D based on all my research. It ultimately will depend on the details of each plan and your specific medical needs.
There are also several disadvantages of Advantage plans:
- Choice. Under original Medicare you can visit any doctor in the country that accepts Medicare patients. Under Advantage you are limited only to those doctors in the HMO’s or PPO’s network. Some plans do allow you to get care outside their network but at a significantly higher cost. In addition, if you need to see a specialist, under Advantage you generally need a referral from your primary care physician.
- Guaranteed issue. This applies to Medigap policies and means that the insurer cannot reject you or charge you a higher premium based on your individual health situation. If you sign up for a Medigap policy within the first six months of your 65th birthday it will be guaranteed issue. If instead you sign up for Advantage, and later wish to switch to Medigap, you will be subject to medical underwriting and can be refused a Medigap policy or charged extra for it, except under certain circumstances. Switching from Medigap to Advantage, on the other hand, is always possible.
- Standardization. Choosing a Medigap plans is easy. Decide on the plan you want (e.g. plan G), then find the one with the lowest premium. Advantage plans, though, can have widely differing features from one HMO/PPO to another. Comparing them can be a daunting task.
In short, there’s no clear winner between the two types of Medicare insurance. Be aware also that neither provides long-term care (LTC) coverage except for a very short period of time under very limited circumstances. Every family should have a plan in place for the possibility of an LTC event.