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The following came up in an ongoing email conversation between myself and a gentleman who was inquiring about moving from his Advantage plan that has a premium in the $70 per month range, to a true Medicare Supplement and Part D prescription plan at a cost of $150. Tens of thousands of Western PA seniors have an HMO or PPO around this price, give or take a few dollars. If you are one of those, please read this column carefully. After giving him a quote for a male his age, 75, Richard asked me, “Why would I want to change to a Supplement if it’s almost double what I am paying now?”
My first response was, “I understand it’s more expensive. And the best insurance in the world isn’t worth a nickel if you can’t afford it.” I went on to explain when taking into consideration what he may pay for medical services, in addition to Advantage Plan HMO or PPO premiums, a Supplement could be a much better value. Let’s take a look.
In his plan, Richard has an inpatient hospital co-pay of over $200/day. So, if he were to have one stay of five days or longer, his responsibility would be $1,100. The same cost for that stay if he had a Supplement would be $0. You see, Supplements expose those who have them to very little, if any, out of pocket medical costs. Advantage Plans, meanwhile, have co-pays for virtually every single service.
Let’s do the math. Divide the $1,100 for that one hospital stay by 12. That comes to $90/month. Add the $70 Richard is paying, and now his “adjusted monthly premium,” when taking into account just his hospital bill, is $160. Now, let’s take the same scenario and assume he took an ambulance to the hospital. His co-pay for that was $250. He also needed a follow up MRI or CT Scan at a co-pay of $200, and two visits to a specialist at $40 each. I believe this actually may be a conservative estimate of aftercare services following a six-day hospitalization. Now our “adjusted monthly premium” is up over 200/month, compared to $150 with the Supplement. And that’s assuming he has no other co-pays for the rest of the year, which probably isn’t likely.
Richard, who did his math with the idea he would never get sick, be hospitalized, or need more expensive treatments, ended up paying $400 more this year than he would have if he were on a Supplement when calculating in medical costs and the $198 deductible for Supplement Plan G. And that’s with just one hospitalization and minimal follow up services.
No one wants to think about more serious health conditions or diagnosis. But if he would have had a Stroke or another major health issue and needed Skilled Nursing, not out of the question at his age, at a co-pay of $160 per day, and stayed 20 days at that cost, add another $3,200. Now his “adjusted monthly premium” is up over $450/month! The $5,700 he spent on premiums and medical bills for the year could have paid for 37 months of Supplement premium!
On the flip side, I understand the thinking of many people, including Richard. If I stay healthy for five years and don’t need services other than doctor visits and blood tests that have small co-pays with HMO’s and PPO’s, I can save thousands of dollars. I’m okay with that if you understand the risks. My agency has over 3,000 of our approximately 8,000 Medicare clients on Advantage Plans, so obviously there’s a place and need for them.
But please, please, please. If you are going the Advantage Plan route, choose the right one. Richard’s plan has a 5-day hospital co-pay of $1,100. In addition, he could be billed close to $6,000 in a calendar year, known as the Out-of- Pocket Maximum (MOOP). I would recommend he consider two other Advantage plans that have significantly lower premiums, a co-pay for that same hospitalization of around $300, and a similar or even lower MOOP of over $1,000. In addition, the more expensive plans with larger hospital co-pays do not come with comprehensive dental or Over the Counter (OTC) benefits as the lower priced plans with smaller hospital co-pays do.
Why people continue to stay on less competitive plans will always drive me crazy, especially considering many seniors live on a fixed income. I realize Medicare Annual Election Period ended on December 7th; however, many people can still make changes. Don’t assume you can’t. Call or email us, and we will let you know if you qualify to do so.
We also invite anyone who is considering retiring soon, turning 65 in the near future, or even those who already have plans to make an appointment for a no-cost consultation to go over options and learn about the different types of plans. The Health Insurance Store will also help those ages 60 and over choose a health insurance plan to bridge the gap to Medicare as well, which would include determining if an ACA (Obamacare) plan, or COBRA, is the best option. Those who continue to work past 65 should also consider whether staying on an employer plan or moving to Medicare makes more sense. Most employer plans renewed January 1st, and premiums are going up. This means your employer may be passing those costs on to you in the form of more money being deducted from your paycheck or higher out of pocket costs.
If you are not already doing so, please follow us on Facebook. I will be announcing the schedule of our soon to be airing webcasts and podcasts. We also post important information on our page regarding our ever evolving and complicated healthcare system. It’s my goal to make it easier to understand for the senior community.
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