Question from Bruce:
Choosing a Supplement instead of an Advantage Plan was always a no-brainer for me because I didn’t like rolling the dice on my future out of pocket heath care costs. I also like that I have access to basically every doctor and hospital in the entire USA without needing pre-approval by the health insurance company to get procedures or services. As long as my doctor orders them, I don’t need any authorizations and can get them asap. My question to you is since Stand Alone Part D drug plans are changing the way they cover Tier 3 drugs, could that extra cost per year be higher than an Advantage Plan’s MOOP? If that’s the case, there would be no financial advantage anymore to be on Original Medicare and Supplement. Is that correct?
Answer
This is a great question and I suggested to Bruce, a current client that he really might want to sit down and discuss it and compare not just premium differences, but what he would spend out of pocket on medications and medical care with his Supplement vs an Advantage Plan in 2024.
Although Tier 3 drugs are going to cost more for those who have Supplements and Stand-Alone Part D plans in 2024, it WILL NOT exceed Advantage Plan MOOPs because out of pocket costs for covered drugs will be capped right around $3,000. Once that has been met, all medications will be no cost. Those on Stand Alone plans, like Bruce, who would pay out the $3,000 for a Tier 3 drug would still spend around $2,000 if they an Advantage Plan in 2024. It’s not like Tier 3 drugs still won’t be expensive for those on HMOs and PPOs due to the Donut Hole.
That being said, if we looked at it just in terms of premium and drug savings along with the real dollar value of ancillary benefits such as dental, vision, hearing, OTC, gym memberships, etc., supplied by Advantage Plans, relatively healthy people would rarely choose Supplements which don’t offer them. Advantage Plans have never been better than they are today and will be in 2024 in terms of low premiums, co-pays, MOOP, as well as the number and generosity of ancillary benefits. It’s hard to turn that all down to pay more money for a Supplement.
However, the number one reason people choose them is because there is no interference from an insurance company when it comes to getting care. Your doctor and you decide what’s medically necessary, not an insurance company. If your physician wants you to get an MRI, biopsy, surgery, physical therapy, etc., you can receive those services the very same day.
With Advantage Plans, that’s not the case. All of those need prior authorization and in a best-case scenario, it takes about two weeks for them to go through. And although it’s not common, it’s definitely possible the insurance company can force you to get physical or injection therapy before you can have the services the doctor recommended.
There’s also the chance those on Advantage Plan HMOs and PPOs can get bills in the thousands of dollars which is never mentioned in any of the solicitations and advertisements you’re going to get in the mail, see on TV or billboards this fall and winter. If you’re diagnosed with cancer and need chemotherapy or radiation, injection or infusion therapy, a lengthy skilled nursing stay, and a couple of other less common expensive services, you will almost certainly get bills equal to your annual Maximum Out of Pocket (MOOP), from $3,900 to $9.450 in 2024. And statistics show that 1 in 20 people who have an Advantage Plan will meet their MOOP.
And once someone on an Advantage Plan gets those kinds of bills, there’s likely no going back to a Supplement. This is because those companies can discriminate on who they accept based on current and preexisting health conditions.
Here’s another fact that’s rarely mentioned; the extra benefits, low premiums and co-pays on Advantage Plans are not set in stone. They can be changed. Five years ago, when the companies were reimbursed by the government at a lower rate, approximately $10,000 a year vs today’s estimated $12,000, they looked completely different. The best plans cost up to $80 per month and had no comprehensive dental, OTC benefits, hearing aid allowances, debit cards to purchase food and pay for co-pays, etc.
Medicare is in serious financial trouble. That’s not a secret. I can see Advantage Plans being forced to take a cut in reimbursement closer to the pre 2018 levels which would likely mean significant changes including any combination of higher premiums, co-pays, MOOP, and/or a reduction or elimination of some ancillary benefits.
I love what Advantage Plans offer. We have clients who’ve literally saved tens of thousands of dollars in premiums vs Supplements and received thousands more in value of goods and services. However, people must understand some of the risks associated with Advantage Plans, which are rarely explained by other agents who are more concerned about getting paid a commission than anything else.
There is a very large group of Medicare beneficiaries who are better off choosing an Advantage Plan this coming Annual Election Period. However, there may be close to as many who are best not to make that change due to a multitude of reasons, namely the overall cost of medical care, and for others, what Bruce mentioned. He loves being able to get care as his doctor orders it and not having to wait for approvals. That’s worth every penny of the extra premium to many.
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